‘Game changer’ Equality Act update could cause EPL issue ahead of Christmas party season

An update to 2010’s Equality Act around the treatment of workplace sexual harassment has the potential to impact employment practices liability (EPL) insurance or directors’ and officers’ (D&O) cover as Christmas party season looms for British businesses.

Effective from October 2024, the “game changer” legal refresh – entitled Worker Protection (Amendment of Equality Act 2010) 2023 – imposes a new “positive duty on every employer, regardless of size, to take anticipatory steps to prevent sexual harassment at work”, according to Raymond Silverstein, partner and head of the employment practice at law firm Browne Jacobson.

Speaking at an event last month (19 November 2024) in association with MGA Rising Edge, Silverstein explained that “at work doesn’t just mean in the office” – the amended legislation now takes into consideration sexual harassment incidents that occur “in the work environment”, which could include “after work drinks, after work parties [or] social events”.

This makes the act especially relevant now as organisations across the UK arrange Christmas parties and social gatherings ahead of any festive workplace shutdowns.

Claims risks

For Silverstein, there are a couple of key reasons as to why this specific legal update could present a claims and financial risk for employers.

Firstly, the amended law requires organisations to take proactive “reasonable steps” to predict and prevent circumstances that could lead to possible sexual harassment.

However, the government has not ringfenced exactly what these reasonable steps look like, with Silverstein commenting that this could therefore be very different on a case by case basis, depending on who is involved in each tribunal.

Silverstein said: “It’s very open ended. It’s very vague. What is reasonable is pretty subjective. There’s risk attached to it and it’s on the employer to prove [that reasonable steps to prevent sexual harassment were in effect].”

Secondly, there is a sizeable financial impact if a tribunal decision goes against the employer in question.

Silverstein explained: “The kicker or incentive for employers to comply is that if they don’t and sexual harassment is found to have taken place, compensation can be increased by up to 25%.

“Compensation for sexual harassment has no cap, there is no ceiling on it, but the tribunals can add to the compensation by up to another 25% if the employer hasn’t taken reasonable steps to anticipate and prevent that sexual harassment from taking place.”

Proactive steps

To mitigate possible sexual harassment claims under the amended Equality Act, Silverstein recommended that businesses conduct a workplace audit and risk assessment, review and refresh staff training, appoint a staff member to monitor, evaluate and review measures addressing workplace sexual harassment and encourage employees to report any sexual harassment incidents.

As well as refreshing internal human resources policies and procedures on handling sexual harassment cases, employers should also look to their EPL and D&O insurances.

“Because the law has changed and because there is now this new positive anticipatory duty, most policies will not be reflecting that,” Silverstein noted.

“Most policies have been sitting around, gathering dust for X many years, they’re not fit for purpose anymore.”

EPL insurance is optional and typically covers claims made against a company for damages arising from employees’ emotional or mental condition. It can protect against claims for discrimination, sexual harassment and wrongful termination, for example.

Owen Dacey, head of claims and general counsel at Rising Edge, advised that EPL policy wordings should be updated to include investigation costs cover, ensuring that the definition of employees and their workplace are broad enough to encompass all potential allegations and that organisational entities and individuals – such as directors – are both insured against possible claims.

Furthermore, policies must be clear on whether award uplifts are included in the purchased cover alongside the existing provision for compensation.

Dacey added that brokers must help clients to assess whether policy limits are sufficient.