For a long time, the most important question in a workplace sexual harassment matter was what the employer did once it found out. Did it investigate? Did it act quickly? Did it protect the person who spoke up?
Those questions still matter. But Australian law now asks an earlier and harder one: what did you do before anyone said a word?
That shift began with the Respect@Work reforms in late 2022, and it has quietly changed what it means to run a compliant workplace. The cases coming through the courts in 2025 and 2026 suggest that many businesses, and smaller ones in particular, have not yet caught up.
What most employers miss: the law now starts before the complaint
Section 28A of the Sex Discrimination Act 1984 (Cth) defines sexual harassment as an unwelcome sexual advance, an unwelcome request for sexual favours, or other unwelcome conduct of a sexual nature, in circumstances where a reasonable person would have anticipated that the other person might be offended, humiliated or intimidated. What the person intended is not the test, and the conduct does not need to happen more than once.
The Act also reaches conduct that many people would not instinctively call harassment. Sex-based harassment covers demeaning treatment because of a person’s sex, even where nothing sexual is said or done. A hostile work environment can arise where sexualised “banter” or explicit material has simply become part of the furniture, even if nobody in particular is the target, and even victimising someone because they raised a concern is unlawful in its own right.
Since March 2023, the Fair Work Act 2009 (Cth) has also prohibited sexual harassment in connection with work (section 527D). In practice, this means a worker may be able to bring a claim through the Australian Human Rights Commission, the Fair Work Commission, a state or territory body, or more than one of them. The protections cover employees, contractors, labour hire workers, apprentices, volunteers and job applicants.
The centrepiece of the reforms is the positive duty in section 47C of the Sex Discrimination Act. Employers must take reasonable and proportionate measures to eliminate, as far as possible, sexual harassment, sex-based harassment, hostile work environments and related victimisation. That includes conduct by customers, clients and suppliers, not just staff. What counts as reasonable will depend on the size, resources and nature of the business, so a suburban café is not expected to do what a national retailer does. But every business is expected to do something real, and to be able to show it.
Since 12 December 2023, the Australian Human Rights Commission has been able to enforce that duty without waiting for a complaint. It can run inquiries, issue compliance notices, seek court orders and accept enforceable undertakings. In 2024 to 2025, it conducted formal inquiries across retail, accommodation and food services, finance, and transport and warehousing, reaching around 7,500 workers. It has named retail and hospitality as priority industries and has asked the government for the power to seek civil penalties.
This creates an uncomfortable possibility. A business can have a spotless complaints record and still be in breach. If the Commission asks what you have done to identify and reduce the risk of harassment, “nothing has ever happened here” is unlikely to satisfy it. Sometimes, a silent complaints register means the issues are not being raised at all, rather than not occurring.
For more information on your obligations as an employer, read our Fair Work Act guide for employers.
The person most policies forget: the boss
Two of the most significant recent decisions share a detail that is easy to miss.
In Magar v Khan [2025] FCA 874, the owner of a fast-food franchise, a man in his sixties, sexually harassed a worker in her early twenties, including in his car, and then victimised her after she complained. The Federal Court ordered him personally to pay $305,000, which has been described as the largest total award under the Sex Discrimination Act to date.
In Mejia v Capital City Café-Bar [2026] FedCFamC2G 468, the first concluded case under the Fair Work Act provisions, it was the café’s director who made unwanted advances towards a 23-year-old waitress, hugging and kissing her and making lewd comments. That cost him $90,000, including $50,000 in compensation and a penalty for the harassment itself.
In both cases, the person doing the harassing was the person at the top. That is not unusual, particularly in small and family-run businesses, and it exposes a gap in a lot of workplace policies. A policy that tells staff to raise concerns with their manager offers little help when the manager, or the owner, is the problem.
A useful test is to picture your most junior casual employee and ask who they could realistically go to if the owner or a senior manager made them feel unsafe. If the honest answer is “no one”, the reporting process may exist on paper but not in practice. For a small business, the fix may be as simple as nominating an external contact, such as an HR consultant or a lawyer, who sits outside the chain of command. It is also worth remembering that owners and directors can be personally liable, both for their own conduct and for helping or permitting someone else’s.
