Governance in the Era of the #Metoo Movement: an Overdue Wake-up Call
As part of our series of bulletins on the duties and obligations of directors1, we will focus on the application of the general concepts of psychological and sexual harassment.
Ending intolerable behaviour: also a governance issue
Few topics have dominated the news over the last two years more than the numerous allegations and accusations of sexual harassment made against public figures in Quebec and abroad. These recent scandals remind us of the need to take all necessary measures to prevent or put a stop to any form of harassment in their workplace2 but also in a non-work context that can nevertheless be associated with the organization3 4. The #MeToo movement and the media attention it has received are a reminder that harassment has become a major risk for an organization’s reputation and that of the individuals who manage it5. And who says risk, says governance issue!
In fact, as part of their obligations of care, diligence, honesty and loyalty6, directors play an active role in overseeing the affairs of the organization. They are also subject to legislative norms that may directly render them personally liable if they “have prescribed or authorized the perpetration of the offence or agreed or was a party thereto”7.
An employee who files a complaint of psychological and/or sexual harassment against his employer must prove(i) the presence of vexatious behaviour or serious conduct, from the standpoint of a “reasonable victim”8, (ii) the violation of dignity and integrity9, and (iii) a harmful work environment10. If the evidence is established, it is up to the employer to show that it did not fail to meet its obligation to prevent harassment and to stop it when it is brought to its attention. Please note that sexual harassment is a form of psychological harassment.
First, strive to prevent harassment … then react swiftly if it nonetheless occurs
The board of directors must thus ensure that the employer has effectively fulfilled its obligations, both with respect to prevention and with its actions to stop to the harassment brought to its attention11.
It is important to note that the law does not define the means that must be implemented by an employer to show that it has fulfilled its obligations. As the Court of Appeal points out in Association des médecins résidents de Québec v. Leclerc12 [TRANSLATION]: “Each case is sui generis, such that the measures taken by the employer must be adapted to the circumstances specific to it.”
It is therefore up to the organization to ensure that it takes the measures that a reasonable person would consider appropriate under the circumstances. This standard may change over time, and what were deemed appropriate measures in 2010, may no longer be in 2018, with the emergence and discovery of behaviours that can no longer be tolerated. It is therefore essential to regularly review the measures in place to counteract these behaviours. The major issues that harassment issues raise for organizations, both the well-being of their employees and the organization’s reputation, make the directors’ involvement necessary in order to ensure that prevention and control measures are in place and are being applied. This is all the more important in light of section 142 of the Labour Standards Act, referenced above.
Because it’s 2018!13
But what should be considered appropriate in 2018? As far as prevention is concerned, there should be in particular a policy in place regarding harassment, and a code of ethics, signed by all employees and included in the employment contract, as well as regular training for all employees and members of senior management, including the directors themselves. Indeed, both above-mentioned policy and training must apply at all levels of the hierarchy.
The harassment policy should also provide for complaints implicating senior management, including any member of the board of directors, to be made directly to the board and possibly even a board committee designated to receive complaints of this kind. It may also be appropriate to consider an anonymous hotline for making complaints, as well as annual audits to verify the work climate and determine if there are harmful behaviours within the organization. In addition, the board of directors must make known its support for a zero-tolerance organizational culture and concrete actions in the event of any breach.
Thus, the board of directors must ensure that internal policies, procedures and internal controls related to harassment are not only in place, but that they are actually being effectively applied. The board must therefore actively:
i) ask management about the existence of such policies and internal control;
ii) become familiar with the latter, and with the internal investigation process;
iii) ensure that such policies are updated regularly in accordance with industry standards;
iv) ensuring the presence of a proven, experienced and capable human resources team able to implement such policies when required;
v) question and challenge human resources management;
vi) ensure processes whereby the board is informed of complaints (e.g. for large organizations, obtain reports on complaints involving management, as well as statistics regarding complaints filed in offices/establishments/plants or any other useful information regarding the existence of delinquent patterns beyond unique and isolated instances of such behaviours within the organization);
vii) obtain a report from human resources management on potentially problematic situations;
viii) retain an independent professional to conduct an objective investigation, if warranted;
ix) create a board committee overseeing human resources, and put in place a mechanism for reporting complaints of this nature to the board;
x) ask for and participate in training sessions in this regard;
xi) review the anti-harassment program on a regular basis and amend it when circumstances warrant;
xii) ensure that an effective crisis-management plan has been adopted;
xiii) ensure by means of adequate internal communications that a zero-tolerance culture prevails and concretely show that such delinquent behaviours will not be tolerated.
