Third party harassment: is the employer liable?

30 August 2018

Alison Dixon

The #metoo movement continues to throw up stories of sexual harassment in the workplace in all sectors and industries, and employers are scrambling to keep up. The reputational stakes have never been higher; businesses who are perceived or reported to be enablers (or sweepers under the carpet) of inappropriate sexual conduct attract adverse publicity and may suffer financially.

You may have seen our recent video discussing, amongst other things, how wide the definition of harassment is, and how this often comes as a surprise to people who think that "harmless banter" isn't actionable (it certainly can be!). We also discussed some of the steps employers need to take to ensure that their workplaces are free from harassment, and to minimise the risks of incurring liability for harassment by their staff.

But what about staff who come into contact with third parties in the course of their employment – could an employer be liable for acts of harassment by those third parties against its staff? This will clearly be a significant concern in many industries, and in particular those in which workers come into regular contact with the public (retail, hospitality, healthcare and aviation, to name a few). In the hospitality sector in particular, customers may well be "letting their hair down", drinking alcohol, and feeling uninhibited, which substantially increases the risk of harassing behaviour.

Could an employer be at risk of claims for failing to prevent sexual, or other forms of harassment, by a wayward customer? And what could they do to mitigate this risk?

The current legal position in the UK

The original case on this topic involved a hotel group. In Burton v De Vere Hotels [1997] two waitresses brought claims against their employer after suffering racist abuse from “comedian” Bernard Manning, who was giving an after dinner speech at the hotel. The hotel was held to be liable for the race discrimination suffered by the waitresses on the basis that it had been in a position to prevent the abuse and failed to do so. This case was later overruled, but it was subsequently held that the UK position on third party harassment did not properly reflect the extent of employers’ obligations to protect their employees from harassment under the EU Equal Treatment Directive. This ultimately led to Parliament's enactment of specific statutory provisions on third party harassment.

These provisions were included in the Equality Act 2010 ("EA 2010") and stated that an employer could be liable where it knew that an employee had been harassed by a third party on at least two previous occasions and did not take "reasonably practicable steps" to prevent the harassment.

This gave employers a clear "get out": they could argue that they did not know about, and could not even reasonably be expected to know about, harassment by a third party. Even if the employee complained about alleged harassment, how could the employer be certain of the truth if the third party could not be asked, or did not admit to the harassment? Many viewed this as unsatisfactory.

The provisions in the EA 2010 on third party harassment were, in any event repealed back in 2013, so there is currently no express statutory provision fixing an employer with liability for harassment by a third party.

Until recently, it was considered that there was another potential route to liability, under the "standard" provisions on harassment in employment in section 26 of the EA 2010. Harassment under the EA 2010 is defined as unwanted conduct which is:

• "related to" a protected characteristic (including sex, but also covering sexual orientation, race, religion, disability, age and gender reassignment); and

• has the purpose or effect of violating the victim's dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment for them.

It was thought that the relatively loose causal language of "related to" (rather than conduct "on grounds of" a protected characteristic) meant that an employee could, potentially, get a case off the ground by arguing that an employer's failure to prevent harassment by a third party is itself unwanted conduct “related to” a protected characteristic that has the required harassing effect. However, in the recent case of Unite the Union v Nailard (judgment handed down on 24 May 2018), the Court of Appeal held that this is a very high threshold: essentially the employer itself must have a discriminatory motivation for failing to take action in the face of complaints of third party harassment in order to be liable. The court concluded that the availability of liability for third party harassment was a matter for Parliament, and specific statutory provisions would need to be enacted to cover this.

Why should you be concerned?

Although the current legal position in the UK does not give employees robust rights against their employers where they are harassed by third parties in the course of their work, there are a couple of key reasons for businesses to be concerned about third party harassment.

The first is that changes to the law may be in the pipeline to strengthen workers' rights in this area. The intense media focus on stories of sexual harassment in the wake of the Weinstein scandal, and in particular the Presidents Club scandal, has led to the current legal regime being scrutinised. First, the Equality and Human Rights Commission (EHRC) published a paper in March of this year which specifically recommends not only reinstating the third party harassment provisions in the EA 2010 but also amending them to remove the requirement for the employer to know that the employee has been subjected to two or more instances of harassment before they become liable. The Women and Equalities Committee (WEC) has also held an inquiry into sexual harassment in the workplace, and released its report in mid-July. One of the stated aims of the inquiry was to obtain evidence on "how workers can be better protected from sexual harassment by clients, customers and other third parties". The report recommends the reintroduction of a specific statutory provision fixing employers with liability for failing to prevent third party harassment of workers, and, like the EHRC, the WEC recommends that this should not be limited to cases where the employer is aware of previous occurrences of harassment. The WEC also recommends introducing a statutory duty on employers to prevent sexual harassment at work and punitive fines for those who do not comply. The stakes may therefore be raised significantly for employers who do not do enough to protect their employees.

The second reason is commercial: employers who do not help and protect their staff when faced with harassment by third parties risk significant reputational damage in the current climate. Allegations that are made public can “go viral” and reach huge audiences very quickly. The mis-handling of an allegation of harassment could therefore be extremely harmful to a client’s brand. Employers who are perceived as not providing adequate protection and support to staff will not be seen as attractive places to work and will not retain the best people. Clearly, protecting employees against harassment is a business issue, not just a legal one.

What can be done?

Businesses with workers who come into contact with third parties have a difficult path to tread. They need to make sure that their staff are protected and supported, but at the same time, they cannot fully control the actions of those third parties.

As an absolute minimum, however, employers should have a sexual harassment policy, giving workers a route to raise complaints, not only about co-workers but also about third parties, and which clearly states that harassment of staff by customers or other third parties will be taken seriously and appropriate action taken, where possible, to prevent harassment. The policy should ideally also give details of any appropriate third party organisations and health care providers who can help and advise victims of harassment (or other sexual misconduct). The policy should be publicised to all staff and should be easily accessible.

All employees must know what behaviour is and is not acceptable and it is fundamental for employers to educate their staff accordingly. In addition, training for managers and HR on how to handle complaints of harassment, not only against co-workers but also third parties, is also essential. Training should cover how harassment allegations should be investigated and what options might be available to sanction or pursue third parties who harass staff (e.g. do they need to be reported to the police, if they are clients or customers, should they be declined future custom), as well as how complainants should be treated. Simply having the policy is not enough: it is fundamental that those to whom allegations are likely to be reported understand the importance of treating those complaints seriously, and listening to complainants.

Businesses should also consider whether their commercial agreements (with clients, suppliers, and other third parties) expressly prohibit the unlawful harassment of their staff by those third parties or their representatives, and whether appropriate contractual remedies can be built into those agreements in the event of breach.

Ultimately, this issue is not going away. More and more victims of harassment are speaking publicly about their experiences. Doing nothing to move with these changing times is not an option for employers, particularly if the law on third party harassment is strengthened as recommended by the EHRC and the WEC. We will need to watch this space.

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