Back in September, the SRA released new detailed guidance on dealing with sexual misconduct within regulated firms.
The guidance continues the trend amongst regulators, not least the SRA and the FCA, to take a greater interest in conduct which does not have a direct bearing on client service.
In this article we highlight five key points for all professional services firms when dealing with potential sexual misconduct. We cover:
1. Know when, and where, sexual misconduct may arise
“Sexual misconduct” refers to a broader range of behaviours than sexual harassment, as defined in the Equality Act 2010, or the various criminal offences relating to sexual acts. The guidance is clear that it does not always involve physical contact.
The most relevant issues from the SRA’s perspective are whether the conduct constituted a breach of its Principles or the Codes of Conduct. The SRA Principles are broadly cast and engaged in many potential scenarios: this is especially the case for the requirements to act with integrity, encourage equality and diversity and uphold public trust and confidence in the profession. For that reason, a very broad range of behaviour may potentially be of interest to the regulator, whether or not they also constitute unlawful harassment or criminal offences.
Although consensual relationships between colleagues are not likely to become the subject of an SRA investigation, the opposite may be the case if it involves exploiting a professional position for sexual purposes, for example after a consensual relationship has ended.
Alongside scenarios in the workplace, the guidance also deals with sexual misconduct occurring elsewhere. In these circumstances, it is more arguable that the SRA does not have as much justification to intervene, especially in view of the High Court’s decision in SRA v Beckwith, which warned the SRA against encroaching too far into a solicitor’s private life.
However, the guidance reminds firms that:
2. Investigate promptly and fairly
Regulators will expect that firms investigate all allegations of sexual harassment sensitively and appropriately, and in compliance with their legal and regulatory obligations.
The SRA’s guidance acknowledges that many scenarios will confront firms with difficult and disputed issues of fact. They may have to deal with non-cooperative witnesses (or even complainants not wishing to take formal action) or contradictory evidence. However, these should be resolved within robust procedures which enable the firm to manage, investigate and (if necessary) report complaints of sexual misconduct promptly after they are made.
Firms should determine the scope of the matters to be investigated at an early stage. Although firms will want to avoid investigating an overly broad set of terms of references, they must equally be prepared for accusations of wilful blindness if the scope of the investigation is too narrow. The key decisions as to the investigation’s scope should be documented, as should any decision to suspend an employee pending the outcome of the investigation.
The person tasked with investigating the allegations should be someone suitably experienced and able to effectively interview the accused and the accuser. For smaller firms or offices it may be appropriate to bring in an external investigator.
Where some allegations are made anonymously, it is important to consider how much weight they should be given. It should be stressed to all those involved in the investigation that the allegations and identity of those involved should be kept confidential in order to protect the accused and the accuser.
The allegations must be put to the alleged wrongdoer in sufficient detail, and in such a way as to afford them a genuine opportunity to respond to the allegations.
3. Consider whether the matter needs to be reported
SRA-regulated firms are required to promptly report to the SRA of any facts or matters which they reasonably believe are capable of amounting to a serious breach of the SRA’s regulatory arrangements (or which they reasonably believe should be brought to the SRA’s attention so that it may investigate the relevant facts or matters).
Similar duties apply for ICAEW-regulated individuals under its byelaws, where the referral is in the public interest.
The recent guidance from the SRA gives a high degree of detail around how it will assess the seriousness of a potential breach in the context of sexual misconduct. Relevant factors include:
Firms should assess the allegations against the factors above. Sufficiently serious cases, particularly those without significant disputes on the facts, may warrant an early report to the SRA. In that case, it should be made clear that the matters reported are disputed and have not been fully investigated by the firm.
4. Do not disregard the employment rights of any party
Whether or not they are regulated, many firms will want to take swift and decisive action after allegations of sexual misconduct have been brought to their attention.
Misconduct of this type will often make it appropriate to suspend an employee who has been subject to allegations is under investigation. However, this decision should not be taken lightly and must be balanced against the employee’s interests. Courts and tribunals do not view suspension, even if on full pay, as a neutral action and recognise its detrimental effects on a person’s reputation at work and elsewhere.
A ‘knee jerk’ decision to suspend an employee may sufficiently damage his or her reputation to warrant a breach of contract claim, for which the compensation would be unlimited by any cap on compensation. There is also the prospect of a discrimination claim if, for example, an accused employee or partner who is male alleges that he would have not been suspended if he had been the opposite sex.
Firms should first consider any less draconian measures which achieve the aim of suspension, such as requiring the accused employee to work from home or (if there are concerns about the preservation of evidence) limiting access to the firm’s IT systems.
Of course, there are also the employment rights of the complainant to uphold. If the firm is unwilling to suspend the accused employee or partner, when the complainant objects to his or her presence in the office, then that may also undermine trust and confidence and amount to a breach of contract.
The same risks may apply for reporting concerns to the regulator: there will be circumstances where neither the complainant nor the accused would welcome the matter being reported to an external authority, as that could rule out a swift and private resolution to the matter, which may be in all parties’ interests. It is conceivable that both the complainant and the accused may assert employment claims if they feel a report to the regulator was not warranted, but that is ultimately a decision which the firm has to make – it cannot avoid its reporting obligations simply because the parties involved would prefer otherwise.
5. Take care when using NDAs
Although there will be occasions where a confidential settlement will be in the interests of all parties, NDAs cannot be used as a way to prevent an employee from reporting concerns to the regulator or making a protected disclosure under whistleblowing legislation.
Even where an employee is willing to sign up to confidentiality obligations as part of a settlement, firms should follow best practice such as the guidance issued ACAS, the Equality & Human Rights Commission, the Law Society and the SRA.
NDAs should not be used to try and prevent co-operation with a criminal investigation or prosecution, reporting misconduct to a regulator or other disclosures required by law, taking legal or tax advice, or seeking medical help.
Contact us If you have any questions about these issues in relation to your own organisation, please contact a member of the professional services team or speak to your usual Fox Williams contact.
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