Protecting the workforce: preparing for the new duty on employers to prevent sexual harassment

As part of a continued concerted effort to protect the rights of individuals and improve culture in the workplace, a new Worker Protection Act, effective 26 October 2024, requires employers to “take reasonable steps” to prevent sexual harassment in the workplace.

Sexual harassment, as defined by the Equality Act 2010, 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. It can encompass a range of actions, including making sexual remarks or comments, telling sexually offensive jokes, and displaying or sharing content of a sexual nature.

Under the new duty, employers (regardless of their size, sector, or circumstance) are required to take a 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 which outlines various examples and case studies to support employers to meet the additional new requirements.

Key points to note include:

• The duty is anticipatory – employers 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.
• The duty extends to sexual harassment by third parties – including visitors, clients, or customers. The legislation does not make employers liable for third-party harassment itself, however.
• The duty 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, increasingly an area of focus in recent years. As such, the regulator is expected to keep a close eye on firms’ approach to the new duty.

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. However, 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 underwriting D&O cover.

Both EPL and D&O insurers will be keen to see firms take steps to comply with the duty and mitigate risk. Specifically, these may include:

• Reviewing existing policies and training procedures and enhancing where appropriate 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.
• Conducting 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.
• Establishing reporting channels – put in place clear guidelines for whistleblowing for issues around sexual harassment, bearing in mind the need to ensure that those reporting issues are protected, respecting the need for confidentiality and data protection.
• Implementing 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.
• Establishing repercussions for those found guilty – and maintain the capability for allegations to be effectively and independently investigated.
• Seeking an external review – g. from an employment law firm or similar professional consultant, and implement 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). As the first cases are pursued in relation to the new duty, the press coverage may be extensive. Any impacted firms will want to carefully manage their response.

For more information, please contact laura.skaanild@lockton.com

Laura Skaanild