The Federal Circuit and Family Court of Australia recently handed down a significant sexual harassment decision with implication for employers, and external contractors and consumers in the workplace, ordering that a contractor and a customer to pay an employee $116,000 in compensation and penalties for targeting him with “homophobic and sexualised statements”, in “a very serious example of sexual harassment at work”.

The applicant, Mr Eklom, commenced employment at Storage King as a storage consultant in September 2023 and later assumed responsibilities equivalent to that of a full site manager.

The first respondent, Mr Marshall, initially a customer and later a contractor who assisted with cleaning and maintenance for the company, made repeated homophobic and sexualised comments towards Mr Eklom.

He said the contractor referred to him as the “office boy”, and made comments like “Oh, the gay boy is cleaning again”, “He probably likes it that way”, and “You sure you are not just into blokes?”  Mr Marshall would also engage in “unwanted physical contact”, including by shoving or bumping into Mr Eklom.

The second respondent, Mr Marshall, a significant customer of the business, later became friendly with Mr Marshall, and subsequently joined in making sexualised remarks and harassing the applicant, including suggesting degrading behaviours and making derisive comments.  Mr Eklom said they regularly referred to him as the “gay boy” and “the storage queen”, a play on the business name, the Storage King.

He said that in January 2025, Mr Mitchell said that Mr Eklom had been “Getting tied up and left in a shed” and Mr Marshall replied, “He is probably used to it”, which Mr Eklom believed implied that because of whatever sexual orientation they presumed him to be, he would enjoy “fetish play” that involved being tied up.

During another incident, when Mr Eklom bent over while cleaning, Mr Marshall said he had bent over “to clean the shed like he is practising for something” and Mr Mitchell responded, “Yes, we know you like it that way”.

They also made comments about him “getting pounded” or raped in the shed, and said that if someone followed him into the shed, “It will turn into a sex party”.

The harassment caused Mr Eklom significant emotional distress, resulting in diagnoses of anxiety, stress and depression.  He eventually complained to his employer, but the complaint was dismissed, and applicant was subsequently terminated after taking personal leave.

Mr Eklom filed an application in the Federal Circuit and Family Court of Australia in July 2025 seeking declarations that there had been a contravention of s 527D the Fair Work Act 2009 (Cth), by the respondents engaging in sexual harassment of the applicant, who was a worker within a business or undertaking; seeking pecuniary penalties that arose from that contravention and also seeking compensation pursuant to s 545(2)(b).  The original application alleged that his employer had also breached the Fair Work Act because of the activities of the respondents, but that claim was withdrawn once it was made clear that they were never employees.

The respondents did not engage at all in this process.  The hearing was conducted in their absence and Judge Vasta proceeded to make the declarations sought, finding that:

• Section 527D of the Fair Work Act, a relatively new section which prohibits sexual harassment in connection with work, had been breached by the actions of both respondents, which fell squarely within that definition.
• The harassment was deliberate, repeated and degrading, manifesting in a pattern of behaviour that caused significant emotional harm to Mr Eklom.
• The respondents were ordered to pay the sum of $90,000 as compensation for loss suffered by the plaintiff due to their contraventions of section 527D of the Fair Work Act 2009, reflecting the serious nature of the harassment and its detrimental effects on Mr Eklom.  The court determined that the second and third respondents were jointly and severally liable for compensating the plaintiff for the loss.
• The respondents were each ordered to pay a $13,000 pecuniary penalty to Mr Eklom.  The pecuniary penalties were imposed to achieve specific and general deterrence, ensuring the respondents and others were dissuaded from engaging in similar misconduct in the future, in line with principles previously established by the High Court.
• No aggravated damages were awarded as the respondents’ lack of engagement was not considered an aggravating factor.
• The court declined to award aggravated damages, as the respondents’ failure to engage in the process was not deemed to be an unreasonable act causing additional expenses for the plaintiff, nor were costs awarded as the plaintiff would have incurred the same expenses regardless of the respondents’ non-participation

Section 527D, which came into effect in March 2023, was incorporated into the Fair Work Act to expressly prohibit sexual harassment of a worker, prospective worker, or person conducting a business or undertaking.  This decision is one of the first applications of the section, and the first made against contractors and customers external to the employer in connection with work (the first being that of Mejia v Capital City Cafe‑Bar [2026] FedCFamC2G 468 (26 March 2026)).

The decision demonstrates that the new provisions confirm that workplace harassment laws extend beyond traditional employment relationships.  There are now repercussions for all customer-facing environments, including retail, hospitality, health and service settings, where harassment may come from clients, contractors or patrons.

It is also a reminder to employers as to the essentiality of providing a safe work environment and proactively taking all reasonable steps to prevent sexual harassment in the workplace. 

Stopping at preparing a sexual harassment policy and implementing regular training is unlikely to be sufficient.  Employers should consider:

• Having their sexual harassment policies refer to the obligations of bystanders and state that disciplinary action will be taken against workers who engage in sexual harassment;
• developing a complaints handling procedure for recipients of complaints to follow in the event of sexual harassment; and
• monitoring workplace culture to ensure workers understand and comply with sexual harassment policies and training.