Harassment claims: The costs of getting it wrong

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A year ago #MeToo galvanised a public conversation about sexual harassment. Certain legal developments and trends mean that the risks for employers of getting it wrong are only increasing

The #MeToo movement has shown that the old adage that it takes 20 years to build a reputation and five minutes to ruin it has never been more true. Employees are more aware of their rights than ever and more ready to call out bad behaviour. This is made easy by the speed and ease of social media and platforms for anonymous reviews of employers. Businesses need to protect their reputations, to be accountable, and to lead the charge with taking positive steps on social issues. This means building trust both internally with their own employees and externally with customers, clients and partners.

Employment claims will mean reputational damage and a drain on respect, morale, productivity and employee retention. They will also mean immediate financial damage in compensation (if the claimant wins), and legal costs and management time (whether they win or lose). Employment tribunals are heaving under the quick increase in claims being made since the abolition of fees, and this trend looks set to continue. There is no cap on discrimination and harassment compensation. Awards will be made for injury to feelings and can include awards for personal injury, aggravated and exemplary damages.

Even if complaints or claims are settled without recourse to the employment tribunal there is no guarantee that they can be kept confidential. Just how far non-disclosure agreements (NDAs) or 'gagging clauses' in settlement agreements can go is another hot topic at the moment. This is under scrutiny by the media, the Solicitors Regulation Authority and the Women and Equalities Committee. It has been raised in both houses (Commons and Lords) and the prime minister has recently promised to look at the unethical use of NDAs. Employers should be ready for the law to develop to restrict the ability to sweep difficult and uncomfortable complaints under the carpet, or to make them go away with large payouts.

Hand in hand with the above is the ever-narrowing view being taken by the courts as to when an employer may be vicariously liable for the actions of their employees or workers. Recently, in Britain’s first data leak class action, the supermarket Morrisons was held liable by the Court of Appeal for a malicious data breach carried out by one of its employees, paving the way for a mass payout.

Morrisons said in a statement after the hearing: 'A former employee of Morrisons used his position to steal data about our colleagues and then place it on the internet and he's been found guilty for his crimes.

'Morrisons has not been blamed by the courts for the way it protected colleagues' data, but they have found that we are responsible for the actions of that former employee, even though his criminal actions were targeted at the company and our colleagues.'

Morrisons' shares turned negative after the ruling and were last down nearly 1%. The landmark case has clear implications for all companies, with legal experts arguing that the ruling was a stark warning to businesses that they are liable for the illegal acts of their employees.

These are just a few of the wide-ranging and complex issues that feed into how businesses need to respond to the #MeToo movement, and the costs of getting it wrong. All of this dictates a thoughtful, engaged and proactive response to the issues raised by the movement as a whole, and the dialogue it has opened up.

Employers need to take a hard and honest look at their businesses and identify areas of risk. This should involve looking also at where unintended consequences or backlashes to the movement could arise, and how to tackle them transparently and effectively. Employers should seize the opportunity to lead a positive conversation on these difficult issues and to stay in step with the social and cultural conversations.

Esther Langdon is an employment lawyer with Vedder Price

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