Harassment and the Equality Act 2010: case study 2
Rosanne Capper of Clyde & Co LLP continues a series of articles on the impact of the Equality Act 2010 on the law relating to harassment, with a second case study. The case study concerns a situation in which employees are subjected to racial and sexual harassment by third parties. It looks at how the Equality Act extends liability on employers for third-party harassment.
Dazzling Designers Ltd is
a retail chain that sells premium clothing in over 30 stores across the
Harassment occurs when an individual engages in unwanted conduct that has the purpose or effect of violating another individual's dignity or creating a hostile, degrading, humiliating or offensive environment for that individual. The definition of the type of behaviour that amounts to harassment is largely unchanged by the implementation of the Equality Act 2010 (see Harassment and the Equality Act 2010: overview in this series for more details). Under s.26 of the Act, to be unlawful, the conduct must be "related to a relevant protected characteristic". Race is a relevant protected characteristic, as are age, gender reassignment, disability, religion or belief, sex and sexual orientation. It is likely that Edward's comments would amount to harassment related to race.
The majority of the provisions in the Equality Act 2010 come into effect on 1 October 2010. Prior to this date, liability for third-party harassment is limited to sexual harassment (s.6(2B) to (2D) of the Sex Discrimination Act 1975 (SDA)). Therefore, Dazzling Designers is not liable, pre-Equality Act, for racial harassment by a customer like Edward.
However, the Equality Act extends the third-party harassment provisions to all of the relevant protected characteristics. Under s.40 of the Act, an employer will be liable for harassment by a third party that is related to any of the relevant protected characteristics, if it fails to take reasonable steps to prevent the third party from harassing the employee in the course of his or her employment. This rule applies provided that the employer knows that the employee has been harassed in the course of employment on at least two previous occasions. This is known as the "three strikes rule". To be liable, the employer will need to have been put on notice that the employee is at risk of harassment from a third party and have had a reasonable opportunity to rectify the problem. Third parties are people from outside the employment, for example customers or suppliers. Given that Edward has, at this stage, made racist comments to Aisha only on this one occasion, this incident will not, in itself, give rise to a successful claim for harassment against Dazzling Designers. This is the case, even though Carl knows that Edward has, in the past, made discriminatory comments to other employees.
Edward returns to the shop on a few more occasions and makes more derogatory comments about Aisha's race. He also makes comments, on more than one occasion, about her being a woman, saying that she probably doesn't have a clue how to use the till anyway. Aisha is very upset by this and speaks to Carl again. She states that she believes Dazzling Designers is now liable for the harassment by Edward in respect of the sexist and racist comments he has made. Is she correct?
Once the Equality Act is implemented, Dazzling Designers will be liable for both the race- and sex-related harassment by Edward, provided that:
- Aisha has been harassed on at least two previous occasions;
- Dazzling Designers knows that Aisha has been harassed on at least two previous occasions; and
- Dazzling Designers has not taken reasonably practicable steps to prevent the harassment.
The Act does not make clear whether or not, for an employer to be liable for harassment on the third occasion, harassment on the two previous occasions must be related to the same protected characteristic.
Aisha raised the issue of the first incident of racial harassment with Carl and the company has not taken any steps to prevent further harassment. The company would need to know about a second occasion before it could be liable for the third. Therefore the company's liability for the racial harassment at this stage will depend on whether or not Aisha has previously informed it (through Carl, for example) that she has been subject to harassment on at least two previous occasions.
As mentioned above, the Equality Act extends employers' liability for third-party harassment to all relevant protected characteristics. However, prior to its implementation, of the different strands of anti-discrimination legislation, only the SDA imposes liability on employers for third-party harassment. Therefore, Dazzling Designers is not liable (pre-Equality Act) for Edward's racial harassment, regardless of the number of times that he has racially harassed Aisha and whether or not she has raised the issue before (although it could be liable if its reasons for not dealing with the harassment are also related to Aisha's race (Macdonald v Advocate General for Scotland; Pearce v Governing Body of Mayfield School [2003] IRLR 512 HL)).
With regard to sexual harassment, Aisha is protected pre- and post-Equality Act against third-party harassment. Dazzling Designers will be liable provided that it has been made aware of the fact that harassment has taken place on at least two previous occasions and it has not taken reasonable steps to prevent further incidents.
Bhavi (who is of Indian origin) has also been subjected to racist comments by Edward on two previous occasions, of which Carl is aware. She is working in the changing rooms when another customer, Felicity, comes in to try on some dresses. Felicity needs some assistance with getting the right size and Bhavi brings her some different dresses to try on. Felicity speaks to her in a derogatory manner and mutters under her breath to her friend "those types should not be allowed to work in such a high class establishment". Bhavi bursts into tears and runs to the staff room where Carl finds her. Bhavi explains what has happened and that she is very upset. Carl thinks that, as this is now a separate incident with a different customer, Dazzling Designers is not liable if Felicity's behaviour amounts to harassment. Bhavi thinks this is wrong. Who is right?
Once the Equality Act is in force, liability for third-party harassment extends to racial harassment and Bhavi is right. Section 40(3) of the Act provides that it does not matter if the third party who harasses an employee is the same or a different person on each occasion. Therefore, even though Edward carried out the first two acts of harassment and Felicity carried out the third, the latter incident could constitute harassment for which Dazzling Designers could be liable. The company, through Carl, had already been put on notice that Bhavi had been subjected to racial harassment by Edward, on two occasions. Therefore, it was under an obligation to act, to try to prevent a third incident.
Carl realises that there have been a few incidents in the shop lately. He calls a meeting with all the staff and says that, with the extremely valued clients, some comments will just have to be ignored and that staff should remember that "the customer is always right". What should Carl have done instead?
Although the three strikes rule has the effect of allowing an employee to be harassed twice before the employer is at risk of liability, Carl should have acted before matters escalated. He should have adopted a "zero tolerance" approach to objectionable language and behaviour by customers or any other third party with whom employees might have contact. As soon as he knew about the harassment to which Edward was subjecting Dazzling Designers' employees, he should have spoken to him to explain that this type of conduct is not tolerated by the company no matter how valued he is as a customer. Carl should have done likewise with Felicity. Although he could have handled the matter in a discreet manner if necessary (as Dazzling Designers is unlikely to want to damage its relationship with Edward or Felicity), the point should be made clear to them.
What further action should Dazzling Designers take?
Given that potential exposure to liability for third-party harassment is extended by the Equality Act 2010, it is in Dazzling Designers' interest to ensure that it is alive to the issues and takes steps to reduce that liability. It should make sure that its policies and procedures relating to harassment are fully up to date in light of the impending changes and make clear how employees should raise complaints about third-party harassment, so that the company can deal with them. It should also ensure that its employees are aware of the revised policies and procedures and, where appropriate (for example in the case of managers like Carl), given relevant training in how to recognise, and deal with, harassment, including harassment by third parties such as customers and suppliers.
Next week's article will be a checklist to help employers avoid liability for harassment claims, and will be published on 28 September.
Rosanne Capper (Rosanne.Capper@clydeco.com) is a solicitor at Clyde & Co LLP.
Further information on Clyde & Co LLP can be accessed at www.clydeco.com.
