Defending harassment claims now comes with potential higher costs for employers

Both Houses of Parliament have now passed the Federal Government’s final piece of legislation enacting the Respect@Work reforms, meaning that defending sexual harassment claims in court is about to become a whole lot riskier and potentially more expensive for business.

First introduced in November 2023, the Australian Human Rights Commission Amendment (Costs Protection) Bill 2023 will amend the Australian Human Right Commission Act 1986 by inserting a new ‘equal access’ cost protection to apply to all claims brought under federal anti-discrimination laws.

The new ‘equal access’ costs protections regime means that an applicant is far more likely to be awarded legal costs in discrimination cases (which includes sexual harassment cases).  It also enshrines protection against a costs order for applicants who bring unsuccessful claims.

This model is a departure from the traditional legal costs model that ‘costs follow the event’.   This means that applicant who brings an unsuccessful claim may be liable for both their costs and those of the other side.   This approach is seen to have deterred potential applicants from bringing discrimination and sexual harassment claims to court because of the potential exposure to a costs order if they are unsuccessful.

The likely outcome? Encouragement for applicants who might otherwise have been dissuaded from bringing a claim due to the prospect of costly legal fees.

What will change? 

There are a couple of key changes that employers should be aware.

1. Where an applicant is successful on one or more grounds in their claim, the court must order that the respondent pay the applicant’s costs.  The only exception to this is if the court is satisfied that the applicant’s unreasonable act or omission caused the applicant to incur costs, in which case, the court is not required to order the respondent to pay the costs incurred as a result of that act or omission.
2. Unsuccessful applicants will not have costs awarded against them, except in certain limited circumstances.  This means that the applicant and respondent will bear their own costs.  There are certain limited exceptions to this position:
   • the applicant instituted the proceedings vexatiously or without reasonable cause; or
   • the applicant’s unreasonable act or omission caused the other party to incur the costs; or
   • all of the following apply:
     • the other party is a respondent who was successful in the proceedings;
     • the respondent does not have a significant power advantage over the applicant;
     • the respondent does not have significant financial or other resources, relative to the applicant.

It’s important to note that the changes also apply to “representative” applications (ie. those made on behalf of an applicant by a third party), though costs won’t be awarded against a person on whose behalf the application has been made. This change is intended to encourage public interest litigation in unlawful discrimination matters.

What should employers do?

Employers are facing a brave new world of litigation in which they are guaranteed to be required to pay a successful applicant’s legal costs, as well as any damages.  This is in addition to funding their own defence.

The best thing to do? Avoid the courts entirely.  This is where discharging the new positive duty comes into play.  Taking all reasonable and proportionate steps to eliminate the five types of unlawful behaviour (sexual harassment, sex-based harassment, sex-discrimination, conduct creating a hostile workplace environment and victimisation) in your workplace will reduce the likelihood of legal claims and other compliance action against you, including by the Australian Human Rights Commission.

Not yet compliant with the new positive duty? Get in touch on 1300 565 846 or email info@ablawyers.com.au for details on how ABLA's positive duty how-to-guide and toolkit can help you on your way to fulfil your obligations.