Landmark Federal Court decision sets a precedent on ‘genuine complaints’ in sexual harassment case

The full bench of the Federal Court has rejected an appeal by a former senior EnergyAustralia employee who claimed she was unfairly dismissed following allegations of sexual harassment, in a decision with big legal implications for all businesses.

In August 2013, Kate Shea sued EnergyAustralia (then known as TRUenergy) in the Federal Court, accusing its former chief financial officer of harassing her during a 2010 work trip to Hong Kong.

EnergyAustralia underwent a corporate restructure during February 2012 in which Shea was made redundant. However, Shea, who was the company’s head of corporate and government affairs at the time, claimed the dismissal was in response to the sexual harassment claim.

Shea also accused the company of a culture of sexual harassment so bad the human resources director had to actively monitor the managing director for anything inappropriate.

However, on March 25, Judge Dodds-Streeton dismissed Shea’s $6 million adverse action claim against the company, in the process setting an important precedent about the need for workplace complaints to be genuine.

“The complainant must hold a genuine belief in the truth of the matters communicated as a grievance or accusation. In the absence of such a belief (which may be difficult, albeit not impossible, to establish in the absence of some reasonable basis) the complaint would not be a genuine grievance or finding of fault,” Dodds-Streeton said.

Following an appeal, in a decision handed down on December 8, the full bench of the Federal Court further clarified the obligations for businesses when dealing with complaints.

“Considerable care needs to be exercised before implying … any constraint that would inhibit an employee’s ability to freely exercise the important statutory right to make a ‘complaint’,” the judgment states.

“To too readily imply … the necessity for a complaint to be a ‘genuine’ complaint, necessarily would be productive of argument about whether a ‘complaint’ is bona fide and may serve to discourage those who may well have mixed motives for making a complaint.”

“When considering the construction of these provisions, there is an obvious need to balance the legitimate interests of both employees and employers in a manner consistent with the objects of the Act as a whole.”

Based on this, the court upheld Dodds-Streeton’s original ruling.

“Ms Shea failed to demonstrate that her Honour erred in finding that none of her alleged complaints were a substantial and operative factor in EnergyAustralia’s decision to make her position redundant,” the judgment states.

In a statement, an EnergyAustralia spokesperson told SmartCompany the company is “pleased with the Federal Court decision to uphold the original judgement”.

“In March, the Federal Court dismissed Ms Shea’s application and found in favour of EnergyAustralia. Ms Shea appealed the decision,” the spokeswoman says.

“We want to focus on the future, not the past, and ensure we are growing our business and delivering for our customers.”

“We are a business that values our employees and strives to provide a safe work environment, and we expect our employees to meet the highest standards of conduct and decency at all time.”

M+K Lawyers partner Andrew Douglas told SmartCompany the case is a landmark decision for all business owners.

“Shea’s case is the leading case for workplace investigations to make sure complaints are made for a proper purpose. And if they are not made for a proper purpose, the complaint itself will be the basis of a serious misconduct and the complainant can be subject to disciplinary action,” Douglas says.

“What the appeal from the first decision makes clear is that the complaint must be wholly for an improper purpose for an improper complaint finding.”

Douglas says it is quite common for someone sent off into performance management to file a bullying complaint that is clearly for an ulterior motive. The decision is a powerful tool in the arsenal of employers in that situation.

SmartCompany also contacted Kate Shea’s counsel, Charles Gunst QC, who did not comment on the matter.