Sexual harassment rulings: Court muddies waters for employers

The recent decision of the High Court in Equal Opportunities Commission v Secretary of State for Trade and Industry was reported in the press as heralding a new dawn for employee rights in the workplace. The decision was wide-ranging, covering both sexual harassment in the workplace and rights for employees who take maternity leave.

Reports following the High Court’s ruling have indicated that employers will now be liable for discriminatory acts by third parties against employees. This will no doubt have sent a shiver through HR departments across the country – particularly those where employees are exposed to clients, customers or third parties.

However, stepping back from the stark media headlines, is the High Court’s decision really as significant as recent media reports have suggested?

Media speculation

It is worth noting that there are, as yet, no concrete proposals from the government concerning the required changes in the law. Therefore, media comment about the changes required to the law are, at the moment, speculatory (albeit that the government has indicated that it will not be appealing the High Court’s ruling).

The position under English law prior to this decision was that employers were not liable to their employees in connection with discriminatory acts committed by third parties, except in limited circumstances. The High Court ruling does nothing to alter this basic principle, so employers who fear that any comment or act by one of its clients or customers could constitute sexual harassment that could result in the employer being held liable can rest a little easier.

However, as ever, there is a fly in the ointment for employers. When presenting its case to the High Court, the DTI stated that the changes it introduced to sex discrimination legislation in 2005 meant that employers could be liable for acts of harassment by third parties in certain circumstances.

Liability factsheet

The DTI referred to a factsheet, published by the government’s Women and Equality Unit, which says that employers should take steps to protect an employee from third-party actions that create an offensive working environment for employees and over which the employer has control.

If the employer fails to take these steps by, say, knowingly failing to protect an employee from repetitive harassment by a customer or supplier, the Women and Equality Unit says that the employer would be subjecting the employee to harassment and would therefore be liable.

The Equal Opportunities Commission argued that these points were not implemented properly in changes to the sex discrimination legislation in 2005. And the government says that it will clarify the legislation.

Lesson from history

But if history is any guide, this is unlikely to be reassuring for employers. Consider, for example, the government’s efforts to ‘simplify’ dispute resolution procedures in the workplace, which have done anything but that.

The House of Lords ruled in Pearce v Governing Body of Mayfield Secondary School (2003) that the circumstances in which employers could be liable to employees in connection with discriminatory acts by third parties were limited.

The government seems to have chipped away at this principle with its amendments in 2005 to the Sex Discrimination Act. Following the High Court’s decision, it now has a real opportunity to clarify exactly when employers will be liable for third-party harassment.

We can only hope that the government rises to the challenge.

The responsibility gap

  • The media seems to suggest the floodgates will open and employers will be liable for sexual harassment towards their employees by third parties. This is not correct.
  • The DTI and the EOC may be lobbying for change, but the government is not yet proposing any amendments to existing legislation.
  • The position is unsatisfactory since employers do not know the extent of their responsibility.

By Michael Smith, employment associate and Ranjit Dhindsa, partner, Reed Smith Richards Butler

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