Culture in professional services firms: New duty to prevent sexual harassment

Professional services firms will of course already be aware of the need to take any complaint of sexual harassment seriously. But from 26 October 2024 there will be a new proactive duty on employers to “take reasonable steps” to prevent sexual harassment of their employees.

What does this mean for firms, and what should firms be doing, now, to prepare for this?

Back to basics: Why do firms need to tackle sexual harassment in the workplace? 

The issues around sexual harassment claims aren’t just about managing the immediate issue and protecting and safe-guarding employees; they are also about managing consequential issues that can impact a firm – including negative publicity leading to reputational damage, managing difficult questions from current and prospective clients, and the potential negative impact on recruitment and retention strategies. 

Taking proactive steps to prevent these issues arising will not only help professional services firms comply with their regulatory obligations and the new duty coming into force in October 2024 but will actually help with drives to an inclusive and positive workplace culture.

In addition, heightened expectations for a positive workplace culture and a (rightfully) diminished tolerance for poor behaviour, mean that firms that neglect to prepare for this new duty could face an increase in harassment claims.

What is the current legal requirement in relation to sexual harassment for employers?

Current legal duty

Sexual harassment is defined as unwanted conduct that is sexual in nature, where the purpose or effect of the conduct is to violate a person’s dignity or create a hostile environment. 

Unwanted conduct of a sexual nature encompasses a range of actions. Examples include sexual comments or jokes, displaying sexually graphic photos, spreading sexual rumours about a person, and asking intrusive questions about a person’s private or sex life.

Professional services firms can be vicariously liable for sexual harassment committed by one of their employees or partners against a colleague, although it is a defence for the firm to show that they have taken “all reasonable steps” to prevent that individual from doing so. As a minimum, this means:

• providing adequate and appropriate training of staff
• dealing effectively with and investigating complaints
• taking appropriate disciplinary action against harassers 

Current regulatory expectations

Regulated professional services firms in England and Wales also need to comply with the regulatory frameworks set by the professional regulators. Alongside increased scrutiny of the robustness of firms’ systems and controls, regulators in the last few years have ramped up their focus on non-financial misconduct including sexual harassment:

• In April 2023, following high-value sex discrimination, harassment and bullying claims, and complaints of failure to address unacceptable behaviour, the Solicitors Regulatory Authority (SRA) introduced new rules into the SRA conduct rules for solicitors and law firms on treating colleagues fairly and with respect. The new rules include express obligations not to bully or harass colleagues or discriminate unfairly against them. They also include a positive obligation on managers to “challenge” behaviour in others that does not meet this standard. The language is broad enough to encompass all types of mistreatment of others, including sexual misconduct.  The rules are further supported by updated SRA Guidance on the workplace environment and previous SRA Guidance on sexual misconduct. Where there is a serious incident, this should be reported to the SRA in accordance with its enforcement strategy.
• A broader Duty to Report Misconduct (effective June 2023) to the Institute of Chartered Accountants in England and Wales (ICAEW) has been introduced for accountants, both in scope (what must be reported) and application (who must report). Accountancy firms, in addition to individuals, are now obliged to report misconduct by themselves, another ICAEW member, provisional member or firm, with the result that firms may now face allegations in relation to a failure to report misconduct (which explicitly includes sexual harassment at work).
• There is a continued focus by the Financial Reporting Council (FRC) as part of its Audit Quality Review process on monitoring accountancy firms’ policies and procedures including those relating to non-financial misconduct.
• The Royal Institute of Chartered Surveyors (RICS) introduced guidance relating to unacceptable behaviour by members (effective December 2023) which requires firms to deal promptly with complaints and to promptly report members in breach to RICS following investigation.

New legal proactive duty on employers from 26 October 2024

New legislation will apply to all employers (including professional services firms) and will strengthen the protection from sexual harassment of employees at work. It does so by introducing a new pro-active duty on employers, from 26 October 2024, to “take reasonable steps” to prevent sexual harassment. The intention of the legislation is to shift the focus from redress to prevention and protection, which adds to the onus on employers to take proactive steps. 

EHRC draft guidance on the new duty

Indeed, the Equality and Human Rights Commission (EHRC) has now published draft guidance on this new duty which emphasises that this is an anticipatory duty. Employers should not wait until an incident of sexual harassment occurs before taking action. Instead, they should undertake risk assessments to identify situations in which their workers may be subject to sexual harassment and take action to prevent such harassment taking place

The guidance also makes reference to harassment by third parties – and whilst there is no direct legal protection for employees against third party harassment, as this was dropped from the final legislation, the guidance indicates that the new duty will require employers to take reasonable steps to prevent sexual harassment by both their own workers and third parties. Professional services firms should be mindful to protect staff from sexual harassment, not just in the office but also at work related events and from clients and customers.

Enforcing the new duty

There will be a corresponding new compensation uplift of up to 25% for breach of the new employer’s duty to prevent sexual harassment. Employees won’t be able to bring a claim for breach of the duty as it won’t be a standalone claim. However, where an employee’s claim for sexual harassment succeeds, the Employment Tribunal will then consider applying an uplift to any overall compensation awarded if it also considers there has been a breach of the new duty. 

