Sexual Orientation and Third-Party Harassment – Employer's Liability Determined

In their judgment in the MacDonald and Pearce appeals on 19 June 2003, the House of Lords ruled that employers who discriminate on the grounds of sexual orientation are outside the scope of the Sex Discrimination Act 1975 ("the SDA"). The House of Lords also stated (albeit not as a binding part of their judgement) that the pivotal Burton v De Vere Hotels case on an employer's vicarious liability for the acts of third parties, was wrongly decided. The Lord's view was that a failure to protect employees from third party discrimination will not make an employer liable, unless the failure is itself discriminatory and is connected to the sex or race of the employee.

The effect of the House of Lords decision is that it is not unlawful to discriminate on the grounds of sexual orientation, provided that employers treat homosexual men and women equally. Furthermore, an employer's failure to protect employees from harassment will not constitute unlawful discrimination if the failure had nothing to do with the sex or race of the relevant employees. All of this will of course change from 1st December 2003, when the new regulations outlawing sexual orientation discrimination come into effect.

Sexual Orientation not protected under Sex Discrimination Act

In the relevant cases, Mr MacDonald was dismissed from the Royal Air Force because he was homosexual, while Ms Pearce, a lesbian school teacher, suffered homophobic abuse from pupils. Both applicants claimed direct sexual discrimination by their employers under the SDA.

The House of Lords ruled that:

• Sexual orientation discrimination is outside the SDA.
• In determining whether a homosexual employee had been less favourably treated, the appropriate comparator should be a homosexual member of the opposite sex, rather than a heterosexual member of the opposite sex.

The appeals were consequently dismissed as the discrimination was held to be gender-neutral. Notably, in Ms Pearce's case, the alleged sexual harassment claim was rejected because she could not prove that she was harassed 'on the ground of her sex', even though the harassment was gender-specific in form.

Although this case clarifies the current law, it is important to note that employees will be accorded protection from sexual orientation discrimination very shortly. The Employment Equality (Sexual Orientation) Regulations 2003 are due to come into force on 1st December 2003 (see below).

Employers Not Liable for Third-Party Harassment

Ms Pearce based her claim on the school's failure to protect her from third party harassment, arguing that this constituted sexual discrimination. The landmark case of Burton v De Vere Hotels has been taken as authority for the proposition that if an employer could have controlled whether the discriminatory conduct of others took place or not, the employer should be taken to have subjected the victim of the conduct to that conduct. However, the House of Lords has now stated that Burton was wrongly decided. According to Lord Scott, the Burton case overlooked the all-important need to establish discrimination. In that case there was nothing to show that the employer would have behaved any differently if the butts of the entertainer's offensive humour had been white waitresses (instead of black waitresses), or black men, or white men. Therefore employers are not liable for the racial or sexual harassment of their employees by independent third parties if the employer's failure to prevent the harassment is not connected with the sex or race of the employees.

Sexual Orientation – New Laws in December 2003

Employees will be accorded protection from sexual orientation discrimination very shortly. The Employment Equality (Sexual Orientation) Regulations 2003 (which implement parts of the Equal Treatment Directive 2000/78/EC) are due to come into force on 1st December 2003.

The Regulations define "sexual orientation" as "an orientation towards persons of the same sex; the opposite sex; or both sexes". The principle of equal treatment is upheld via the prohibition against direct and indirect discrimination, victimisation harassment and discrimination post termination of employment. Altogether, the Regulations are potentially wide ranging in making it unlawful for employers to discriminate on the grounds of sexual orientation on initial employment, promotion or training and upon dismissal. For instance, Part II of Regulations contains specific provisions in term of discrimination in particular fields of employment, such as contract workers, police force, barristers, partnerships and pension schemes.

The Regulations mark a widening of the scope of UK anti discrimination legislation. As such, they are likely to have a significant impact on policies and procedures developed by employers. It will be interesting to see how the Regulations work in practice, and how comfortably the MacDonald and Pearce judgements will sit amidst this new addition to the law.

If you require further information about sexual orientation in the workplace, please contact Anthony Fincham at anthony.fincham@cms-cmck.com or on +44(0) 207 367 2783 or Simon Jeffreys at simon.jeffreys@cms-cmck.com or on +44(0)207 367 3421.