The Federal Court ordered the owner of a fast-food franchise to pay compensation and damages to a former employee
Pictured: Corinna Dowling and Dexter Cabal from Barry Nilsson
The Federal Court of Australia (FCA) has ordered the owner of a fast-food franchisee business to pay compensation and damages to a former employee who was subjected to sexual harassment by the business owner.
The key questions considered by the FCA were whether the business owner and senior employee of a fast-food franchisee business contravened the Sex Discrimination Act 1984 (Cth) (SD Act) arising from alleged:
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Sexual harassment of the applicant, Ms Magar.
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Harassment of Magar on the ground of sex, with the FCA providing the first judicial interpretation of s. 28AA of the SD Act.
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Victimisation of Magar for complaining about the conduct.
The FCA was also required to determine the compensation and damages to be ordered arising from contraventions found.
Magar was a former employee of Mexicali Enterprises Pty Ltd (Mexicali), a franchisee company of Mad Mex Franchising Pty Ltd, a fast-food franchise chain. Mr Khan was the owner of Mexicali and its senior employee.
Following a complaint made in the Australian Human Rights Commission that could not be resolved in that jurisdiction, a proceeding was commenced by Magar in the FCA. The matter proceeded to final hearing before Justice Bromwich.
Worker alleged repeated incidents of sexual harassment
Magar alleged that between mid-January and mid-February 2023, Khan subjected her to conduct amounting to sexual harassment and harassment on the ground of sex (together, the sexual harassment allegations) in contravention of the SD Act. She also alleged being victimised for making complaints about the sexual harassment allegations.
The incidents amounting to the sexual harassment allegations were:
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Khan asking Magar sexualised and demeaning questions in relation to a hickey on her neck on 12 January 2023 (the Hickey Incident).
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Khan asking Magar intrusive questions and making comments of a sexual nature between 12 January 2023 to 16 February 2023 (Sexual Comments).
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Over a five-week period between mid-January 2023 to mid-February 2023, Khan:
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Showed Magar pornography
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Asked and discussed matters of a sexual nature with her
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Asked her to attend a massage parlour and a hotel with him
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Discussed, showed her, and touched her with sex toys while she was in or near Khan’s car (the Car Incidents).
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Magar’s male work colleagues using sexualised and sexually explicit language and descriptions in relation to female employees and female customers (Group Behaviour).
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Khan and another store manager behaving in a way that was disrespectful to her and making derogatory statements dictating how she and other women should dress, notably her wearing skinny jeans (Managers’ Behaviour).
Justice Bromwich accepted, as being more probable than not, Magar’s accounts of the Hickey Incident, the Car Incidents, and the Group Behaviour and Managers’ Behaviour over Khan’s blanket denials.
Worker subjected to sexual harassment: court
Justice Bromwich found that Khan was in a position of power and authority by reference to Magar, as Magar was in her early 20s (and Khan was significantly older than her, in his 60s), and Khan being the owner of Mexicali and its senior employee, was able to direct Magar in relation to her work.
Justice Bromwich found that Magar was subjected to the more serious harassment allegations, being sexual harassment by Khan in relation to the Hickey Incident and four out of the five Car Incidents, as well as finding that Magar was victimised by Khan for making complaints about the sexual harassment allegations. The Group Behaviour and the Managers’ Behaviour were found not to amount to harassment of Magar on the ground of sex because the conduct did not occur in relation to her. Justice Bromwich also found the Sexual Comments allegation was not proven.
Justice Bromwich made an order that Khan pay Magar the total sum of $305,000, comprising: $90,000 for past economic loss, $40,000 for future economic loss, $170,000 for general damages ($160,000 for sexual harassment and $10,000 for victimisation) and $5,000 for aggravated damages.
The order for compensation in Magar v. Khan, [2025] FCA 874, is in keeping with the upward trend in damages awarded.
Sexual harassment, despite its heightened exposure in the media since the rise of the #MeToo movement and, consequently, the increased measures to address the conduct in the workplace and at the legislative level, is still a frequent form of harassment in the workplace.
Legislative changes require proactive approach, policies
Amendments to legislation to protect workers and reflect community expectations that such conduct does not belong in the workplace, provide directives to employers that a proactive approach is required to mitigate the risk of offending conduct to maintain a safe workplace.
It is important for employers to have a sexual harassment policy that is known to and is accessible to all workers. It is also important for employers to provide its workers with ongoing training on sexual harassment and to have clear reporting mechanisms to ensure workers subjected to such conduct, or workers who witness such conduct, are encouraged to report the contravening conduct so that the complaint can be adequately investigated and addressed.
Lastly, it is likely that litigation will continue to increase in the sexual harassment space, given the change in the costs position introduced in October 2024 relating to sexual harassment and unlawful discrimination litigation at the Federal level. Under the framework in the Australian Human Rights Commission Act 1986 (Cth), the respondent must pay the applicant’s court costs if unsuccessful in defending the application, while the applicant is not required to pay costs (absent exceptional circumstances) if an application is unsuccessful. The change to costs considerations provides greater challenges for parties (notably employers) to resolve disputes prior to final hearing and determination, making it all the more important for employers to mitigate the risk of offending conduct from occurring.
Corinna Dowling is a Principal in Barry Nilsson's Insurance and Health Team in Melbourne, specialising in employment practices liability claims. Dexter Cabal is a Special Counsel in Barry Nilsson's Insurance and Health Team in Sydney, specialising in employment practices liability and workplace health and safety. For more information visit bnlaw.com.au.
