Employment law risks when keeping clients happy

Advice  |   12 July 2023

Written by
Emma Thompson, Partner

The client is king and businesses will usually do anything they can to keep and grow clients, but not everyone is committed to increasing diversity and inclusion at the same pace. This can create some tricky dilemmas. Should an employer accommodate a client’s discriminatory preferences? And does the employer have a duty to protect employees from discriminatory clients?

‘Employers can sometimes find themselves in the difficult position of wanting to keep a client happy, but also needing to protect their employees. The law in this area is a mix of seemingly contradictory provisions,’ says Emma Thomson, Partner and head of employment at Thackray Williams.

Our employment team offers guidance and practical tips for dealing with this type of scenario and also looks at the potential impact of clients rewarding diversity and inclusion.

For the sake of simplicity, we have used an example of sexism, but the scenario and dilemmas apply for all protected characteristics.

What if the client refuses to work with women?

How should you act if an important client makes it clear that he wants to work with a male project manager, but the best and obvious person for the project is female?

If the employer chooses a man over a woman to accommodate the client’s discriminatory preference, the employer is likely to be liable for direct discrimination. The law does not allow employers to justify the decision, for example by arguing that they need to keep the client’s business.

But what about protecting the employee?

While not wishing to discriminate against the female employee, the employer will need to consider the impact on the employee if she is given this project. This is particularly important if past experience shows that this client can be disrespectful, undermining, and rude to female project managers, for example by making crass sexist comments and telling them to ask a male colleague when it gets ‘too technical for her’.

However, even where the employer’s motivation is to protect the female employee from such behaviour, giving the project to the male colleague in these circumstances would still be direct discrimination.

Could the employer be liable for the client’s behaviour?

This type of behaviour, if carried out by a colleague in the same company, would fall squarely under the legal definition of harassment and the employer would in most circumstances be liable for it.

Employers are generally not liable for harassment by third parties, so if the employer insists that the female employee runs the project, they would not be liable for the client’s harassment because the client is a third party.

However, the employer still faces several risks if they just stand by and do nothing:

  • the employer could be liable for the failure to intervene if the decision to not intervene is itself an act of discrimination, for example if the employee could argue that the employer would not tolerate a male employee being treated like this;
  • if the client’s treatment has a detrimental impact on the employee’s mental health, the employer could potentially be liable for a personal injury claim; or
  • failure to intervene could result in a breach of the mutual duty of trust and confidence with the employee, allowing them to resign and claim constructive unfair dismissal.

How the employer deals with this situation could have an impact on other staff too. If seen as unsupportive or turning a blind eye to poor behaviour from the client, this could affect staff morale and reputation, in turn having a negative impact on recruitment and retention.

Practical tips

In this scenario the employer should talk to the employee and explain their concerns, giving the employee the option to turn down the work or to take it up with support from her manager and an agreed strategy to ‘manage’ the client.

Employers should ensure that terms and conditions of business, or a public statement, make it clear that clients should not discriminate against staff.

The employer then needs to manage the client and explain that the employee is the best person for the job.

By frequently checking in with the employee and being prepared to remind the client to treat staff appropriately, the employer should be able to keep the business and protect their staff.

Clients promoting diversity and inclusion

In recent years, some companies have been using their purchasing power to push for more diversity in the external teams that they work with. For example, Microsoft has offered a reward to the American law firms it uses by increasing their legal fees if the firms meet diversity goals.

In the UK, positive discrimination is generally prohibited so businesses could not put forward employees for particular work simply based on a characteristic such as gender, race or transgender status. Such a move could directly discriminate against other employees without that characteristic unless there was a genuine occupational need for an employee with a specific characteristic. This would only be the case in relatively rare circumstances, such as only employing women to work in a women’s refuge.

The exception to the rule against positive discrimination is that employers can treat disabled employees more favourably than non-disabled employees. For example, subject to any data protection issues, this could allow an employer to put forward neurodiverse employees for a piece of work if the client was keen to create opportunities for neurodiverse individuals.

Finally, when pitching for work, to avoid any perception of ‘tokenism’ among staff, employers should ensure that any promotion of the diversity of the team is backed up by genuine opportunities to work on the project beyond the pitch meeting.

Positive action

Employers who are looking to increase the diversity of their workforce, particularly in specific roles, may be able to take positive action in relation to recruitment or promotion. This is distinct from positive discrimination and is lawful in the UK. We can help you assess whether this route would be appropriate for you and ensure your processes are legally sound.

How we can help

We can help you balance these competing interests and help you ensure your workplace remains inclusive. For further information, please contact a member of our employment team on 020 8290 0440.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Related Insights