$90,000 Lesson for Employers: Sexual Harassment Is Now a Fair Work Act Risk
- May 11
- 4 min read
Sexual harassment is now a direct breach of the Fair Work Act 2009, with penalties applying in addition to compensation claims.
Since 6 March 2023, the Fair Work Act 2009 has included a specific prohibition on sexual harassment in connection with work. This means employers face not only reputational risk, but civil penalties, compensation claims and court enforcement.
A recent court decision in the case of Mejia v Capital City Café-Bar [2026] FedCFamC2G 468 (26 March 2026) highlights how quickly that risk can materialise.
What happened in the Café-Bar case?
In this case, a small business owner was found to have engaged in sexual harassment of a young casual employee. The conduct included unwanted physical contact and inappropriate behaviour in the workplace.
The Federal Circuit and Family Court of Australia ordered the employer to pay approximately $90,000, including:
Compensation for non-economic loss
Penalties for sexual harassment
Additional penalties for payroll and record-keeping breaches
This case demonstrates that even a single incident of sexual harassment can result in significant financial penalties under the Fair Work Act, particularly where there is a clear power imbalance and poor workplace systems.
Why this case matters (even if the law isn’t new)
The legal framework itself is not new. However, this decision is one of the early examples of how courts are applying and enforcing the Fair Work Act sexual harassment provisions in practice.
1. Courts are actively enforcing the Fair Work Act
Sexual harassment claims are no longer confined to discrimination law pathways.
Employees can now:
Lodge claims through the Fair Work Commission
Escalate matters to court proceedings
Seek both penalties and compensation
Sexual harassment is now enforceable under mainstream workplace law, not just anti-discrimination frameworks, significantly increasing employer exposure.
2. Financial consequences are real and multi-layered
The ~$90,000 outcome was not limited to the harassment itself.
The Court also penalised:
Underpayment and record-keeping failures
Lack of proper HR systems and processes
Where sexual harassment sits alongside payroll or compliance failures, courts may treat the issue as systemic, increasing overall penalties.
3. Prevention is now the legal expectation
The Mejia decision aligns with broader reforms under the Sex Discrimination Act 1984, including the positive duty on employers to prevent sexual harassment before it occurs.
In this case, the Court specifically noted that the business had no sexual harassment policy and provided no training to its staff. This lack of preventative action contributed to the court's decision to impose penalties. It serves as a warning that:
Policies aren't optional: Courts will look at whether you took "reasonable steps" to prevent conduct before an incident happened.
Systems matter: The quality of your training, reporting pathways, and how you manage the power imbalance in your workplace are now under the microscope.
Proactive over reactive: Employers are no longer judged only on how they handle a complaint, but on the systems they built to ensure the complaint never had a reason to exist.
Employers are no longer judged only on how they respond to complaints, but also on whether they took proactive steps to prevent them.
4. Small businesses and directors are exposed
This case is particularly relevant for SMEs.
Key risk factors included:
Direct interaction between owner and employee
Power imbalance (young, migrant worker)
Informal workplace practices
Lack of structured HR processes
Importantly, individuals can be held liable under accessorial liability provisions of the Fair Work Act 2009.
Business owners and directors can be personally liable for workplace contraventions, particularly where they are directly involved in the conduct.
The broader trend: increasing claims + stronger enforcement
This case does not sit in isolation.
Recent reforms, including the Australian Human Rights Commission Amendment (Costs Protection) Act 2024, have made it easier and less risky for employees to bring claims.
Together, these changes create a clear trend:
More claims
Lower barriers to entry
Higher financial exposure
Greater regulatory scrutiny
What employers should do now
To address this compliance and governance issue, employers should prioritise:
1. Prevention frameworks
2. Reporting and investigation processes
Accessible complaint pathways
Structured, defensible investigation procedures
Access to independent investigators where required
3. Broader compliance alignment
A well-drafted policy is not enough. Employers must demonstrate active implementation, training and enforcement.
Frequently Asked Questions (FAQ):
Is sexual harassment now illegal under the Fair Work Act? Yes. Since 6 March 2023, sexual harassment in connection with work is expressly prohibited under the Fair Work Act 2009 and can result in penalties and compensation.
Can employees bring claims through the Fair Work Commission? Yes. The Fair Work Commission can deal with disputes through conciliation, mediation and arbitration (by agreement), with matters escalating to court where required.
Are small businesses at risk? Yes. This case demonstrates that small businesses, particularly those with informal structures, face significant exposure.
Can directors be personally liable? Yes. Individuals involved in contraventions may be held liable under accessorial liability provisions.
How WorkPlacePLUS can help
WorkPlacePLUS supports employers to move from reactive response to proactive risk management, including:
Workplace investigations - WorkPlacePLUS provides expert workplace investigation services to support employers managing complaints and risk.
Sexual harassment and respectful conduct training - We deliver sexual harassment workplace training to help employers meet their compliance obligations.
Policy and compliance framework development
Psychosocial and cultural workplace reviews
Complex HR consulting - Our team provides HR compliance services tailored to Australian employers.
If your organisation has not reviewed its approach since the 2023 reforms, now is the time.
For more information and tailored support, contact us today.
