Exposure for employment claims in strata plans

Most strata plans have agreements to engage labour to provide services relevant to the plan. In doing so Owners Corporations (OC), Strata Manager (SM) and/or Building Management Committee (BMC) may have exposure to ‘employment liability’ risk.

Bellrock has observed recent trends in claims being brought by employees (and even contractors) alleging unfair dismissal, a breach of the Fair Work Act 2009 (Cth) protections (general protection/adverse action claims) and accusations against committee members (e.g. harassment). In the context of the above, a lot owner had threatened the concierge of a building. The concierge was employed by the OC.

The concierge reported bullying to the SM, and the BMC were also apprised of the conduct. The abusive lot owner was not on any executive committee, nor were they an office bearer on the BMC or OC.  The OC, BMC or SM failed to act

The concierge  has pursued a claim for bullying under the Fair Work Act (2009) Cth, for, amongst other things, the right not to be bullied in the workplace and the employer’s failure to provide a safe work environment.

Office bearer’s liability (such coverage is included in most strata policies) will indemnify insured natural persons (executive committee members) for legal costs to defend allegations of employment wrongful acts. Where liability materialises, some policies will also pay the plaintiff’s damages (including adverse legal costs).

Most saliently, not all policies will trigger where the OC/SM or BMC is named (as distinct to a natural person who is in on an executive committee). In the example previously extracted, the offender is a lot owner who, relevantly, is not on an executive committee. Coverage as such would only extend wherein liability would attach to the BMC, OC or SM (or any natural person who sat on an executive committee) wherein their actions caused or contributed to loss suffered by the plaintiff.

Employment claims are costly. As like all risk, prevention measures should be in place. Employee grievance procedures, including proper notification and a timely dispute resolution process may have very well remedied the development in this particular matter. SMs should also ensure that there are employment and contractor agreements in place for the OC/BMC. In turn here, legal advice should be sought early in the event of an impending employment dispute.

As always, the scope of coverage will vary across insurer policy wordings. OC’s should be cognisant that some policies may only extend to cover natural persons, others will only indemnify for legal costs in such matters. Office bearers’ liability coverage is claims made, so, allegations of wrongful employment practices must be reported as soon as practicable.

Whilst early notification to insurers is a policy condition, rapid reporting to an employment expert/lawyer to manage such allegations quickly, has in our experience considerably reduced the cost and reputational issues associated with these matters.

For further advice on insurance requirements for strata properties, please contact us via the form below.