Is Section 40 of the Equality Act due a comeback?

21 Sep 2018 By Richard M Fox

Should Section 40 of the Equality Act 2010 be reinstated as recently called for by the CBI? Richard M Fox reports

Section 40 of the Equality Act 2010 (EqA 2010) rendered employers liable to employees if they were subjected to harassment by third parties during the course of their work and if – despite knowing harassment had occurred on two previous occasions – the employer had not taken reasonable steps to stop it happening again. Some referred to this as the ‘three strikes’ rule. 

As CBI director-general Carolyn Fairbairn explained in her recent speech to the Fawcett Society, most employers already believe they have a duty to protect their staff from harassment, not only by fellow employees and managers, but also by third parties. However, there are a minority of employers who, she said, do not fully appreciate that fact. And that is exactly why Section 40 made sense. To a significant extent, it allowed employers to know where they stood, and where their responsibilities lay. 

The reason Section 40 was abolished goes back to the days of the coalition government. Misguidedly in my view, when it first took office, it seemed to believe that employers were reluctant to recruit because they felt constrained by employment ‘red tape’. Cut away that red tape, the theory went, and we would see recruitment rise again. In fact that was never the case, and after a while, the government changed its language and started talking about there being a ‘perception’ of red tape. But not soon enough to prevent Section 40 being sacrificed on the so-called bonfire of regulation, which was (apparently) going to make employers’ lives so much easier.

‘Bernard Manning’ case 

The result now is that this is an area largely governed by the common law. Unfortunately, the relevant cases are by no means straightforward. The ‘Bernard Manning’ case (Burton v De Vere Hotels) did seem to be relatively clear. A hotel had commissioned the services of a comedian to speak at a dinner at their premises. He made racist jokes which (understandably) offended two Afro-Caribbean waitresses. The hotel was held liable for harassment. 

However, in a subsequent case (Pearce v Governing Body of Mayfield Secondary School), the ‘Bernard Manning’ case was said to have been wrongly decided. For the employer to be liable, the failure to take steps to prevent an employee being racially or sexually abused had to amount to race or sex discrimination – an arguably much tougher test. 

#MeToo movement 

More recently the #MeToo movement has ushered in a new era of heightened sensitivity to harassment at work, with victims more empowered to come forward and with much more pressure on employers to investigate and act in cases of unacceptable behaviour. 

It is now more apparent than ever that it was a mistake for the government to leave it essentially to the common law to provide answers as to whether employers should incur liability for the action of third parties. After all, if an employer is able to control a situation in which third parties engage with their employees, need it matter that the harassment was perpetrated by, say, an external management consultant to the business, or by a client or customer of the employer? That is why there is an ever-growing clamour for the law to be restored to where it was five years ago. 

Once the government concedes this is the right course, discussion can move on to the precise scope of a replacement provision. Whether the so called ‘three strikes’ rule should persist is open to question. In the current climate it is perhaps more likely that this will no longer be a prerequisite to liability under the statute, but whatever the form to be arrived at, if the government wants to be seen to take action in relation to the whole area of sexual misconduct in the workplace, it would do well to give urgent consideration to the reintroduction of Section 40, possibly in amended form.

Richard M Fox is head of employment law at Kingsley Napley LLP

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