The cost of sexual harassment

Introduction

In 2006, American activist Tarana Burke started the #MeToo movement. Originally a youth programme aimed at junior and high school students addressing sexual violence in the community, the movement gathered momentum in 2017 when allegations against Hollywood movie mogul, Harvey Weinstein, surged under the #MeToo banner. Since then, there has been an increase in sexual harassment claims globally. 

Whilst it is impossible to quantify the overall cost of sexual harassment claims to the insurance industry, it is clear that the number of claims has risen dramatically in recent years.

Awards for sexual harassment can range from tens of thousands of pounds to hundreds of thousands of pounds in serious cases, and there is no cap on the potential level of an award. Various factors will impact upon the level of award, for example, the claimant’s financial losses, injury to feelings, and any applicable uplift to an award for the employer's failure to prevent the harassment. To compound matters for respondent employers, legal fees, and reputational damage may also be significant.

It is for these reasons that employers who have been subject to such claims are often required to pay higher premiums, there is increased underwriting scrutiny, resulting in changes to policy terms for employers' liability insurance.  

In the UK, under the Equality Act 2010, sexual harassment is a form of unlawful sex discrimination. A key issue in recent years is the extent to which employers are likely to be liable for acts of harassment which have occurred ‘in the course of employment’.  Employers should be reminded that whilst harassment may happen at work, it is frequently extended beyond work, i.e. outside the workplace and / or working hours, especially during social activities, for example at sporting events or the annual Christmas party. 

A recent appeal from the Employment Tribunal to the Employment Appeal Tribunal (EAT), is a stark reminder about the fact that the words ‘in the course of employment’, will be interpreted widely.

The case

AB v Grafters Group Ltd (t/a CSI Catering Services International) 

The facts

A, the claimant, worked for a hospitality recruitment agency and, although she believed she was scheduled to work a shift at a racecourse, the company had cancelled her shift without telling her. Another employee C had sent A sexually harassing texts in the early hours of that morning and whilst C was working a shift for the company. A arrived at the company’s office assuming that transport to the racecourse would be arranged for her. C had completed his shift, and so was not working when he offered a lift to A. 

 
Shortly after the journey began, C informed A that she was not scheduled to work that day. A, then asked to be taken to a bus stop, but was instead taken by C to a golf course where, the Employment Tribunal found, C had verbally and physically sexually harassed her.

Employment Tribunal decision

Whilst the tribunal found that C had sexually harassed A, it concluded that C was not acting in the course of his employment at the time of the incident. Therefore, the employing agency was not legally responsible for his actions. The decision was based on the following facts:-

• C was not scheduled to work the same day as A
• the company had arranged other transport
• the lift was informal and not arranged by the employer
• C’s actions were personal and not related to his duties

Employment Appeal Tribunal decision  

The EAT found that the tribunal’s decision was wrong, because it failed to consider:
- whether the lift and harassment were closely connected to work, which would make it ‘in the course of employment’; and 
- the extent to which the employer discharged its duty to protect staff from harassment. 

The EAT noted that legal definitions and phrases such as ‘in the course of employment’, can be complex and fact specific. The case was remitted back to the same Employment Tribunal to reconsider whether C’s actions were sufficiently connected to his employment to make the company vicariously liable for them.

Reducing the risk of claims 

Since October 2024, employers are under an increased legal duty to take ’reasonable steps’ to prevent sexual harassment in the workplace. Having a policy in a handbook about harassment is not enough. Employers must take proactive steps to prevent harassment which should include: - 

• conducting workplace risk assessments 
• developing and reviewing anti-harassment policies regularly
• delivering effective employee training regularly  
• promoting a workplace culture where harassment is not tolerated 
• ensuring employees feel safe to report incidents 
• investigating all complaints of harassment promptly
• taking appropriate measures during and after the investigation
• reflecting upon the outcome of an investigation and identifying any lessons to be learned

Conclusion 

The wide-ranging circumstances that can give rise to a successful claim for sexual harassment, and the difficulties experienced in controlling staff to stop them behaving in such a way, creates real challenges for employers and their EPLI insurers, as illustrated by the Grafters Group decision.

Fostering a positive workplace culture and implementing robust systems to prevent and deal with complaints of harassment is a key issue for all employers. Underwriters and brokers should look for evidence of such systems when placing cover. The associated risks and costs of harassment should not be underestimated.