Harassment, reporting and regulatory risk: governance challenges for modern law firms

Investigations in law firms can be particularly difficult to manage, given the interplay of a firm's regulatory obligations, partnership dynamics, and employment law considerations. Separate consideration must be given to each element to ensure the correct steps are followed, so that the firm does not expose itself to potential claims, reputational damage, and regulatory repercussions. This note will explore common pitfalls in managing accused and complainant, regulatory reporting obligations, investigator’s selection and other relevant considerations that one ought to consider during a course of an investigation. 

Once a law firm receives a complaint of a sexual nature, there is a natural urge to act expeditiously to address the concerns, but practice shows that this may be counterproductive. In the first instance, it is advisable to assess the complaint and establish the appropriate course of action so that you have a clear roadmap. It is also important to identify with the client the instructing group (e.g., the Board) to ensure that legal advice pertaining to the investigation is adequately separated from general advice. For instance, if the accused is a partner, they will ordinarily have access to legal advice unless the LLP agreement (‘LLPA’) says otherwise or the advice pertaining to the allegation is duly segregated. 

At the onset of the investigation, it may also be prudent to seek other specialist advice (e.g., criminal, personal injury and PR advice) in order to provide the client with comprehensive advice. Further, it is important to consider whether there is a requirement to report the matter to the SRA given the firm’s regulatory obligations. 

Misconduct of a sexual nature will trigger reporting obligations where the matter is capable of amounting to a serious breach of regulatory requirements. Whilst what is “serious” will depend on the facts/context, the SRA’s Enforcement Strategy makes clear that sexual misconduct allegations are at the more serious end of the spectrum, alongside allegations of dishonesty and the misuse of client money (among other things).

Sexual misconduct allegations will often engage the following SRA Principles, which provide that those working in law firms must act:

1.  in a way which upholds public trust and confidence in the profession (Principle 2);
2. with integrity (Principle 5); or
3. in a way that encourages equality, diversity, and inclusion (Principle 6).  

Notably, the word “capable” implies that the reporting requirement is not contingent on a definitive finding having been made in respect of the conduct. Once a decision is reached that the alleged conduct meets the required threshold, the matter must be reported to the SRA promptly to ensure compliance with the SRA Code of Conduct for Firms (3.9–10).  In practice, this means that firms are required to report matters at the start, rather than the end, of an investigation.

Firms are often wary of reporting allegations against individuals which have yet to be substantiated.  While this is understandable, a failure to report promptly may itself give rise to regulatory action against the firm. In order to protect the individuals involved, the initial report is often brief and made on a “no names” basis. The objective is to demonstrate to the SRA that the firm is taking appropriate steps to investigate the matter. Providing the SRA is satisfied with the initial report, they will usually allow the firm to complete their investigation before deciding whether they also need to investigate. As a preliminary step, due consideration should also be given to the selection and instruction of an investigator. That said, this step may also be taken concurrently with informing the accused of the allegation (as outlined further below). 

As a general rule, the more serious the allegation, the greater the need for an external investigator with appropriate experience. The firm’s internal investigator may lack the required skillset to conduct complex investigations, or they may have innate bias, which may lead to a production of unreliable and subjective findings. Instructing an external investigator will mitigate (to an extent) the risk of findings being challenged on grounds of credibility or independence and reduce the risk of exposing the firm to claims for failing to follow a fair process.

If an external investigator is preferred, it is advisable that the instruction is issued by the practitioners advising the firm, thereby creating a degree of separation between the investigator and the firm. Intrusting the investigator will largely involve drafting terms of reference (‘ToR’), which will: 

1. outline the scope of the investigation;
2. specify that it is a fact-finding investigation (it is for the firm to determine culpability and appropriate sanctions);
3. identify the relevant parties (including the witnesses);
4. determine the standard of proof; and
5. as an option request the investigator to produce recommendations (e.g., policy reviews, training, etc.,). Practitioners should exercise caution when requesting the investigator to produce recommendations, as this may suggest a predetermination of guilt. 

The ToR together with a bundle of documents will form the foundation for the investigation, making it important to ensure that due care is given to this step. 

