Richard Barnes was a high-performing assistant manager at Flight Centre company Student Flights when he became concerned another employee was being severely bullied by store manager Kelly Gallasch.
The case centres on claims Ms Gallasch made an employee wear a boob apron (an apron with fake breasts) to a work awards night.
She allegedly told her "no wonder your husband left you" and told other workers the worker was "useless" and "stinks".
Mr Barnes made several complaints about Ms Gallasch's behaviour at the Frankston store but alleges Flight Centre failed to take action.
He is also claiming Ms Gallasch then targeted him as a result of his complaints about her.
Maurice Blackburn Lawyers on Monday filed the action in the Federal Court in Melbourne on Mr Barnes' behalf.
The firm's employment law principal Josh Bornstein said the company's response was unacceptable.
"Our client blew the whistle on extreme bullying behaviour at Flight Centre and as a result, was victimised, demoted and ultimately lost his career with the company," he said.
"The fact that a company which has won awards for being an excellent employer has tried to sweep this under the rug, ignoring obscene and belittling bullying in its own ranks and then turning on those that try to expose it, reflects an unacceptable work attitude."
Flight Centre Limited (FCL) says it will "vigorously defend" the case.
"The company considers it acted appropriately and denies various allegations that have been made against it," it said in a statement.
FCL said it investigated and acted against several people when the complaint was received last year, including complaints made against Mr Barnes.
It said it takes such allegations seriously, has measures in place to prevent and discipline such behaviour, and has a whistleblower's facility staff can use to report alleged wrongdoing.
The case was lodged in January at Fair Work Australia but the parties were unable to reach resolution.
The latest action was filed under the Fair Work Act's adverse action provisions, which protect whistleblowers from victimisation and retribution.
Mr Bornstein said national workplace bullying laws are needed because no law directly addresses workplace bullying and makes it illegal.
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