HR 25 January 2018

The Presidents Club scandal: Are employers liable for third party harassment?

Campaigners have called for employer third party harassment rules to be reinstated

Head of advisory at employment law firm Peninsula, Kate Palmer, looks at employer liability issues around third party harassment in the wake of an investigation at an all-male charity dinner for The Presidents Club in London.

The issue of liability for third party harassment has been called in to question following an undercover investigation by the Financial Times at an all-male charity event.

The Presidents Club ran an event where female hostess were reportedly subjected to sexual harassment by male attendees, although these attendees had been warned against harassing others in the event’s brochure.

Reports of harassment at the charity dinner have included groping, comments of a sexual nature and propositioning female members of staff.

Due to high profile incidents from Hollywood to London, at the start of 2018 the spotlight is firmly on sexual harassment, and questions are being asked from employers about how they can protect staff and businesses.

The Presidents Club all-male dinner took place at The Dorchester hotel on 18 January

Sexual harassment will occur where an individual is subjected to unwanted conduct related to sex which has the purpose or effect of violating their dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment.

It will also arise where there is unwanted conduct of a sexual nature which has this purpose or effect, or where a person is treated less favourably because they have rejected, or submitted to, conduct of a sexual nature.

Previously, employers could be found liable for harassment by third parties under the Equality Act. This made employers responsible where third parties harassed employees, so long as the employer was aware of at least two previous incidents of harassment by the third party and had failed to take reasonable steps to stop this taking place.

This protection against harassment by customers, clients or visitors was removed in October 2013, meaning that employers were no longer liable.

Several days before details about the investigation at the President Club event were released this week, the Fawcett Society, a campaigning body for equality and women’s rights, released a report calling for current harassment laws to be strengthened.

As part of the report, the Fawcett Society recommended reinstating liability for third party harassment, with the employer’s knowledge of previous harassment incidents being reduced to a single incident.

The timeliness of this report, coupled with the President Club revelations, could lead to even more pressure on the government to reintroduce this provision.

The use of non-disclosure agreements to prevent female staff speaking about their experience has also come under scrutiny. Employers can use non-disclosure agreements (NDAs) to prevent staff sharing company information, however, these are usually used for business reasons, such as to protect trade secrets or business acquisitions.

Misuse of NDAs has the potential to damage employment relationships, especially where staff feel pressured in to signing an agreement to remain employed.

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Employers are also unable to use NDAs to avoid providing employees their rights, and they can’t contract out of liability for matters such as harassment.

Companies remain vicariously liable for acts of harassment carried out by their employees in the course of employment, unless they have taken all reasonable steps to prevent this happening.

What the Financial Times investigation reveals, however, is that employers should be taking all necessary steps to stop any form of sexual harassment occurring to safeguard their staff and limit the risk of making unwanted news headlines.

Business Advice contributor Kate Palmer is head of advisory at Peninsula

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