In the first instance, it should be decided whether to suspend or not to suspend the accused. Law firms often find this question difficult, as suspension may be viewed as a predetermination of the outcome or as a disciplinary action even though it should not be. The firm should apply its mind carefully to whether it is reasonable to suspend or whether there are alternatives to suspension. 

It may be reasonable to suspend the accused, in circumstances where the accused and the complainant work together, or there is a real concern that the accused may hamper the investigation (e.g., interference with evidence or witnesses) or is a potential threat to the business if remains in situ. Conversely, it may not be appropriate to suspend the accused where:

1. they work in a different office to the complainant and are unlikely to have any interaction (e.g., they work on different matters with no supervisory relationship);
2. the accused is on prolonged leave and unlikely to return to their duties in the near future;
3. the allegations can reasonably be regarded as minor, though in instances involving potential sexual misconduct this is rarely the case; or
4. other alternatives are available (e.g., work from home)

As a practitioner advising law firms, it is important to reassess the need for suspension on a regular basis (e.g., fortnightly) or when new matters come to light. This will enable the client to justify its suspension decisions, should these be challenged later.

Regarding suspension mechanics, much will depend on whether the accused is an employee or a partner. If it is the latter, the LLPA will usually include the right to suspend and set the scope of limitations (e.g., not attending the office or communicating with clients and colleagues). It is essential to consider whether any time limitations apply to suspension. Some LLPAs limit the overall period of suspension to three months, which may be insufficient for an investigator to finalise their report and for the firm to consider next steps. Varying a suspension provision may require a special resolution vote, entailing firm-wide disclosure of the underlying cause. If the firm wishes the subject matter to remain confidential, putting the matter to a vote will undermine that. If the investigation is expected to last beyond the limitation period, a hybrid approach (i.e., suspension varied by an agreed leave of absence) may be a safer option.

If the accused is an employee, the firm could rely on either the employment contract or the firm's disciplinary policy, whichever sets out the suspension provisions. In the absence of any contractual right to suspend, the firm could seek to agree a voluntary period of suspension to mitigate the risk of a potential breach of contract or constructive dismissal claim.  If not, other alternatives should be explored further, as per ACAS guidance. 

Following the decision on suspension, the next step is to inform the accused of the allegations. While there may be an inclination to disclose all details at this stage, doing so may be counterproductive. Where there are no direct witnesses and the allegations turn on credibility, the investigation outcome may largely depend on testing the accused's evidence. The investigator may wish to examine the accused's unscripted reaction to additional facts. Providing all details in advance may deprive the investigator of this opportunity, however, a sufficient level of detail should be provided to enable the accused to understand the nature of the allegations and engage properly in the process.  

The accused should also be informed of:

1. the firm’s decisions on suspension and the SRA reporting;
2. the statement that the firm proposes to make internally and externally (only applicable in the event of suspension) – it is often helpful to at least give the accused opportunity to comment on this if time permits;
3. the designated contact person with whom they can raise questions;
4. the identity of the investigator along with the next steps;
5. potential repercussions if the allegations are upheld;
6. the requirement to keep the matter confidential (subject to usual exceptions); and
7. a caution not to victimise the complainant or interfere in the investigation, and not to destroy potential evidence.

It is also advisable to inform the accused of any available support (e.g., mental health services) and assign a buddy to check on them, as an investigation into their conduct will naturally be stressful regardless of the allegations' merit.   Providing adequate support is important to ensure an accused can sustain the investigation process; any allegation can be perceived as an attack on a lawyer’s integrity creating immediate distress.  The more serious the allegation, the greater the impact on that person’s career causing concerns outside of the fact of the allegation. 

The complainant should likewise be informed of any available support, the steps the firm proposes to take, and the requirement for confidentiality. If they are an employee or partner (as opposed to a client), the firm may also wish to nominate a human resources contact to provide regular updates and check on their wellbeing. Legal risks can potentially arise in relation to the complainant, particularly if their allegations are ultimately upheld, underlining the importance for all interactions to be handled with care, sensitivity and appropriate support. 

Ultimately, while investigations will inevitably vary in nature and complexity, a careful and measured approach should remain constant to ensure that the firm adequately mitigates its potential legal exposure, comply with regulatory requirements and preserve its reputation intact.