UK: Weinstein And The End Of Wilful Ignorance

Last Updated: 14 November 2017
Article by Henry Ker

Boards need to take immediate action to deal with cases of harassment

Harvey Weinstein is currently at the centre of a storm of accusations. Over fifty women have come forward to accuse him of offences, including sexual harassment, sexual assault and rape, with police in the US and UK now investigating specific allegations.

Through his spokesperson, Weinstein has 'unequivocally denied' any allegations of non-consensual sex.

The Weinstein Company, which Weinstein founded with his brother in 2005, wasted little time and fired Weinstein from his position of chief executive three days after the initial New York Times exposé.

Alongside this came reports that Weinstein's name would be removed from future production credits and the company was considering an overall name change in an effort to distance itself from the damaging allegations.

But a surprising twist in the story has recently emerged. Entertainment news website TMZ claims to have had access to Weinstein's employment contract, which allegedly states if Weinstein 'treated someone improperly in violation of the company's Code of Conduct' then he must reimburse the company for settlements or judgments, and in such instances, he cannot be terminated.

Additionally, the company would require Weinstein to pay a fine to the company in such situations, the contract stating: 'You [Weinstein] will pay the company liquidated damages of $250,000 for the first such instance, $500,000 for the second such instance, $750,000 for the third such instance, and $1,000,000 for each additional instance,' TMZ claims.

The contract allegedly states this constitutes a 'cure' for the misconduct charges.

Leaving aside the shocking nature of the allegations against Weinstein, this supposed contract raises separate questions about the legality and morality of a clause like this, and whether a company can really attempt to recuse itself from responsibility for its executive's actions.

Avoiding the stairs

Michael Burd, chair and partner of Lewis Silkin LLP, said: 'It is unheard of for a company to say to an executive, in effect, you can breach our policies about treatment of others with impunity provided you pay for the consequences.

'Employers have duties of care to other employees, and often to third parties as well, and the existence of such a clause would be proof that the company was aware of the risk to others but deliberately avoided taking steps to protect them against it.'

US federal law, such as Title VII of the Civil Rights Act of 1964, and state law like the New York State Human Rights Law set out this responsibility.

Within UK law, that duty of care is also well documented – from an implied contractual duty owed by employers to their employees and the provisions of the Equality Act 2010, to the directors' duties in section 172 of Companies Act 2006. A contract clause would not absolve a company from this duty.

"A clause so specific in an employment contract could also indicate that the company was aware that Weinstein posed a risk"

As Gareth Brahams, managing director of Brahams Dutt Badrick French LLP, explained: 'A clause equivalent to the alleged one in Weinstein's contract would blow out of the water any suggestion that the company had taken reasonable steps.'

James Hockin, a dual New York and English law qualified associate in the Withers LLP employment team, said: 'In the US, as in the UK, such a contractual clause would totally undermine an employer's defence against being held liable for the actions of an employee, as it would highlight that the employer was not exercising reasonable care to prevent and promptly correct harassing behaviour.'

Too great an asset

There have been suggestions that the allegations now surfacing were common knowledge within certain circles. And as Burd said, a clause so specific in an employment contract could also indicate that the company was aware that Weinstein posed a risk.

A clause like this would suggest a risk analysis of the value versus potential damage – reputational and financial – of having Weinstein at the company, the hypothetical balance sheet coming out in favour of the former CEO. As Brahams said: 'That kind of clause could only occur in an organisation where one individual wielded so much economic power and value'.

This is not surprising; historically allegations in the industry such as this were swept under a rug with a payout and a non-disclosure agreement, allowing the employee – who is valued because of their unique network of connections, influence and industry reputation – to remain an asset to the company.

Brave new world

However, times have changed. Given the fallout for Weinstein, and by association his namesake company, that hypothetical balance sheet looks like a serious miscalculation.

The Academy of Motion Picture Arts and Sciences, better known as the Oscars, has booted Weinstein out. The Weinstein Company has meanwhile suffered a raft of cancelled projects and sponsorships, as partners like Apple, Amazon and car company Lexus seek to distance themselves from a toxic association, and it has looked for investors to secure its financial future.

The contribution of a well-connected executive can pale in comparison to the damage caused by the company's connection to him.

It could also be argued that, in cases like this, a company has undermined its duty of care to its other employees. Sarah Chilton, partner, and Wonu Sanda, associate solicitor, at CM Murray said: 'Employees may not just be able to seek remedy after an instance of harassment – the company has exposed them to a level of risk.

'If employees could show that the employer knew about previous cases of harassment, then they may argue they have been forced to work in a dangerous, stressful and hostile environment, possibly detrimental to their mental and physical health. This could be a basis for constructive dismissal.'

"It could also be argued that, in cases like this, a company has undermined its duty of care to its other employees"

The Oscars board said of its decision to evict Weinstein: 'We do so not simply to separate ourselves from someone who does not merit the respect of his colleagues, but also to send a message that the era of willful ignorance and shameful complicity in sexually predatory behaviour and workplace harassment in our industry is over'.

Elsewhere, New York state senator Brad Hoylman has co-sponsored legislation that would bar organisations from making contractual provisions to conceal claims of discrimination, harassment or other violations of public policy. 'By silencing victims, we are just creating new victims', he said.

Swift response

Boards should take note: take allegations of misconduct seriously. Any employee proven guilty by the evidence of serious harassment should have their contract terminated.

Sexual harassment should be treated with the same contempt as fraud, bribery or any of the other crimes for which rogue directors are cited.

Chilton and Sanda said such cases could increase harassment claims: 'There has been a huge swell recently of women speaking out about harassment.

'Where previously they were afraid of reprisal due to the power imbalance between the harasser and harassee – particularly as the harassee often feels they may be putting their career at risk by speaking out – recent high-profile cases mean now many feel they are more likely to be believed and in some cases see a duty to protect colleagues from future behaviour.

'Also, moving forward, companies will be more sensitive and cautious around issues of harassment – where previously an employee guilty of harassment might be let off with a warning, now I think they are more likely to be dismissed.'

Even if we can somehow ignore the amorality of letting someone known to harass employees – or worse – continue to operate within the company, the numbers on the hypothetical balance sheet show it has to be a business imperative to take immediate action.

Neither The Weinstein Company nor Harvey Weinstein's representatives had responded to our approach for comment at the time of going to press.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions