Discrimination claim trends — settlement rates and record payouts

Analysis

Discrimination claim trends — settlement rates and record payouts

The current sexual harassment case against the large retailer David Jones has attracted a great deal of coverage because of the amount of damages being claimed by the former employee — $37 million. Two sexual harassment cases, in 2007 and 2009, each resulted in payouts of around $400,000. Which types of discrimination cases are likely to result in the highest damages, and which types are most likely to be successful?

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The current sexual harassment case against the large retailer David Jones has attracted a great deal of coverage because of the amount of damages being claimed by the former employee — $37 million. Two sexual harassment cases, in 2007 and 2009, each resulted in payouts of around $400,000. Which types of discrimination cases are likely to result in the highest damages, and which types are most likely to be successful?
 
This article reports on a UK study of recent discrimination claims and also examines the limited evidence available from Australian cases.
 
UK study: disability cases get highest payouts
 
An article by Laura Chamberlain, published on the British HR website Personnel Today, claimed that disability discrimination cases had achieved the highest payouts in 2010. The average payout of more than £52,000 was more than two-and-a-half times that for any other type of claim. Chamberlain noted that depression and related types of conditions came within the definition of ‘disability’. These were often long-term illnesses that required extensive treatment and, consequently, extensive time off work, loss of income or long-term inability to work.
 
Depression could also be a consequence of other types of discrimination, such as sexual harassment. Disability discrimination claims were the second most common type of claim, but just 3% of all claims were upheld by tribunals.
 
Sexual orientation complaints resulted in the next highest average payout, at just over £20,000. This is a ‘growth area’ for number of claims lodged. Five per cent of claims were ultimately successful at tribunal stage.
 
Complaints of sex discrimination were much more frequent than those for any other ground of discrimination and obtained the third-highest average payout. However, the number of complaints has actually declined over the past few years and more than one-half (57%) of 2010 complaints were withdrawn. Just 2% succeeded at tribunal stage.
 
Race discrimination complaints were the fourth most common category, with 3% ultimately succeeding at tribunal stage. Age discrimination complaints ranked fifth, but the volume of complaints is steadily increasing (up 37% over 2009), although payout amounts tend to be lower than for other types of claims. Forty per cent of complaints were withdrawn and just 2% succeeded before tribunals.
 
Complaints of religious discrimination were far fewer than for any other category, although they are another ‘growth area’. Payout amounts were also lowest of all, less than £5,000 on average. Again, just 2% succeeded before tribunals.
 
The above figures are from the UK Employment Tribunal and EAT statistics, and cover the period from April 2009 to March 2010.
 
The Australian situation: types of complaints
 
Australian data shows a similar pattern in terms of the types of alleged discrimination that attract complaints. The latest annual report (2008–09) of the Australian Human Rights Commission claims that the Commission has received an average of 1749 complaints per year, over the five years to 2009, but this increased to 2253 in 2008–09 and the Commission reported an increase in enquiries generally. In 2009, showing a similar pattern to the United Kingdom, the highest number of complaints related to disability discrimination (43%), followed by sex discrimination (24%), racial discrimination (18%) and just 7% for age discrimination. However, for each type of complaint, 91% of sex discrimination complaints related to employment, versus 59% for age, 54% for sex and 40% for race.
 
Note: state and territory legislation covers a much wider range of grounds of discrimination than this (eg sexual orientation).
 
About one-half (48%) of all federal complaints were conciliated and 68% of those successfully resolved by conciliation. Race discrimination complaints had slightly higher conciliation success rates and age-related complaints had slightly lower rates.
 
One-third of complaints (34%) were terminated or dismissed, and the remaining 18% were withdrawn. Data over the past five years indicates that more complaints are being conciliated and fewer are being dismissed/terminated. Note that one of the meanings of ‘terminated’ is that the Commission believed that there was no reasonable prospect of conciliating the complaint, which means that the complainant had the options of pursuing legal redress or withdrawing the complaint.
 
