Respect@Work in Action: First decision under section 527D of the Fair Work Act

In the recent decision of Mejia v Capital City Café-Bar [2026] FedCFamC2G 468 (26 March 2026), the Federal Circuit and Family Court of Australia (the Court) ordered a café owner pay $90,000 to a casual worker for sexual harassment, wage contraventions, and other breaches of the Fair Work Act 2009 (Cth) (Fair Work Act).

The sexual harassment related to a single incident involving non-consensual hugging and kissing at work, and the making of lewd comments.

This is the first concluded case under section 527D of the Fair Work Act, which prohibits sexual harassment in connection with work. Section 527D was introduced in 2023 as part of the Respect@Work reforms.

Background

The applicant, Ms Mejia, was a 23‑year‑old casual employee from Colombia on a Bridging Visa who commenced proceedings against her former employer, Capital City Café‑Bar, and its sole director, Mr Kehal.

The sexual harassment alleged by Ms Mejia arose from a single incident on 29 July 2024, shortly after she had queried discrepancies with her pay with Mr Kehal.

While Ms Mejia was in the Café’s kitchen, Mr Kehal hugged her from behind, pressed against her, waved his wallet at her and suggested she take some money. Feeling she “had to do something to get him away from me”, Ms Mejia grabbed a $50 note and pushed Mr Kehal away, who then proceeded to kiss her on the lips.

Over the following days after the incident, Mr Kehal sent a series of text messages to Ms Mejia apologising for what had occurred, describing it as a “blunder”, promising it would not happen again, and asking whether Ms Mejia intended to tell his wife.

Despite pleading with her to return to work due to the Café being short staffed, Ms Mejia did not return to work after the incident.

Additionally, Ms Mejia made allegations relating to underpayments and record‑keeping breaches under the Fair Work Act. During 12 weeks of employment at the Café, Ms Mejia received only one pay slip, which was provided three days after her final shift and understated her hours worked and overstated the hourly rate she was being paid.

Decision

The Court ordered that Mr Kehal pay Ms Mejia a total of $90,000 in damages and penalties, made up of the following:

1. non-economic loss – the Court, by consent of the parties, ordered $50,000 for non-economic compensation for the sexual harassment.

2. penalty for sexual harassment – the Court imposed a pecuniary penalty of $9,390 (50% of the maximum) for sexual harassment under section 527D of the Fair Work Act. Relevant factors included:

• Ms Mejia being a ‘vulnerable’ worker (e.g. young, female, migrant, limited financial resources and social supports).
• Mr Kehal’s position of authority, and that he sought to leverage that authority, particularly by holding out a financial gain to Ms Mejia; and
• the fact that the conduct involved a single incident, with no evidence of prior inappropriate behaviour or a permissive workplace culture.

3. penalty for wage and record‑keeping contraventions – the Court imposed a penalty of $30,610 (11% of the maximum) for wage and record‑keeping contraventions under the Fair Work Act. The Court noted that providing false or misleading payslips attracts higher penalties where the conduct is intended to avoid penalty by deception.

Key Takeaways for Employers

1. Under section 527D of the Fair Work Act, a single incident of workplace sexual harassment is enough to result in significant compensation and penalties being awarded by the Court.
2. Employers should ensure they have robust systems and training in place to prevent sexual harassment in the workplace. Failure to do so can result in significant penalties under the Fair Work Act.
3. Early, well‑advised responses to allegations of sexual harassment in the workplace are crucial. In this instance, the Court found that Mr Kehal’s late admissions to the allegations (on the day of the hearing) weighed against him in assessing a penalty.

This case serves as a timely reminder for employers to review their bullying and harassment policies and payroll records in light of the Respect@Work reforms.

If you need assistance dealing with any matter relating to the above, please contact principal Tim McDonald for assistance.

Please contact Principal Tim McDonald if you need assistance dealing with any matter relating to the above.

Contributors

• Marko Marelic, Senior Associate
• Angus Dowey, Lawyer