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The Four Key Questions Every Firm Needs to be Prepared for When Dealing with Allegations of Partner Misconduct

It’s 4.30pm on a Friday evening. An email hits your inbox. It is a detailed complaint from a staff member about harassment allegedly committed against them by one of the Firm’s senior partners or LLP members. How should the Firm respond? What steps is the Firm required to take? Who must the Firm notify? These are urgent questions which require delicate handling and a co-ordinated and measured response from Firm management and/or HR. The situation can often develop quickly and it is therefore vital that all partnerships and LLPs ensure that they are prepared as far as possible to respond to such issues before they arise.

In this article, we highlight the four key questions that every Firm should be considering when managing or preparing to respond to alleged partner misconduct.

1. What are the Firm’s legal, regulatory and criminal obligations?

The Firm will normally have a legal obligation (as an employer) to respond to situations involving alleged partner misconduct in the workplace, particularly when the health and safety of fellow staff and potential harassment, bullying or discrimination is involved.

Further, Firms that are professional practices usually have an additional regulatory duty to report the alleged misconduct to their regulator and most Firms would need to seek specific advice on the timing and content of any such report.

Although Firms do not normally have a legal obligation to report the matter to the police if they suspect that the misconduct involved a crime, unless they believe the complainant may be in imminent danger, the Firm should take criminal law advice early. That advice should include the extent of any obligations to report to the police, how best to support the complainant as to whether they personally want to report the matter to the police, and how to conduct any internal investigation – including in relation to dealing with witness evidence – in a way which does not prejudice any criminal case that may subsequently be brought.

2. Does the Firm have the power to take action?

The Firm should undertake a careful review of its contractual duties and powers contained in its partnership or LLP agreement and any policies around partner behavioural standards, and any partner grievance or disciplinary procedures, as well as any policies and procedures that apply to the complaining staff member. Any relevant process should be carefully followed as far as possible to avoid any claim that the Firm has breached its obligations or that any action taken by the Firm is inconsistent with its handling of other similar matters (and therefore potentially discriminatory). However, the absence of an existing specific partner investigation, grievance or disciplinary process does not mean that the Firm does not have to respond to the allegations; in these circumstances a Firm will likely be required to establish a robust and fair process to deal with the complaints.

In our experience (and as suggested by the ACAS Code of Practice on Disciplinary and Grievance Procedures, applicable in circumstances where the complainant is an employee) responsive formal action to partner misconduct allegations will often include a two-stage process in relation to the complainant. Firstly, an independent investigation, where the complainant, accused partner and any witnesses are interviewed and other relevant evidence is gathered to establish the facts. Secondly, a grievance meeting, where the complainant is able to explain their concerns and make representations, be accompanied by a colleague or trade union representative, and following which an independent decision-maker can decide on appropriate action in respect of the complainant’s grievance with (in most cases) the ability to appeal. 

Thereafter or concurrently, a disciplinary process may be instituted against the accused partner, if after an investigation it is decided that there is a case to answer.  Disciplinary action (supported by related duties and powers contained in the partnership/LLP agreement) would usually involve providing the partner with details of the allegations against them and supporting evidence; giving them an opportunity to respond to the allegations; allowing them (if they are an LLP member) to be accompanied at any disciplinary meeting by a colleague or trade union representative; ensuring that the decision-maker is independent of the investigation process; and, where appropriate, imposing proportionate disciplinary sanctions against them.

Firms in such circumstances will normally consider a range of potential sanctions, where allegations are upheld against the accused partner. These may include, without limitation, and depending on the seriousness of the alleged conduct, a written or final written warning, potential removal from a senior role, requirement of an apology to the complainant, reduction in profit share allocation or other profit share penalty, de-equitization or, in the most serious cases, expulsion. The Firm may also consider requiring other action by the accused partner, including coaching, counselling or mediation with the complainant (if appropriate and if they agree).

Before imposing any such sanction against a partner, the Firm must ensure that it has the power to do so. Many Firms’ LLP and partnership agreements are often too simplistic and “vanilla” in this regard. For example, a Firm’s partnership/LLP governance documents may only provide for the sanction of summary expulsion, and only in particular circumstances (for example, if the partner has committed a material breach of the partnership agreement, committed a serious criminal offence or has damaged the business or reputation of the Firm). Any power to impose sanctions may also be at the discretion of the partners or person(s) with delegated authority (such as the Management Board or the Managing Partner). Firms should look carefully at their governance documents to ensure that they include express obligations on their partners to comply with Firm policies such as anti-harassment and anti-bullying policies, and not to engage in any such behaviour; and that there are express grounds for expulsion for breach. Firms should also consider including in their partnership or LLP agreement the power to impose sanctions short of expulsion including, but not limited to, imposition of demotion, de-equitization and financial sanctions.

A Firm should also consider whether they have the express contractual power to suspend the accused partner pending any investigation. Even where such a power exists, a Firm will need to consider carefully whether it has reasonable and proper cause to exercise it, which may depend on issues including the seriousness and nature of the allegations, risks to the business and interference with potential evidence, and the impact on the individuals concerned.