A scenario to consider:
A family-run landscaping business employs nine people. The owner looks after the books and the quotes, and his brother runs the crews. A 19-year-old apprentice starts getting messages from the brother late at night, first about work, then about her appearance, then asking her to come over after a job. The business has a sexual harassment policy, a free online template downloaded a few years ago, and it says to raise any concern with your supervisor. Her supervisor is the brother.
So she says nothing for months. When she eventually resigns and lodges a complaint, the owner is genuinely shocked. He had a policy, nobody had ever complained, and he had no idea anything was wrong. But the question a court or the Commission is likely to ask is not whether he knew. It is whether a young apprentice had any realistic way of telling him, or anyone else, without going through the person who was harassing her. In this scenario, she did not.
What may have changed the outcome is not complicated – a named contact outside the crew structure, a short conversation at induction about how to use it, and a policy that says plainly that it applies to family members and owners too.
If you are unsure what a complaints process should look like, our employer guide to handling workplace complaints walks through the steps, including how to document a concern and avoid a response that may later be seen as retaliation.
What this means for your business
Where the risk actually lives
Most harassment does not happen in the boardroom under fluorescent lights. It tends to happen at the edges of the working day, in places where the employer’s influence feels weaker but where the law still treats the conduct as connected to work.
It happens in the team group chat at 11pm. It happens at the end-of-year party with an open bar and no plan for getting people home. It happens on remote sites and in shared accommodation, which is part of the backdrop in Clarke v Beiler Constructions Pty Ltd [2026] FCA 734, where the Federal Court found that a worker had sexually harassed an apprentice carpenter working across island and metropolitan sites, and that the construction company was vicariously liable. It also happens with the long-standing client who has “always been like that”, whose behaviour staff have learned to absorb because the client account matters.
The positive duty asks employers to think about these moments before they arrive. Who works alone or late? Where is alcohol involved? Where is there a steep imbalance of power, or a customer who controls a worker’s day? These are the questions a regulator is likely to expect you to have asked. Work health and safety laws now point the same way, treating sexual harassment as a psychosocial hazard to be managed like any other risk, and in Queensland, employers have needed a written prevention plan since 1 March 2025.
The Monday morning conversation
Picture a staff member asking for a quiet word first thing on a Monday. What happens in the next half hour may shape everything that follows, including whether the business can later show it took all reasonable steps, which is the test for avoiding vicarious liability under section 106 of the Sex Discrimination Act and section 527E of the Fair Work Act.
The manager who says “are you sure that’s what he meant?”, or who promises to keep it entirely confidential and then does nothing, has probably made the situation worse. What tends to help is listening, explaining the options honestly, taking steps to keep the person safe and then following a fair process. That process matters for the accused person too. Sexual harassment is recognised as serious misconduct and may justify summary dismissal, but a dismissal may still be found unfair if the employee was never told the allegations or given a genuine chance to respond.
Managers rarely get this right by instinct. It is one of the clearest areas where targeted training, rather than a generic online module, is likely to make a real difference.
A fair process will often depend on what other people saw or heard, so it is worth understanding how witnesses can shape the outcome of a workplace investigation before the first interview is booked.
Another scenario:
A casual retail worker tells her store manager that a regular customer keeps commenting on her body and waiting near the staff exit at closing time. The manager, who is busy and well-meaning, says “he’s harmless, just stay out the back when he comes in.” Nothing is written down. Three weeks later, the customer follows her to the car park.
The manager did not set out to do the wrong thing. But that one response moved the problem onto the worker, left no record that the business knew, and missed the chance to ban the customer, change the closing roster or walk staff to their cars. Under the positive duty, harassment by customers is the employer’s problem to manage, not something staff are expected to absorb. A manager who knows to say “thank you for telling me, here is what we will do next” is often the difference between a contained issue and a claim.
