Are you familiar with the cost of doing nothing? Many Australian small business owners believe that because they have a tight-knit team or a "family-like" culture, they are exempt from the heavy requirements of the new Positive Duty legislation.
But the recent Federal Court case of Wood v Kendall [2026] serves as a stark, six-figure warning: In the eyes of the law, having zero workplace policies is not a neutral position: it is an admission of non-compliance.
When 20-year-old trainee Caitlin Wood walked into Heating & Cooling Australia (trading as Hearns Hearth House) for a two-week trial, she expected a professional start to her career. Instead, she encountered a director who leveraged a massive power imbalance, resulting in a $125,238.43 judgment against both the director and the business.
What does this mean for you? It means that "small business" is no longer a valid excuse for failing to protect your staff.
What happened at Hearns Hearth House?
On May 14, 2023, Caitlin Wood started her trial as an administrative assistant. From day one, she was open about her circumstances, disclosing to the 41-year-old director, Kevin Kendall, that she lived with severe anxiety and obsessive-compulsive disorder (OCD).
By May 18, just four days into her trial, she found herself alone in the office with Mr. Kendall. The business premises had reflective windows, meaning no one from the outside could see in. In this isolated environment, the court found that Mr. Kendall engaged in a series of highly inappropriate and unwelcome actions.
Essentially, the director crossed every professional line imaginable. He asked Ms. Wood about her boyfriend and her sexual fantasies. He stepped into her personal space to tuck her hair behind her ear. He asked, "If we dated, wouldn't we have sex?" and followed it with the comment that he thought she would "want it to be special, not in the back alleyway."
Perhaps most damagingly, he told her she had "more of a chance of having sex than running this business." This statement directly linked her future employment to her compliance with his sexual advances.
The takeaway for your business is clear: Any conduct that links job security or career progression to sexual compliance is a high-risk breach of the Sex Discrimination Act.
Why vulnerability matters in Positive Duty
It is important to note that the court took particular issue with the power imbalance in this case. Ms. Wood was a 20-year-old trainee with disclosed psychological vulnerabilities.
Statistics show that this is not an isolated risk. Nearly half of all Australian workers with a disability (48%) experienced workplace sexual harassment in the five years preceding 2022. This is significantly higher than the 33% reported by the general workforce.
Under the new Respect@Work standards, you are required to consider the specific risks in your workplace. If you employ young people, trainees, or people with disabilities, your "reasonable steps" to prevent harassment must be even more robust.
You must identify the "at-risk" groups within your organisation and tailor your prevention strategies accordingly.
The 'Zero Policy' Trap
The most critical failure for Heating & Cooling Australia wasn't just the director’s behaviour: it was the company’s total lack of infrastructure. The court found that the business operated with:
- NO workplace policies
- NO staff induction process
- NO behavioural briefings or handbooks
- NO reporting procedures for complaints
Because the company had nothing in place, they were unable to establish a statutory defence under the Sex Discrimination Act.
Put simply, if an employee harasses someone, the company is usually "vicariously liable" (legally responsible) unless the company can prove they took all reasonable steps to prevent it. If you have no policy and no training, you have taken zero steps. Therefore, you have zero defence.
Having a written policy is the absolute bare minimum requirement for any Australian employer today.
The $125,000 Bill: Breaking down the damages
The court did not hold back in its valuation of the harm caused. The final payout of $125,238.43 was broken down as follows:
- $100,000 in General Damages: This was awarded for the "loss of enjoyment of life" and the severe exacerbation of Ms. Wood’s pre-existing anxiety. The trauma was so severe she couldn't work for four months and even experienced fear responses during a routine eye test with a male optometrist.
- $15,000 in Aggravated Damages: This was added because the respondents refused to engage with the legal process and the Australian Human Rights Commission (AHRC) conciliation.
- $10,238.43 in Economic Loss: To cover the wages she lost while being unable to work due to the trauma.
Ignoring a complaint or a legal notice does not make it go away; it simply increases the final bill through aggravated damages.
What does this mean for your business?
In the past, many small business owners felt they could fly under the radar. But the Respect@Work reforms have shifted the burden. You no longer just have to respond to complaints; you have a Positive Duty to prevent them from happening in the first place.
This case proves that the courts are now awarding much higher damages than they used to. The $100,000 benchmark for general damages in a sexual harassment case is the new reality.
If your business cannot survive a $125,000 legal hit, you cannot afford to ignore your Positive Duty obligations.
How can you protect your company?
The good news is that compliance doesn't have to be complicated. The Australian Human Rights Commission has set out seven standards that every employer should meet: leadership, culture, knowledge, risk management, support, reporting and responding, and measuring and monitoring.
To start securing your business today, you should:
- Implement a robust Sexual Harassment Policy. Don't just download a template; make sure it clearly defines inappropriate conduct and the reporting process.
- Provide Online Training. Every employee and manager needs to understand what constitutes harassment. Our Respect@Work training for managers and training for employees are designed to satisfy the "knowledge" standard of Positive Duty.
- Conduct a Risk Assessment. Identify where your staff might be vulnerable: such as working alone with supervisors or in isolated areas. Read our guide on workplace risk assessments to get started.
- Document everything. If you do provide training or issue a policy, keep a record. This is your evidence for a vicarious liability defence.
Don't leave your defence to chance
Wood v Kendall is a tragic example of how a lack of oversight can destroy a young person's confidence and a business's bank account. But it is also a roadmap for what not to do.
The Federal Court found that the company "fell completely short of its proactive duties." You don't have to follow in their footsteps. By implementing clear policies and providing your team with the right training, you are not just ticking a box: you are building a respectful culture and protecting your business from financial ruin.
At Positive Duty, we specialise in making compliance easy. Whether you need compliance assistance to meet the seven standards or online training courses that your team can complete with minimal disruption, we are here to help.
Request a quote today and let us give you the peace of mind that your business is fully protected.