The SRA recently released new detailed guidance on dealing with sexual misconduct within law firms (the Guidance). The Guidance highlights the importance that the SRA places on firms addressing misconduct which may not at first glance appear to have a direct impact on an employee’s day-to-day role and/or the profession, but is nevertheless likely to be considered a regulatory matter.
This reflects a growing trend among regulators, with the FCA also taking the view that certain non-financial misconduct (including sexual harassment) can impact on whether an employee is considered fit and proper to perform a certified financial services role.
In this article we extract five key points from the Guidance when it comes to dealing with sexual misconduct. While these are of particular importance to regulated firms, the underlying principles are also of wider application. We cover:
1. Know when, and where, sexual misconduct may arise
2. Investigate promptly and fairly
3. Consider whether to report the matter to the regulator
4. Remember the employment contract
5. Take care when using NDAs
“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, for example.
The most relevant issue from the SRA’s perspective is whether the conduct constitutes a breach of its Principles and/or the SRA 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 concern to the regulator, whether or not they also constitute unlawful harassment or criminal offences.
Although consensual relationships between colleagues are not likely to cause employers undue concern, or become the subject of an SRA regulatory investigation, the position may change significantly if it appears that one party has exploited their professional position for improper sexual purposes. That may be the case if the person continues to pursue the relationship after it has ended, for example.
Alongside common workplace scenarios, the Guidance also deals with sexual misconduct occurring elsewhere, acknowledging that the line between private and professional life can become blurred. In such circumstances, the regulatory angle may be less clear cut and it could be argued that there is therefore less justification for the SRA to intervene. The High Court’s decision in SRA v Beckwith is a case in point, with a warning to the SRA against encroaching too far into a solicitor’s private life.
That said, the Guidance also clarifies that some sexual misconduct allegations totally removed from legal practice might still be so serious that they damage public confidence in the profession and might still amount to professional misconduct (e.g. criminal convictions). The Guidance also reminds firms that:
Comparisons can be drawn with the liability of employers for any discrimination and harassment carried out by employees in “the course of employment”, under the Equality Act 2010. Whether or not this threshold has been met may not be immediately apparent without further investigation and the Guidance offers employers some helpful examples of the surrounding circumstances that may be relevant.
Regulators will expect that firms investigate all allegations of sexual harassment sensitively and appropriately, and in compliance with their legal and regulatory obligations. Prompt investigation into alleged misconduct is also a well-recognised aspect of good employee relations practice.
The 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 through robust employment procedures which enable the firm to manage, investigate and (if necessary) report complaints of sexual misconduct to the regulator 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 relating 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, that may mean it is appropriate to bring in an external investigator.
If 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, 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 him or her a genuine opportunity to respond to the allegations.
Regulated firms will be required to report certain serious conduct issues to the regulator.
What is sufficiently serious depends on the regulations. For law firms, the Guidance provides a high degree of detail around how the SRA will assess the seriousness of a potential breach in the context of sexual misconduct. Relevant factors include:
Firms should assess the allegations considering the factors outlined above. Sufficiently serious cases may warrant an early report to the SRA. In that case, it should be made clear if the matters reported remain in dispute and what stage the firm’s internal investigation process has reached.
More generally, the factors identified by the SRA will also be relevant considerations from an employment law perspective, particularly in terms of the gravity of the misconduct and the potential disciplinary process and sanctions that may be appropriate following conclusion of the investigation.
Whether or not they are regulated, most employers will appreciate the necessity of taking 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 while they are under investigation. However, this decision should not be taken lightly and must be balanced against the employee’s interests, including any relevant provisions in the employment contract. Courts and tribunals do not view suspension, even on full pay, as a neutral action and recognise the potential detrimental effect it can have on a person’s reputation and career.
A ‘knee jerk’ decision to suspend without full consideration may sufficiently damage his or her reputation to warrant a breach of contract claim, for example. A discrimination claim may also arise if, for example, an accused male employee alleges that a female colleague would not have been treated in the same way.
Given the legal risks, firms should first consider any less draconian measures which may achieve the same aim, such as requiring the accused employee to temporarily work from home or (if there are concerns about the preservation of evidence) limiting access to the firm’s IT systems.
However, a lack of willingness to suspend an accused employee where such action is warranted and has perhaps been taken in the past, would also run the risk of the complainant employee arguing that trust and confidence has been undermined, giving rise to a breach of contract claim.
The same risks may apply for reporting misconduct concerns to the regulator. 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.
Although there will be occasions where a confidential settlement will be in the interests of all parties, non-disclosure agreements (NDAs) cannot be used as a way to prevent an employee from reporting misconduct/concerns to a regulator or making a protected disclosure under whistleblowing legislation.
Similarly, NDAs should not be used to try and prevent co-operation with a criminal investigation or prosecution, making other disclosures required by law, taking legal or tax advice, or seeking medical help. Even where an employee is willing to sign up to confidentiality obligations as part of a settlement process, firms are advised to follow the best practice outlined in guidance such as that issued by ACAS, the Equality & Human Rights Commission, the Law Society and the SRA.
You can register online or follow us on Twitter or LinkedIn to receive our latest news, events and publications.