It has been more than 6 years since #MeToo called out sexual harassment across society and within the workplace. Research suggests that there are now high expectations for a positive workplace culture and less tolerance for poor behaviour.
In response to a shift in cultural attitudes, from 26 October 2024 there will be a new duty on employers to take "reasonable steps" to prevent sexual harassment in the workplace. Insureds who do not take proactive steps for this new sexual harassment duty may face an increase in harassment claims and a potential 25% uplift in compensation, and there is an extended risk in regulated industries that non-compliance could trigger regulatory considerations.
It will not have escaped your attention that 2024 has already been busy with lots of new employment legislation coming into play. We are also expecting the new Employment Rights Bill soon. With this further update in legislation looming, it is more important than ever for insureds to stay on top of these changes.
Reminder of the current law
Sexual harassment is defined as unwanted conduct that is sexual in nature, where the purpose or effect of the conduct is to violate a person's dignity or create an intimidating, hostile, degrading, or offensive environment.
'Unwanted conduct' could be any of the following (not an exhaustive list):
- Sexual comments or 'jokes'
- Sexual noises, for example, catcalling or wolf-whistling
- Displaying sexually graphic photos, or making sexual gestures
- Unwanted sexual advances or flirting
- Asking intrusive questions about a person's private or sex life
- Someone discussing their own sex life
The Equality Act 2010 currently prohibits sexual harassment and employers are liable for harassment committed by their workers in the course of employment. However, employers will have a defence against claims if the employer can show that they took “all reasonable steps” to prevent the harassment.
New proactive duty on employers
From 26 October 2024, the Worker Protection (Amendment of Equality Act 2010) Act 2023 will come into force and will strengthen existing protection for workers against sexual harassment.
The current law is being added to, rather than replaced. Rather than focusing on addressing harassment in a reactive way, the new law aims to shift employers' focus towards taking proactive measures to identify risks and prevent sexual harassment.
The new legislation seeks to:
- place a new duty on employers to "take reasonable steps" to prevent sexual harassment of their employees;
- give employment tribunals the power to uplift sexual harassment compensation by up to 25% where an employer is found to have breached the new duty. (Employees will not be able to bring a claim for breach of the duty as it will not be a standalone claim); and
- give the Equality and Human Rights Commission (EHRC) power to take enforcement action where employers breach the new duty.
The EHRC has published a draft of its updated guidance on sexual harassment at work to reflect the new obligation. This was subject to consultation and we are currently awaiting the outcome. The revised guidance is expected in September.
"Taking reasonable steps" is not just simply having an anti-harassment policy and delivering annual training. It is not a tick box exercise and there are no minimum requirements that an employer can rely on. The EHRC want to see employers taking proactive steps to prevent harassment in the workplace. Some steps that employers could take are listed at the end of this article.
The new legislation originally sought to reintroduce liability for third party harassment, such as harassment of employees by clients and customers, service users and members of the public, but this was removed during the parliamentary process. However, the EHRC draft guidance suggests that the new duty will require employers to take reasonable steps to prevent sexual harassment by both their own workers and third parties. A failure to comply with the duty in relation to third parties is unlikely to lead to an uplift to compensation at this stage, because this only applies where the employer is legally liable for the sexual harassment. However, should the EHRC's revised guidance remain the same on third party harassment following the consultation, it is likely the EHRC’s powers of enforcement will apply in this scenario and the EHRC will expect employers to treat sexual harassment by third parties equally as seriously as harassment within the workplace.
Focus on the insurance sector and regulatory requirements
Since 2018, the FCA and PRA have made it clear that sexual harassment is an example of non-financial misconduct, which is a regulatory issue. Non-compliance of the new duty could trigger notifications, possible regulatory investigations, and disciplinary action by regulators.
It is expected that the regulators will publish revised rules and guidance shortly. In September 2023, the FCA and PRA consulted on proposals to introduce a new regulatory framework on Diversity and Inclusion (D&I) in the financial sector. We are expecting the consultation responses to feed into policy statements to be published in 2024. The revised rules and guidance will then come into force one year after publication to give firms time to prepare.
How insureds should navigate these changes
What constitutes "reasonable steps" will depend on the specific circumstances of the employer, including its size and sector. Insureds should considering the steps they need to be taking, in light of the new legislation and the revised guidance from the EHRC.
Examples of measures that could be taken include:
- Conducting risk assessments to identify situations in which their employees may be subject to sexual harassment.
- Not waiting until an incident occurs before acting – the board and/or management should take action immediately and create a 'lead from the top' culture.
- Ensuring that policies are up to date with the new legislation and promote these within their organisation. At a minimum this will include an anti-harassment policy but it may also be appropriate, depending on the organisation, to also introduce a separate sexual harassment policy.
- Implementing or refreshing reporting procedures and encouraging a "speaking- up" culture.
- Making sure that line managers are up to date with the new legislation and have a good working knowledge of how their business proposes to deal with the changes.
- Conducting regular training sessions with both managers and employees.
- Effectively dealing with complaints and taking the appropriate disciplinary action against harassers.
- Not ignoring complaints made by employees which concern third parties.
What does this mean for EPL insurers and their insureds?
As mentioned above the new legislation is not introducing a new stand-alone claim. However, if insureds neglect to prepare for this new duty there is likely to be an increase in harassment claims. In addition the claims could be more costly. If an employee succeeds with an employment tribunal claim for sexual harassment and the employer is found to have breached its duty to take reasonable steps to prevent sexual harassment, the employment tribunal can increase compensation for a successful claim of sexual harassment by up to 25%. As there is no cap to the compensation which can be awarded for discriminatory harassment, this uplift could be significant.
Looking ahead, there are likely to be further changes in this area. The government has highlighted its intention to expand the new duty to require employers to take "all reasonable steps" to prevent harassment occurring (not just "reasonable" ones). It also intends to make employers legally liable for harassment by customers and other third parties, and give whistleblowing protection to those who report sexual harassment. Which is all likely to result in an increase in claims and higher compensation.
