Repeal of Third Party Harassment - Are Employers Safe from Claims?

by Pillsbury Global Sourcing Practice
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As part of its UK Employment Law Review in 2012, the UK Government announced that it intended to remove the third-party harassment liability provision from section 40(2) of the Equality Act 2010. This provision was repealed on 1 October 2013. This post considers the impact of the repeal and whether employers are safe from claims made by their employees based on harassment by their outsourcing or other third party contractors.

Background
In October 2010, section 40(2) of the Equality Act introduced the concept that employers could be liable for harassment of their employees by a third party where the harassment was persistent and based on a protected characteristic. Under this provision, employees could bring a claim against their employer if they had been subjected to discriminatory harassment by third parties during the course of their employment on at least two occasions and their employer had failed to take any reasonably practicable steps to prevent the harassment. This provision had potentially far reaching impact as employers became potentially liable for acts committed by third parties such as their suppliers, customers or visitors.

The Repeal
The UK Government's rationale for the repeal was that it recognised that imposing such a duty on employers was unworkable because employers have little or no direct control over the actions of a third party. During the UK Government's consultation process on the proposal to repeal this provision, the UK Government received 80 responses from individuals, public sector employers, unions, equality lobby groups, not-for profit sector employers and business organisations. Interestingly, only 20% of the respondents were in favour of the repeal and 71% were opposed to it. Nonetheless, the UK Government concluded that the provision should be repealed because there is "no evidence to suggest that the third-party harassment provisions are serving a practical purpose or are an appropriate or proportionate manner of dealing with the type of conduct that they are intended to cover."

Are Employers Safe from Claims?
While the repeal is helpful to employers, employers should be mindful that employees can still potentially rely on other provisions in the Equality Act 2010 or other legislation to bring claims against their employers. It is currently unclear whether the general harassment provision in the Equality Act 2010 will exclude acts by third parties. An employee could argue that the failure to prevent third-party harassment in itself amounts to "unwanted conduct" under the general harassment provision and there is a risk that a sympathetic Tribunal may find in the employee's favour. Similarly, an employee could argue that being placed in a situation where the employee is subjected to third party harassment amounts to direct discrimination. An employee could also claim that being subjected to such harassment and the employer failing to take any appropriate actions amounts to a breach of mutual trust and confidence entitling the employee to resign and claim constructive dismissal. It is likely that the Tribunals will now rely on case law that was established before the third party harassment liability provision existed in which the test for liability is whether the employer had control over the event and whether it could control if the harassment occurred or not.

It remains prudent and good employment practice for employers to continue to take any concerns or complaints from their employees about third-party harassment seriously and deal with it appropriately in accordance with the employer's grievance procedure, harassment and equal opportunities policies. Outsourcing agreements should continue to have adequate provisions and indemnities covering claims that may arise from such concerns or complaints.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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