Insurance Considerations: Sexual Harassment in the Workplace

United Kingdom

The Government has opened a public consultation to consider whether current laws protecting people from sexual harassment in the workplace are effective. There is a perceived gap between the duties set out in the existing law and employers taking proactive steps to prevent sexual harassment from happening in the workplace, brought into sharper focus by recent press reports of sexual misconduct at law firms and the recent exposure of the wide-spread use of NDAs by employers in place of addressing cultural issues in the workplace.

The most relevant proposal in the Consultation from an insurance perspective concerns a proposed change in the law to introduce a mandatory duty on employers to protect workers from harassment and victimisation in the workplace. There is also a proposal to extend this duty to protect against sexual harassment by non-employees (such as clients or customers). The current law as set out in Section 109 Equality Act 2010 states that employers are vicariously liable for acts of harassment carried out by their employees in the course of their employment, unless the employer can show they have taken “all reasonable steps” to prevent their employees from acting unlawfully.

The new duty, if introduced, would not require employers to take any practical steps that they are not already expected to take, but would mark a shift from employer liability after an incident of harassment to a proactive duty before any unlawful conduct has taken place. This would encourage employers to play a more active role in prevention.

There is also a proposal that interns and volunteers should be given the same protection from sexual harassment as afforded to employees.

The introduction of a new mandatory duty on employers could have an impact on employers’ insurance arrangements. A statutory code will more clearly set out what steps employers are required to take to prevent sexual harassment. This will provide more certainty as to what will be considered “reasonable steps” for the purposes of defending a claim under the Equality Act 2010. Boards who are proactive in adopting measures in accordance with the code may be seen as a better underwriting risk and may benefit from lower premiums. If real change happens at board level to prevent sexual harassment in the workplace, there should be less incidents of harassment and fewer claims against employers.

On the other hand, employers may have an increased exposure to additional claims from individuals for breach of these new duties if preventative measures are not implemented, and from a larger group of claimants if interns and volunteers are given additional protection. This may in turn lead to an increase in claims under their D&O and EL policies, which may include additional penalties (depending on how the law is amended).

If you wish to contribute to the consultation, you may do so via the below link (submissions close 2 October 2019).