As part of a continued concerted effort to protect the rights of individuals and improve culture in the workplace, the Worker Protection (Amendment of the Equality Act 2010) Act 2023 (The Worker Protection Act’), effective 26 October 2024, requires employers to “take reasonable steps” to prevent sexual harassment in the workplace. While existing legislation (the Equality Act 2010) already prohibits sexual harassment in the workplace, the incoming legislation imposes a positive duty on employers to take steps to prevent the sexual harassment of employees while at work.
The Worker Protection Act provides that the duty can be discharged by taking reasonable preventative actions. Below, we explain what constitutes ‘reasonable’, and how employers can take the requisite steps to discharge the new duty. We also explore the likely impact of the new duty on an employer’s risk profile, and what Employment Practices Liability and Directors’ and Officers’ Liability insurers will likely want to understand about the approach taken by individual firms.
Existing legislation
Sexual harassment, as defined by the Equality Act 2010 (opens a new window), is when a person engages in unwanted behaviour of a sexual nature, whether verbal, non-verbal or physical, that creates an intimidating, hostile, degrading, humiliating or offensive working environment.
Unwanted behaviour of a sexual nature encompasses a range of actions. Examples including making sexual remarks or comments, telling sexually offensive jokes, and displaying or sharing content of a sexual nature.
Until now, employers have been vicariously liable for sexual harassment committed by their workers in the course of their employment, although it is a defence for an employer to show that they took “all reasonable steps” to prevent the harassment. As a minimum, this includes:
Providing staff with adequate and appropriate training
Dealing effectively with complaints (including investigations); and
Taking appropriate disciplinary action against perpetrators.
26 October 2024: the new duty comes into effect
From 26 October 2024, a new enhanced duty will apply, for employers to take ‘reasonable steps’ to prevent sexual harassment in the workplace.
Under the new duty, employers (regardless of their size, sector, or circumstance) will be required to take a much more proactive approach to tackling sexual harassment, the intention being to shift the emphasis from redress to prevention. The duty is accompanied by Equality and Human Rights Commission (EHRC) technical guidance (opens a new window) which outlines various examples and case studies, in an attempt to support employers in their approach to meeting the additional new requirements.
Crucially, this is an anticipatory duty. As such, employers should not wait until an incident occurs to act. Instead, they are required to undertake risk assessments to anticipate and identify scenarios in which their employees may be subject to sexual harassment, and to take preventative action.
Other key points to note include:
The duty extends to sexual harassment by third parties – although the legislation does not make employers liable for third-party harassment, employers will be required to take reasonable steps to prevent their employees being subjected to sexual harassment during the course of their work. Relevant third parties include visitors, clients, or customers.
The duty extends beyond the immediate workplace – instead, it applies to ‘the course of employment’. This could mean time working offsite, in training, and external meetings. It may include work-related time, such as work social events. Accordingly, an all-encompassing and broad approach is needed to meet the requirements of the new duty.
Whether action is deemed ‘reasonable’ will depend on the specific circumstances of the employer. Likely factors of relevance the employer’s size, and its practices and procedures (e.g. grievance and reporting procedures) for preventing and dealing with sexual harassment.
Enforcement measures
Employees will not be able to bring claims directly for an employer’s breach of the duty. However, where there is a successful claim for sexual harassment, the Employment Tribunal will then consider applying an uplift of 25% to any compensation awarded if it also considers the employer to have breached the duty. Even without the uplift, the compensation payable to employees after suffering sexual harassment can be substantial. As such, the financial impact of the new duty could be material.
From 26 October 2024, the EHRC will also have power to take enforcement against employers where they are found to have breached the duty.
The regulatory approach to such issues is also evolving. The Financial Conduct Authority (FCA) considers bullying, harassment (including sexual harassment) and discrimination to be forms of non-financial misconduct, a topic which has been an increasingly hot one in recent years and a real area of focus. As such, it is anticipated that the regulator is expected to keep a close eye on firms’ approach to the new duty.
Preparing for the new duty
Employers should take steps to ensure that they are complying with the new duty, including:
Reviewing existing policies and training procedures and enhancing where appropriate e.g. equal opportunities policy, anti-harassment policy, and disciplinary policies. Assess the training provided in relation to relevant rules (e.g. misconduct) and the methods of delivering and communicating such training.
Identifying potential sources of risk – this may include reviewing past claims or grievances, or (if conducted) exit interviews or employee surveys relating to workplace culture. Compare current methods of recording and resolving complaints against relevant policies to identify potential gaps. Consider scenarios in which sexual harassment is likely to take place and identify steps to minimise/ eradicate these.
Conduct regular training – focus on ensuring that staff understand what sexual harassment is, how to identify it, the potential consequences, and how to respond should they experience or be informed of alleged sexual harassment.
Establish reporting channels – put in place clear guidelines for reporting concerns relation to sexual harassment, bearing in mind the need to ensure that those reporting issues are protected, respecting the need for confidentiality and data protection.
Implement regular reviews – to ensure that policies are kept up to date and reassessed at regular intervals, and in response to relevant incidents and/or failings.
Insurance considerations
As with any key changes to employment legislation, employment practices liability (EPL) insurers will have a keen interest in understanding firms’ approach. The new act does not place additional personal duties on directors but the potential for regulatory scrutiny and also an increase in the potential for boards to face allegations that they didn’t have appropriate systems and controls in place to prevent sexual harassment, means that Directors’ and Officers’ liability (D&O) insurers can be expected to focus on the subject when assessing and underwriting D&O cover. This is perhaps more so for financial services firms and other sectors which may historically have been considered to have a higher incidence of such issues.
As such, we set out below examples of matters which both EPL and D&O insurers will be keen to understand as part of their overall assessment of a firm’s risk profile.
How have the board and the organisation approached culture? What have the steps been to implement a positive culture which doesn’t condone or tolerate sexual harassment? Does the company promote a code of conduct and what is the “tone at the top” in terms of attitude towards harassment?
What is the firm’s approach to preventing sexual harassment and how is this enforced? In addition to training sessions, what preventative steps have been taken? Have policies around background checks, references, interviewing, and onboarding been reviewed and updated?
Has awareness been raised as to the existence of a whistleblowing hotline and that this can be used for reporting concerns about sexual harassment?
Are appropriate repercussions in place for those who are found to be guilty of sexual harassment? Is there capability for allegations of harassment to be effectively and independently investigated?
Are measures in place to reduce the likelihood of sexual harassment occurring in high-risk situations (for example, reminders issued about appropriate behaviour prior to off-site activities and those where alcohol will be consumed)?
Are reminders displayed or offered to visiting third parties regarding the company’s intolerance of harassment of its employees?
Has the board sought an external review of the company’s policies regarding preventing harassment from an employment law firm or similar professional consultant and implemented any advice provided?
As for wider insurance considerations, it is important to consider the extent to which your cover allows for public relations (PR) costs to support through any potential reputational issue (or can be adapted to provide for such advice). We imagine that, in time, as the first cases are pursued in relation to the new duty, the press coverage may be extensive, and any impacted firms will want to carefully manage their response.
The new duty provides the perfect opportunity for firms to revisit their approach to all aspects of culture, considering how they can take proactive steps to provide a positive and inclusive work environment where all feel safe and supported, while firms meet their legal and regulatory responsibilities.
For more information, please contact laura.skaanild@lockton.com (opens a new window)
