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A recent decision of the Federal Circuit and Family Court of Australia has highlighted how the sexual harassment provisions of the Fair Work Act 2009 (Cth) (Fair Work Act) that were introduced in 2023, extend to covering well beyond the conduct of the employer and employees.  The decision carries important lessons for employers, particularly for those operating customers facing businesses.

Eklom v Marshall [2026] FedCFamC2G 772 is one of the first significant applications of these still relatively new provisions.  The Court found that a contractor and a customer were liable for misconduct and sexually harassing an employee. The judgment is an important reminder that businesses must take seriously the risk of inappropriate conduct of third parties who deal with staff their staff.

The case involved a worker (the applicant) who was a site manager at a storage facility.  While at work he was subjected to ongoing sexualised and homophobic comments and humiliating insinuations by a contractor and a customer who regularly attended the premises.  The conduct was persistent and over time escalated into repeated degrading remarks implying sexual behaviour and orientation.  The Court accepted that the applicant developed anxiety, stress and depression linked to the harassment and that he had raised concerns with his employer but these were not effectively addressed.

Importantly, the individuals accused of making the homophobic and sexualised remarks were not employees of the business. Again, their involvement arose through their connection to the workplace as a contractor and a customer.

The Court found that both the contractor and customer were held to have contravened s527D of the Fair Work Act which prohibits sexual harassment ‘in connection with work’ by engaging in sexual harassment.

The Court emphasised that the provision is deliberately broad in its operation. It is not limited to only capturing conduct that is committed by employees. Rather, the focus is on whether:

• the affected person is a worker; and
• the conduct occurred in connection with that person’s work.

The contractor and customer were held jointly and severally liable and ordered to pay $90 000 to the applicant for the psychological harm suffered as well as $13 000 each in pecuniary damages to the employee.

Why this matters for employers

Although the employer was not ultimately held liable in this case, the decision carries clear warnings for businesses. It reinforces that workplace risk is not confined to employees and that exposure can arise wherever staff interact with others in the course of their work. Employers need to actively manage ‘third party risks, particularly in industries where staff regularly interact with clients or external providers.

In practical terms, organisations should assume that their duties to provide a safe workplace extend to all interactions connected to work, not just internal relationships.

Practical steps for employers to manage risk

1. Review and strengthen workplace policies
   Workplace policies should clearly set out expected standards of behaviour not only for employees but also for the proper monitoring and regulation of conduct by:

• • contractors;
  • clients and customers; and
  • other third parties interacting with staff.

Clear consequences for unacceptable conduct should also be set out.

2. Provide targeted training
   Training should equip staff and managers to recognise and respond to harassment in all forms including conduct by third parties. Staff should be supported to:

• identify inappropriate conduct from external parties;
• understand their right to raise concerns; and
• know what steps to take when issues arise.

Managers, in particular, should be equipped to intervene early and appropriately.

3. Implement effective response mechanisms
   Employers should have clear processes in place to address complaints involving third-party misconduct. This may include:

• • restricting or managing access to the workplace;
  • escalating concerns; and
  • terminating business relationships where necessary.

4. Respond promptly and appropriately
   The Court’s observations in this case highlight the impact on workers who feel unsupported. Even if the conduct is coming from outside the organisation, employers should:

• • respond quickly to complaints;
  • investigate appropriately; and
  • take visible action to protect the affected employee.

A failure to do so may compound the harm and expose an employer to separate liability.

5. Consider contractual protections
   Where appropriate, behavioural expectations should be reflected in contractor agreements and terms of engagement. This can assist in managing issues if they arise and provide a clearer basis for enforcement.

Key takeaway

Eklom v Marshall reinforces that workplace sexual harassment laws will be applied in a practical and expansive way, reflecting the realities of modern working environments.

For employers, the takeaway from Eklom v Marshall is clear: ensuring a safe workplace requires more than managing employee conduct. It demands a proactive and comprehensive approach to all interactions connected to work. Risk does not stop at the payroll, and neither should the employer’s policies, training, and response systems.

This article was published on 3 July 2026 by Carroll & O’Dea Lawyers and is based on the relevant state of the law (legislation, regulations and case law) at that date for the jurisdiction in which it is published. Please note this article does not constitute legal advice. If you ever need legal advice or want to discuss a legal problem, please contact us to see if we can help. You can reach us on 1800 059 278 or via the Contact us page on our website. (www.codea.com.au).