3. How can the Firm ensure a fair process is followed?

To enable a Firm to carry out a fair process, certain aspects should be proactively considered and safeguarded, including impartiality of decision-makers, confidentiality, zero-tolerance to retaliation and supporting the wellbeing of those involved in the process.

It is important that fact finders and decision-makers are impartial and as far as possible have not been previously involved in the case. This may require the Firm to use an external investigator and plan ahead to ensure appropriately senior and independent decision-makers are available at each stage of the process, including for a potential appeal.

Firms should seek to maintain confidentiality in respect of the complaint (subject to any legal, regulatory or other obligations). The Firm will want to consider the privacy rights and wishes of any alleged victim of the misconduct as far as reasonably possible, given any conflicting legal and regulatory obligations the Firm may have. It is not uncommon for victims to insist on anonymity. This is difficult to guarantee and can sometimes create difficulties for the Firm’s investigation and its legal and regulatory compliance. It is often a question of ongoing communication with the individual and gaining their confidence by providing reassurance and tailored support.

Complainants and witnesses in a partner misconduct investigation may feel reluctant to be involved in the process for fear of retaliation. It will therefore be important for the Firm to make it clear (and enforce as necessary) that victimisation or retaliation against a complainant or anyone involved in the process will not be tolerated and could result in disciplinary action.

Firms should also bear in mind their pastoral obligations, to the victim of any alleged serious misconduct (such as sexual assault), to witnesses, and also to the accused partner. Partners who are faced with potentially career-ending allegations and/or regulatory or even criminal sanctions, can be under immense stress. The pressure of the allegations and investigation can be overwhelming for the accused partner, because of the impact of the allegations on their family and family life, as well as their career and reputation. Firms should consider emergency medical intervention if necessary – including recommending that any affected individual attends A&E immediately if they appear to be in imminent danger. It is important for Firms to support the complainant and the accused partner (and witnesses too as necessary) through any investigation/disciplinary process (e.g. with individual and tailored counselling or medical assistance if appropriate), particularly where there are signs of mental distress.  

4. How can the Firm protect against future partner misconduct?

The consequences of not responding in an appropriate and timely manner can affect the Firm’s legal, regulatory, reputational and financial position as well as the morale and retention of the workforce.
 
In some circumstances (such as unlawful discrimination by a partner), the Firm may also be legally responsible for the misconduct, although it may have a defence if the Firm can show that it took reasonable steps to prevent the misconduct. Reasonable steps may include:

• Completing a risk assessment: a risk assessment of the circumstances where partner misconduct is likely to arise and responsive control measures;

• Awareness-raising: introducing and communicating policies on the behaviour and conduct expected from partners;

• Training:

– providing tailored training for partners on the Firm’s partner behavioural policies and values, and on the likely consequences for partners who act in breach of those obligations and expectations.

– training for HR, partners and other members of the Firm who are likely to be first responders to any complaint, on how to triage the issues raised with them in a way which is sensitive, to escalate them in line with firm policies and regulatory obligations, and to do so in a manner which does not create additional liability for the Firm by the first responder’s own handling of the situation.

• Monitoring:
implementing a process for monitoring partner behaviour and reporting concerns;

• Enforcement: adopting and communicating a “zero-tolerance” approach to all forms of serious partner misconduct and retaliation, and investigating and taking appropriate disciplinary action where complaints are determined to be well-founded;

• Updating Partnership/LLP agreements with express duties for partners and powers for the Firm: including to prohibit discriminatory harassing and bullying behaviours, to require compliance with related policies and procedures, and to allow for partner suspension and for a range of potential sanctions depending on the seriousness of the misconduct;

• Leadership from the top: it is essential for senior management to both support and endorse good partner behaviours, and to model them themselves.
 
These steps can help to create a culture where everyone in the workforce can feel confident in identifying and reporting misconduct. 

Firms should also familiarise themselves with the Equality and Human Rights Commission’s helpful ‘Sexual Harassment and Harassment at Work’ Technical Guidance, which provides best practice for effective prevention of, and response to, misconduct in these areas. However, partner misconduct is not limited to incidents involving sexual harassment and bullying. It can include conduct such as drug or alcohol abuse, falsifying expenses claims, or committing other serious crimes. No matter what it is, management and HR of Firms need to be prepared to prevent and respond to such situations.

Our team of 17 partnership and employment lawyers are experienced in advising on partner misconduct, partnership agreements, workforce policies and contractual arrangements. We can work with you to design and implement bespoke measures, policies and processes to prevent partner misconduct as far as possible, and to put you in a position to be able to respond quickly and effectively to partner misconduct if it does arise, in order to best protect your business and your greatest assets – your people.

If you are concerned about partner misconduct or have any questions on the issues highlighted above, please contact Associates Wendy Chung and Wonu Sanda, Partner Zulon Begum or Managing Partner Clare Murray. Wendy, Wonu, Zulon and Clare advise partners and partnerships in all sectors on a range of legal matters (including partnership structures, profit sharing arrangements, partnership mergers, partner disputes and legal risk management).