In any such situation, the directors’ duty is not only to act prudently and diligently to prevent delinquent behaviours and protect victims, but also to ensure that the person targeted by allegations of harassment or improper behaviour can defend himself or herself. And when such allegations are raised in the workplace, often the best approach is to suspend the targeted employee with pay, in order to carry out an independent investigation as quickly as possible.
Obviously, the board of directors cannot be complacent or negligent to intervene because the problem situation involves a senior executive or key employee of the corporation. No “economic” grounds can justify inaction on the part of the board upon being informed of allegations (or even rumours) of harassment. It is their responsibility to take action14.
In conclusion, given the reputational, legal, operational, financial and regulatory risks involved, directors must be able to demonstrate that they have taken reasonable steps to ensure that effective internal policies and processes are in place, that they respect the standards and practices that a reasonable person is entitled to expect and that they were proactive with respect to both the prevention and management of problematic situations.
1 Duties and Obligations of Directors: a Brief Overview; Beyond the Duties of Care and Loyalty … the Civil Liability of Directors; Statutory Liabilities of Directors: Marking the Risk Areas to Avoid Sliding out of Control; Directors’ Liability: Get the Means to Defend Yourself!; Cybersecurity Is Also a Question of Governance
2 Section 81.18 of the Labour Standards Act, CQLR, c. N-1.1 (the “LSA”):
“For the purposes of this Act, “psychological harassment” means any vexatious behaviour in the form of repeated and hostile or unwanted conduct, verbal comments, actions or gestures that affects an employee’s dignity or psychological or physical integrity and that results in a harmful work environment for the employee. A single serious incidence of such behaviour that has a lasting harmful effect on an employee may also constitute psychological harassment.”
3 Consider for example situations where an officer of the enterprise behaved inappropriately with a business partner, supplier, client or candidate for a position within the organization. While such situations cannot trigger application of the provisions of the LSA, they pose other potentially harmful risks for the organization.
4 In addition to these recourses under the LSA, there are others that can be brought before the Human Rights Commission (Commission des droits de la personne et des droits de la jeunesse) or before the civil courts, based on Quebec’s Charter of Human Rights and Freedoms or on article 2087 of the Civil Code of Québec, as well as criminal charges against the harasser.
5 Consider the fire sales of Quebec business enterprises (or their assets) following accusations of sexual harassment or misconduct against senior officers
6 Article 322 CCQ, section 119 of Quebec’s Business Corporations Act, section 122(1) of the Canada Business Corporations Act; Beyond the Duties of Care and Loyalty … the Civil Liability of Directors
7 Section 142 LSA: “Where a legal person commits an offence, every officer, director, employee or agent of that legal person who has prescribed or authorized the perpetration of the offence or agreed or was a party thereto, is deemed to be a party to the offence.”
Section 21(1) Criminal Code, R.S.C. (1985) c. C-46: “Every one is a party to an offence who:
(a) actually commits it;
(b) does or omits to do anything for the purpose of aiding any person to commit it; or
(c) abets any person in committing it.”
Statutory Liabilities of Directors: Marking the Risk Areas to Avoid Sliding out of Control
8 Breton v. Compagnie d’échantillon national ltée, 2006 QCCRT 601 (CanLII); leave to appeal denied, Breton v. Compagnie d’échantillons National ltée, 2008 QCCA 1401 (CanLII)
9 Côté v. Recyclovesto Inc., 2008 QCCRT 36 (CanLII)
10 Bangia v. Nadler Danino S.E.N.C., 2006 QCCRT 419 (CanLII)
11 Section 81.19 LSA:
“Every employee has a right to a work environment free from psychological harassment. Employers must take reasonable action to prevent psychological harassment and, whenever they become aware of such behaviour, to put a stop to it.”
12 2014 QCCA 2374 (CanLII), para. 21
13 This subheading is inspired by Prime Minister Justin Trudeau’s justification for gender parity in his cabinet: “Because it’s 2015!”
14 One need only think of the class action filed against Harvey Weinstein, which included claims for damages against the directors of The Weinstein Company.