Of the disability-related complaints, the most common types of disabilities were: physical, psychiatric, neurological (eg epilepsy), vision-related, or a medical condition such as diabetes. Each of these comprised around 15% of complaints lodged.
 
Limitations of Australian data
 
Although successful discrimination cases tend to receive a lot of media coverage in Australia, it is rare for a complaint to go the full distance. In recent years, Australian and New Zealand Equal Opportunity Law and Practice (CCH Australia Limited) has reported between 30 and 40 decisions per year. This number includes all categories of complaints, not just employment-related ones, and includes those that were dismissed as well as those that succeeded. It also covers complaints lodged under state and territory equal opportunity Acts as well as the federal ones, and cases under other legislation (such as dismissal cases under workplace relations legislation) that raised issues relevant to discrimination. Finally, the 30–40 per year also includes appeals against earlier decisions.
 
On this evidence, it seems that the likelihood of a discrimination complaint ultimately being resolved by a tribunal or Court is less than 1%. The 2253 complaints lodged last year under federal legislation must be combined with complaints lodged under state and territory legislation (eg 1323 in New South Wales in 2008–09), yet in total less than 40 resulted in a court or tribunal decision.
 
Bear in mind, however, that the majority of cases are settled out of court somewhere along the way (by ‘conciliation’). In many cases, a settlement amount is agreed to between the parties, and the amount involved and other terms of settlement usually confidential. However, it appears that statistics beyond the basic ones described above are not kept.
 
Speaking hypothetically, the David Jones case could be settled confidentially with a very large payout agreed upon but, if so, it will merely be recorded in the statistics as a case that was settled by conciliation.
 
What factors do payouts cover?
 
Because so few cases are decided by courts and tribunals, it is not really feasible to draw conclusions from the amounts paid out, unlike in the United Kingdom.
 
Australian legislation allows courts and tribunals to award payments to an employee who was discriminated against for the following:
  • economic losses (eg loss of employment income or future income-earning capacity)
  • damages for non-economic loss (such as embarrassment, humiliation or injury to feelings)
 
Other common remedies include reinstatement of employment, backdating a promotion or pay rise, and varying the terms of an employment contract to remove discrimination.
 
In some jurisdictions, there is a maximum amount of damages that can be awarded.
 
An employee is required to provide evidence of his/her losses. In cases that involve medical/psychological conditions (such as stress or depression), the court or tribunal usually examines the medical evidence in considerable detail.
 
Looking at the two largest payouts in Australian cases in recent years:
  1. Poniatowska v Hickinbotham [2009] FCA 680 (23 June 2009) awarded total damages of $466,000, comprising $200,000 for loss of earnings, $140,000 for loss of earning capacity, $90,000 for pain and suffering, $3000 for medical expenses and $33,000 for interest.
  2. Lee v Smith & Ors (No.2) [2007] FMCA 1092 (6 July 2007) awarded total damages of $387,422, comprising $232,163 for economic loss, $100,000 for hurt, humiliation and suffering, $30,000 for future economic loss and $25,259 for medical expenses.
 
Both the above cases involved serious sexual harassment. Note that they are the only two cases reported by CCH in the past four years where the payout exceeded $120,000.
 
In summary, it appears that damages for economic loss and future earning capacity are the amounts most likely to spiral out of control, particularly if a case drags on for a lengthy period. The Australian Human Rights Commission annual report claims that very few complaints take longer than one year to settle, but those that enter the court/tribunal system can take much longer, particularly if the evidence from each party is extensive.
 
Further reading
 
Australian Human Rights Commission 2008–2009 Annual Report.
 
Chamberlain L, Employment tribunal statistics 2010: which discrimination claims get the largest awards?, published on Personnel Today (UK), 8 September 2010. Accessed 27 September 2010.
 
Source: Mike Toten, HR writer.
 
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