The continuing risk to accountancy firms, in the wake of the #MeToo movement and the increased reporting of alleged sexual misconduct by partners, is all too apparent from recent press headlines.
There are two key issues for firms to consider here:
- what is the best practice approach to take when facing an allegation of sexual misconduct against a partner or LLP member (for the purposes of this article we use the term partner to refer to both); and
- what can and should an accountancy firm do to manage the risk of potential future complaints of sexual harassment/misconduct against partners.
Facing an allegation of sexual misconduct
Once the initial allegations have been identified, the firm should follow certain preliminary steps including reviewing the LLP agreement and any relevant partner policies, as well as the firm’s staff handbook to identify all relevant provisions concerning misconduct. This documentation will provide guidance on the investigation process to be followed, including possible suspension of the accused.
Consideration should be given as to who should be the appointed investigator. In sexual misconduct cases an external investigator may be able to offer greater expertise of the process to be followed, which may be particularly useful where the alleged harassment or sexual misconduct is serious and the circumstances more complex.
Another key issue is to ensure that the appropriate level of confidentiality and data privacy concerning the various parties should be maintained throughout.
Consideration should also be given to the support being offered to the alleged victim by way of confidential counselling, or support via any available medical insurance provider. Best practice suggests counselling support should also be offered to the person against whom the allegation is being made in view of the potentially far-reaching implications for their professional future and the possible impact of any such investigation process.
A special leave of absence should be considered as an option for the individuals concerned at an early stage. Further, the firm should consider taking public relations advice to manage any potential publicity concerns.
To date, the Financial Reporting Council has not focused on cases on sexual misconduct and harassment and has not viewed internal allegations and investigations as something that had to be notified to them. The financial services regulator, the FCA, and the solicitors regulator, the SRA, have adopted a different, more stringent approach, albeit more recently. It is to be expected that the FRC will follow suit in due course.
Investigation process – procedural fairness
The firm will also need to have regard to procedural fairness throughout the process. Partners cannot rely on the unfair dismissal protections available to employees, which would extend to the procedural fairness of any investigation or disciplinary process. However, case law suggests that firms should still follow a broadly equivalent fair process when conducting an investigation, disciplinary or expulsion process for partner misconduct.
During the investigation (and any subsequent process), it must be assumed that all meeting notes and deliberations are ultimately disclosable under a subject access request or under the disclosure process in any possible subsequent litigation. The same will be true of any internal emails.
The accused partner or LLP member should be provided with the following:
- details of the allegations (as far as possible);
- full details of the process and timescale;
- an opportunity to take legal advice;
- an opportunity to be accompanied by a colleague or possibly their legal adviser to meetings (although this is not necessarily a legal requirement); and
- details of any proposed suspension and the expected length (which should be as short as possible) and the terms that will apply; and
- the opportunity to respond to the allegations with written and oral representations.
The allegations should be fully and fairly investigated, taking into account confidentiality and data privacy of those involved, as far as possible.
Result of investigation
Once the investigation process has been concluded, an investigation finding should be made and a report issued. This will usually be shared with the key internal decision-makers within the firm first although care should be exercised to avoid any inference that the decision-makers have been given the opportunity of influencing the investigation finding and recommendations. The alleged victim and accused partner should then be separately notified of the investigation outcome. If the allegations are found to have substance following the investigation stage, the firm may then proceed with a disciplinary and/or expulsion process. In some cases the firm may prefer to deal with the matter by agreeing the partner’s exit or the partner may be offered the option of resigning, with or without notice.
When assessing which approach to take, thought will have to be given to any regulatory and criminal aspects, the impact on the individual who has been the subject of any sexual harassment or misconduct, and the firm’s values, public face and PR implications.
Disciplinary or expulsion process
If the disciplinary process is progressed this should be conducted by someone previously unconnected with the prior process to ensure impartiality is maintained. Again a proper process must be followed and the accused partner should be provided with details of the evidence against them, as far as possible, and provided with an opportunity to respond.
In the event the allegations are found to be substantiated, careful consideration should be given to the possible range of sanctions which may be deemed appropriate. The available sanctions could range from summary expulsion, to an exit with notice, a reduction in profit share, coaching or training (or a combination of sanctions short of exit or expulsion).
In the current climate the lesser sanctions would typically no longer be deemed appropriate if there is a finding of sexual misconduct (whereas historically this may not have always been the case). It would be recommended practice to allow the partner a right of appeal against any disciplinary sanction.
The firm will also need to adopt an appropriate response towards the person who has been harassed and this will have to be considered based on the circumstances of each case and the preferred outcome of the individual concerned.
Managing the risk going forward
Following any investigation process, there will be an opportunity for the firm to redraw its internal procedures and policies as appropriate.
It is good practice for a firm to have in place a comprehensive set of policies which set out the behaviours expected of partners. In a significant number of cases alcohol consumption at work-related events can play a role in sexual misconduct cases and this area of risk should be addressed by firms.
Any policies will not be effective without regular training. Awareness training is essential as it helps partners understand the expected standards of behaviour, the concepts of discrimination, harassment and victimisation, and the sanctions which will be imposed in case of any breaches.
A key senior person should be appointed to whom any concerns regarding sexual harassment can be reported on a confidential basis. It is vital that those who experience harassment know that they are protected and that there are clear steps which they can take to raise any concerns and that these will then be properly investigated.
If employees feel they are able to raise concerns regarding potentially inappropriate behaviour, this may go some way towards providing the firm with an opportunity to address and manage any possible risks, both to its staff and itself, at an early stage.