If sexual harassment claims are successful, the compensation payable to employees can be substantial, even without the impending threat of an uplift. For example, in Tahir v National Grid UK Ltd [2023], an Employment Tribunal awarded over £350,000 in compensation to an employee who resigned after suffering sexual harassment. 

Linking the new duty with regulatory obligations

However, does the new duty actually place any additional obligations on professional services firms in practice, over and above their regulatory obligations? Law firms, for example, already have the obligation to “do all they reasonably can” to prevent harassment (SRA Guidance on the workplace environment). That looks potentially wider than the new legal obligation. 

The key point perhaps for law firms, therefore, is that if an employment tribunal were to find that the law firm had failed to “take reasonable steps” to prevent sexual harassment, regulatory consideration would inevitably follow. 

For other professional services firms, given the focus on “non-financial misconduct”, a finding by an employment tribunal that they have not taken reasonable steps to prevent an actual occurrence of sexual harassment will also potentially result in regulatory consequences.

As with other employment tribunal claims, and allegations and complaints which relate to workplace culture issues, professional services firms should be considering their regulatory reporting obligations at all times.

EHRC investigations

The EHRC currently has the power to investigate breaches of the Equality Act 2010 and to take enforcement action. From 26 October 2024, the EHRC will also have the power to take enforcement action where employers (including firms) breach the duty to “take reasonable steps” to prevent sexual harassment by their own workers or third parties. So, in the same way that, using the example of a law firm above, a tribunal’s finding that the law firm had breached this new duty would lead to consideration of regulatory reporting obligations, and, if the EHRC was to find the firm had breached this duty, regulatory considerations would also arise.

Action points: 4 steps for professional services firms to take

Now that the EHRC has published its draft updated technical guidance on sexual harassment to reflect the new duty on employers, professional services firms should take steps to ensure compliance with their regulatory requirements and the new duty, and to foster an inclusive and positive workplace culture.

This involves firms undertaking a comprehensive review of their current policies and procedures, training and workplace culture and implementing practical measures to help adopt a proactive stance against sexual harassment and other negative workplace behaviours. Agile policies and procedures are needed to address and demonstrate compliance in this area at both an individual level (for managers) and a firm level.

Step One – Review and understand what you are currently doing

• Gather all policies that you have which are relevant to preventing sexual harassment.  This will include your equal opportunities policy, bullying and anti-harassment policy, whistleblowing policy, data protection and disciplinary policies.
• Gather all training that you currently do in relation to these policies, and any programmes you use for communicating them (such as posters, internal newsletters, staff meetings).
• Gather all policies and programmes that you have in relation to reporting. This will include formal reporting channels and telephone hotlines run by third parties.

Step Two – Consider and review your current culture and risk points

• What is your current culture? 
  • Review what claims, grievances and issues you have had, perhaps over the last three years.  Do you carry out leaving interviews and can you review those?
  • Do you do culture or engagement surveys?  Do they ask relevant questions?
  • How are complaints recorded, investigated and resolved? Do they follow your policies? Do they adequately observe confidentiality and support individuals involved?
• Do you need to know more about your current culture and any issues?
  • Can you conduct leaving interviews or add questions around this area?
  • Can you do engagement surveys or, if you already do, can you add questions relating to “speak up” culture?
  • Can you do a culture survey that is specifically related to sexual harassment?
• What actually is your risk?        
  • What are the risks of sexual harassment occurring, and where and when may it be more likely to occur?
  • Do you have any learning from issues which have arisen in relation to, for instance, relationship at work policies, alcohol consumption policies, work trip policies, social event policies?
  • What is the best way of preventing the risk of sexual harassment, as opposed to simply reacting to issues as they arise?

Step Three – Put in place an action plan

• Do you need to update your policies?
  • Do they cover social media and out of work scenarios?
  • Are your reporting mechanisms (both internal and external) sufficient?
  • Have you considered publishing your policies on your external facing website?
  • Should you have a standalone sexual harassment policy?
• Do you need to update your training or awareness or consider a campaign in this area?
  • Has everyone within the organisation received specific training on sexual harassment? Has this been done recently?
  • Is your training sufficiently targeted at the right levels of staff and tailored by role? 
  • Does it include situational training and training for those who witness sexual harassment?
• Do you need to improve the way you communicate your policies to drive a zero-tolerance culture regarding harassment?  
  • Have you considered appointing a senior manager as a workplace champion to assess feedback on whether policies and training are working?
  • Have you provided training to the HR team and investigating managers on how to provide support and investigate complaints in a trauma-informed manner?
  • Have you considered appointing other (more junior) staff within the organisation as points of support for those who lodge sexual harassment complaints.
• What can you do to review your culture? Can you update leaving interviews, engagement surveys and think about a culture audit?
• Can you do a risk assessment?

Step Four – Plan timing and a rolling review

Would you like to know more? Clyde & Co will be hosting a webinar to explore culture in law firms on Thursday 12^th September. To register for this event, please click here.

Get in touch for advice

We can provide bespoke advice tailored to your firm’s needs. Our approach is not just about meeting the new requirements; it’s about fostering a zero-tolerance environment that drives positive change. Our goal is to help you create effective resolution pathways, pinpoint risk areas, and ultimately cultivate a superior workplace culture.

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