Employers have a positive duty to prevent harassment and bullying, and breach of the duty can result in damages claims against employers.

The duty arises from:

  • Implied terms in the contract, from employer policies, or implied by law
  • A duty of care owed in tort law
  • Obligations under OH&S laws

The high water mark was set in the case of Naidu in 2006 when the NSW Supreme Court award $1.9 million in damages to an employee for psychiatric illness caused by workplace bullying.

The actual employer was a labour hire company, and the employer sub-contracted its employee's services to Nationwide News Ltd. The employee was supervised by News staff. The employee alleged bullying, racial harassment, threats of violence and sexual assault.

The employee was awarded $1.9 million for damages, relating to depression and post traumatic stress disorder caused by this bullying.

Both the employer and the supervisor (News) were initially (before a single judge of the Supreme Court) held liable in negligence. They had a duty of care to provide Mr Naidu with a safe workplace and safe systems of work.

The decision was not remarkable for the decision against News – he worked at its premises under its staff so News was responsible. The decision was remarkable because the court said it was an implied term of an employment contract that an employee not be subjected to physical or verbal abuse in the course of their employment.

In addition, it was found that the employer had accepted responsibility for the supervisor's conduct by entrusting its employee to his supervision. They knew he could be unreasonable and was routinely intimidating of staff, and they knew of incidents and should have asked if there were any risks to their employee's health. They failed to do so and were liable for his injury.

The employer had deemed knowledge of the treatment because its other employees had that knowledge, regardless of whether they reported it up the line to management.

The labour hire employer breached its duty of care because it did not:

  • provide a safe system of work; and
  • prevent psychiatric harm.

The labour hire employer breached its implied contractual duties (implied in every employment contract) to:

  • protect from racial or personal vilification; and
  • prevent fear of insult or physical harm.

These findings against the Labour Hire company were overturned by the NSW Court of Appeal.

Labour Hire Companies Off The Hook – The NSW Court of Appeal

Both the labour hire company and News appealed the single judge decision. The Court of Appeal said that News was directly liable and upheld the damages order against News because the News supervisor was "for relevant purposes, the company, irrespective of the existence of lines of authority and reporting to those in the management hierarchy above him," because the manager was the: "alter ego of News for the purposes of directing and supervising the employee's work".

The Court of Appeal said that in any event News was vicariously liable for its supervisor's acts.

However, the Court of Appeal let the labour hire company off the hook because the supervisor was not the labour hire employer and there was no direct liability. Further, the COA said that the labour hire company was not vicariously liable for the News supervisor's conduct. The labour hire management did not know about what was going on and could not reasonable foresee harm to its employee, so was not negligent. The labour hire company was not vicariously liable because it had no control over the News supervisor and his conduct was unconnected with anything he was doing for the labour hire company.

If you get a complaint of alleged misconduct then you should find out:

  • if the complaint is true;
  • details of the misconduct; and
  • check if the victim can cope with the misconduct.

Lessons for Employers – especially:

  • You remain responsible to provide a safe and risk free workplace even if others supervise your employees if you exercise some control over those supervisors.
  • You can be liable in contract, as well as for breach of OH&S and discrimination laws, for damage your employees suffer.
  • You should have systems that identify unacceptable workplace behaviour and take steps to prevent it.
  • You should be ready to investigate complaints and ensure if there is, that psychological harm is averted.


Nationwide News Pty Ltd v Naidu & Anor; ISS Security Pty Ltd v Naidu & Anor [2007] NSWCA 377 (21 December 2007)


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