What getting it wrong may cost
Damages for sexual harassment were once modest. That began to change in 2014, when the Full Federal Court in Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82 increased general damages from $18,000 to $100,000, recognising that community expectations had moved on. The $305,000 award in Magar v Khan suggests the trend has continued.
The economics of defending a claim have shifted as well. Under section 46PSA of the Australian Human Rights Commission Act 1986 (Cth), in federal proceedings started on or after 2 October 2024, a worker who succeeds on any part of their claim will generally recover their legal costs. A worker who loses will generally not have to pay the employer’s costs, unless the claim was vexatious or brought without reasonable cause. For employers, that makes an early and honest assessment of a claim more valuable than ever, and prevention more valuable still.
Settling a claim is not what it used to be
A confidentiality clause used to be one of the first terms drafted in a settlement deed. In Victoria, since 1 July 2026, it has to be the complainant’s idea. Under the Restricting Non-disclosure Agreements (Sexual Harassment at Work) Act 2025 (Vic), an NDA in a workplace sexual harassment matter is likely to be enforceable only if the complainant asked for it, it is written in plain language, they received a prescribed information statement and at least 21 days to consider it, and both parties have acknowledged those steps. Complainants can also end the arrangement after 12 months, although the confidentiality of the settlement amount can continue.
Victoria is the only jurisdiction with these rules so far, but the Commission has recommended similar limits at a federal level. Businesses in other states may find it worthwhile to review their standard settlement terms now rather than waiting for the law to force the issue.
Find out more about these changes in our article, Victoria’s New NDA Laws: Is Your Business Ready?
Your next step
The immediate action is a simple one. Ask three people in your business, at different levels, how they would raise a concern about the owner or a senior manager, and listen carefully to their answers. Those conversations are likely to tell you more about your real level of risk than any policy document.
The deeper consideration is whether your approach would stand up if the Commission asked you to explain it. That usually means looking honestly at where the risks sit in your particular business, making sure your policy covers senior people, customers and after-hours conduct, giving managers practical training on how to respond, and keeping a record of what you have done and why. None of it needs to be elaborate. It does need to be genuine, and it needs to be revisited as the business changes.
Our employment team works with employers who want to get ahead of these issues, and with those who are dealing with a complaint right now. We can review your policies and reporting pathways against the positive duty, train your leaders and managers, run or oversee workplace investigations, respond to claims in the Human Rights Commission and the Fair Work Commission, and negotiate settlements that work under the new NDA rules. Call 1300 003 077 or email enquiry@prosperlaw.com.au to speak with one of our employer lawyers.
Frequently Asked Questions (FAQs)
What is the legal definition of sexual harassment in Australia?
It is an unwelcome sexual advance, request for sexual favours or other unwelcome conduct of a sexual nature, where a reasonable person would have anticipated the other person might be offended, humiliated or intimidated. Intent is not required and a single incident can be enough.
Why is this becoming more important now?
Three things have changed at once. The Human Rights Commission can now enforce the positive duty without a complaint, damages awards are trending upward, and since October 2024 an employer that loses a federal claim will generally pay the worker’s legal costs.
How does the positive duty apply to a small business?
The duty applies to every employer, but what is reasonable and proportionate depends on the size and resources of the business. For a small business, the focus is likely to be on practical steps, such as a reporting pathway that does not depend on the owner and clear expectations for staff and customers.
Can an employer be liable if it did not know about the harassment?
Potentially, yes. An employer may be vicariously liable for its workers’ conduct unless it took all reasonable steps to prevent it. Not knowing is unlikely, on its own, to be enough.
Can we still use NDAs to settle sexual harassment claims?
Outside Victoria, NDAs are not currently prohibited, although the Human Rights Commission discourages using them by default. For matters connected to Victoria, strict preconditions have applied since 1 July 2026.
This article is general information only and is not legal advice.
Last updated October 2026.
About the Author
Farrah Motley
Contact an Australian Business Lawyer Today.
Contact us for a free consultation
