Sexual harassment – where are we now?

04 August 2023

Ever since the #MeToo movement began to help shift the dial on workplace interactions, we have seen a wholesale reform in the way our clients approach sexual harassment complaints.

Government, Parliament and the regulators have also been extremely active in this area, so employers need to keep a constant focus on developments. This note summarises some important recent changes, and sets out some key action points for businesses, with additional guidance for regulated firms.

Recent developments

New legislation

Since the 2013 revision of the Equality Act, there has been no explicit statutory protection for employees against harassment by third-parties. The Government has continually maintained that other methods exist to safeguard employee rights – use of the Protection from Harassment Act, direct discrimination claims based on an employer’s inaction – but these will be unsatisfactory in many cases, of which the incidents at the President’s Club which sparked the #MeToo movement are an excellent example. 

Draft legislation is being debated in Parliament at the moment, on the back of a government consultation on sexual harassment in the workplace, the outcome of which was published in July 2021. The Worker Protection (Amendment of Equality Act 2010) Bill (the Bill) was set to introduce (amongst others) two new provisions:

  • make employers liable for the harassment of their employees by third parties in the course of their employment if the employer has failed to take all reasonable steps to prevent the harassment; and
  • introduce a new legal duty requiring employers to take all reasonable steps to prevent their employees experiencing sexual harassment in the workplace.

When the Bill was initially published, there was some disquiet over what practically an employer would need to do to show that it had taken all reasonable steps. The Equality and Human Rights Commission’s (EHRC) Technical Guidance was assumed to form the basis of the test that the courts and tribunals would adopt, but this was not wholly clear.

In a significant dilution, the House of Lords voted on 14 July 2023 to abandon the provisions in relation to harassment by third parties altogether, and to remove the word “all” from the general duty to prevent harassment, so that employers would only have to take reasonable steps, rather than all reasonable steps. The justification was said to be that the Bill “would still be indicating a serious resolve to tackle sexual harassment while restricting the burdens on business and protecting the principle of free speech”. See below for some examples of what "reasonable steps" is likely to mean in this context.

Employers already benefit from a “reasonable steps” defence against liability for acts of discrimination, harassment or victimisation if it can show that it took all reasonable steps to prevent its employee committing a particular discriminatory act or committing that type of discriminatory act. Whether the Bill marks an advance in protection must be open to doubt. It is due to be considered again after the Summer recess, on 5 September 2023.

Treasury call for evidence

On the same day as the House of Lords debate, the Treasury Committee launched an inquiry into barriers faced by women in finance. The Committee is examining the barriers faced by women in financial services and the progress made in removing gender pay gaps. It will also explore what role firms, the government and regulators should play in combatting sexual harassment and misogyny. Submissions to the call for evidence can be made at any point before 1 September 2023.


Financial services has been at the forefront of regulatory action to reduce the incidence of sexual misconduct. The FCA has repeatedly made it clear that non-financial misconduct can have a serious impact on the culture, reputation and performance of firms, and that it will take into account any such misconduct when assessing the fitness and propriety of individuals and firms, and when deciding whether to take enforcement action. As part of the FCA and PRA joint discussion paper in 2021 on diversity and inclusion, the regulators said that they would publish further guidance on what constitutes non-financial misconduct. A further publication is expected in 2023. See below where we set out some additional considerations for FCA-regulated employers.

Meanwhile, the SRA has published its own guidance on sexual misconduct and risks of failing to protect and support colleagues in the workplace environment setting out the SRA’s approach and its expectations of law firms investigating these type of allegations and lists the factors to be considered, including a number of helpful examples.

Harassment complaints and s.23 agreements

Although misconduct can affect any employee, the day-to-day experiences of women in the workplace are, of course, at the heart of any discussion of sexual harassment. McDonald’s and the CBI are yet further examples in a long line of recent news stories of UK companies failing to properly tackle the issue of workplace harassment. The McDonald’s case is particularly interesting, as it comes in the wake of a formal agreement between the company and the EHRC, under which a steps plan was agreed to address harassment across the business. Whether businesses will seek to make use of these kinds of agreements in future remains a point to watch.

