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Employer's liability for third party acts of discrimination against employees

In 1996 the Employment Appeal Tribunal delivered a surprising judgment. During a “comedian’s” stage act, which took place at a hotel that had not engaged the comedy act, two waitresses were subjected to detrimental treatment by the comedian.

The judgment found that the waitresses were entitled to succeed in their claims of race discrimination because, having raised concerns to their manager about the treatment they were being subjected to, they were required to go back into the room where the comedian was performing to carry out their normal roles. 

If one knows that the “comedian” was Bernard Manning and that the waitresses were from an ethnic minority group then the type of discriminatory behaviour is all too obvious.

This decision alerted employers to the potential liability they had for their employees concerning third party acts of sex and race discrimination.  However, the House of Lords in 2001 indicated that the 1996 decision had been wrong and should not be followed because the employer’s action was not on the grounds of the employees’ race.

Since then the EU has implemented the Equal Treatment Directive, with which every member state is required to comply. To deal with this shifting landscape, the government introduced new regulations in 2005 to implement, in its view, the terms of the Directive.  However, the Equal Opportunities Commission brought proceedings against the government because it argued that the Directive had not been fully implemented by regulations issued to amend the definition of harassment under the Sex Discrimination Act. The government lost the case and was obliged to amend the regulations. These new regulations came into effect on 6 April 2008 and the amendments have broad implications for employers:

Harassment – a new definition

The definition of harassment has been substantially broadened. Historically, harassment only occurred when a woman was subjected to conduct “on the grounds of her sex”. The revised definition is much broader and provides that harassment occurs where a person “engages in unwanted conduct that is related to her sex or that of another person”. 

The breadth of the new definition can be seen from a simple example. A manager habitually picks on a female member of his team because she is a woman. The woman who is being subjected to the treatment has always had the right to bring a claim of discrimination. However, under the new definition, other members of the team, if their dignity is violated or if there is a hostile, intimidating or degrading environment created for that person can also bring a claim of sexual harassment based on the treatment suffered by the individual being picked on. 

Whether employees will begin bringing myriad claims based on their new “right” where treatment is being meted out to another is unlikely but, it is certainly foreseeable, that if they have other grievances of their own it will form an additional ground of claim.

Harassment by third parties

The amendment regulations also make employers liable to their employees for third party acts of harassment. This will include clients and customers who are not under the employer’s control. Obviously in those circumstances there needs to be some safeguards for employers and the regulations make it clear that an employer will only be liable for third party acts of harassment if:-

  1. The employer knows his employee has been subjected to harassment on at least two occasions by a third party, and
  2. The employer has failed to take such steps as would have been reasonably practicable or to prevent the third party doing so.

Surprisingly the regulations make it clear that “it is immaterial whether the third party is the same or a different person on each occasion”.

Quite what is reasonably practicable to prevent a third party from committing acts of harassment is not made clear. When dealing with acts of harassment by employees, employers are required, as a minimum, to have a policy in place and to undertake regular training of their staff. Obviously with third parties this is much more difficult.  For example it may be necessary to place appropriate wording in commercial terms and conditions. Those businesses that deal with the public may need to display “anti-harassment” signs; but until there has been some case law we will not know what is considered “reasonably practicable”.

What is clear is that one off acts of harassment will not impose liability on employers that would have been an impossible burden to bear.  However, an employer now has a series of potentially difficult scenarios to consider;

A female sales executive is heading a large contract negotiation with a client. She complains to her manager that the person leading the client’s negotiating team has made inappropriate comments/suggestions and his behaviour at meetings and on the telephone have created a hostile, intimidating and degrading environment. What does the employer do?  Does he raise the issue tactfully with the client, knowing that it might kill the deal? Does he ask the sales executive to “grin and bear it” thus leaving the company open to claims of discrimination, unfair and wrongful dismissal or does he put another sales executive into the contract negotiation replacing his existing sales executive. Such conduct would raise the prospect of a series of claims by his unhappy employee against the company. To protect itself, the employer will need to raise the matter with the client or ask the female sales executive if she would prefer to be moved off the account.

To go back to Bernard Manning, if claims were to be brought against the hotel for sexual harassment, the hotel would be liable if the women were subjected to harassment on two occasions; complained and were then exposed to the same behaviour again, unless they took reasonably practicable steps to prevent it happening. Alternatively, the hotel could be liable if there had been complaints about previous acts and Mr Manning was the third occurrence.

This latter problem of women being subject to unrelated acts of harassment over time is a real problem for employers.

What an employer does in such circumstances will, inevitably, depend upon the situation at the time. Employers will need to deal sensitively with employees who raise concerns because of the potential liability being imposed upon the employer if they do nothing. Given the fast pace with which the commercial world moves, employers would be well advised to put in place now procedures and polices that can be operated swiftly where such complaints are being raised. The worse possible scenario would occur where the sales executive raises a complaint, the employer does not know what to do, hesitates and in the two or three days of hesitation further acts of harassments take place leading to the employee bringing claims against the employer, implicating the client, which eventually leads to claims being brought in the Employment Tribunal and, with the result of publicity, the client withdrawing from contract negotiations.

Viewed in stark contrast, it is abundantly clear that employers need to take action now to think through how they would deal with such complaints in the immediate aftermath of such a complaint being raised to ensure that they have taken adequate steps to protect their employee.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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