Key takeaways for employers

What are "reasonable steps" to prevent sexual harassment?

Given the current state of the law, and the likely position once the Bill completes its Parliamentary scrutiny, employers should proactively consider what “reasonable steps” they will take to satisfy the new duty to prevent sexual harassment. Such steps will usually include:

  • having and implementing an equal opportunities or diversity and inclusion policy as well as an anti-harassment and bullying policy, and regularly reviewing those policies;
  • making all employees aware of such policies and their implications;
  • providing adequate training to all staff on equal opportunities and discrimination. Tribunals will consider the content and nature of any training provided. A brief training session that is more of a box-ticking exercise, and which does not adequately address issues that are known to exist in the workplace and enable employees to apply what they have learned, will not be sufficient (even if it has taken place recently). Managers and supervisors should also receive additional training in identifying and handling equal opportunities and harassment issues;
  • any initiatives proposed by employees should be considered and acted on if it would be reasonable to do so. Where proposed initiatives are acted on, evidence should be retained by the employer (along with details of how any tests or other schemes are monitored); and
  • taking steps to deal effectively with complaints, including taking appropriate disciplinary action.
Additional points for financial services firms

For firms regulated by the Financial Conduct Authority (FCA), allegations of harassment raise issues of "non-financial misconduct", an area which has become one of increasing regulatory focus for the FCA in recent years. FCA-regulated employers have a duty to ensure that their staff are fit and proper to perform their roles, and to take appropriate action if they become aware of any non-financial misconduct that may affect their fitness and propriety. This duty applies to both senior managers and certified staff, who are subject to the Senior Managers and Certification Regime (SMCR), and to other staff who are subject to the Conduct Rules. The FCA sets out guidance in its Handbook (FIT) as to what it expects firms to consider in assessing those individuals’ fitness and propriety. This includes honesty, integrity and reputation, competence and capability, and financial soundness. It is clear from the FIT guidance that this is a broad-reaching assessment, which includes personal matters insofar as these relate to the individual’s suitability to perform their function and that non-financial misconduct is relevant to the assessment of fitness and propriety.

There is no legal definition of the term “non-financial misconduct” and there are no specific examples contained in the FCA Handbook of Rules and Guidance. However, the phrase is generally understood to include any behaviour or conduct that falls below the standards of integrity, honesty, fairness, respect and professionalism expected of individuals and firms in the financial services sector. Examples include bullying, harassment, discrimination, victimisation, abuse of power, inappropriate use of social media, breaches of confidentiality, and failure to report or escalate concerns.

The FCA may also take enforcement action against individuals or firms for non-financial misconduct, such as imposing fines, suspensions, prohibitions, or public censures, depending on the nature, severity, and impact of the misconduct. Sanctions have been imposed in a number of different factual contexts, including fare evasion, sexual offences outside work, violence outside work, and giving unreliable evidence in court. The range of scenarios emphasises the point that the FCA will take a broad view of non-financial misconduct. Regulated firms should therefore:

  • have clear and effective policies and procedures on non-financial misconduct, including definitions, expectations, reporting mechanisms, investigation processes, disciplinary sanctions, appeals, and whistleblowing protections;
  • provide regular training and communication to staff on non-financial misconduct, the Conduct Rules, and the SMCR, and ensuring that staff understand their obligations and responsibilities, and the consequences of breaching them;
  • conduct thorough and fair investigations into any allegations or suspicions of non-financial misconduct, and ensuring that they are documented, confidential, impartial, and timely;
  • apply consistent and proportionate disciplinary sanctions to staff who are found to have committed non-financial misconduct, and ensuring that they are communicated, recorded, and reviewed;
  • report and disclose any non-financial misconduct that may affect the fitness and propriety of staff or firms to the FCA and other relevant authorities, in accordance with the SMCR, the Conduct Rules, and the FCA's notification and reference requirements;
  • cooperate with the FCA and other authorities in any enquiries or investigations into non-financial misconduct, and providing any information or evidence requested; and
  • review and update the policies and procedures on non-financial misconduct regularly, and monitoring and evaluating their effectiveness and compliance.