Founder of Craig Gordon looks at a case which should make SME employers pay attention.

Discrimination law is perhaps the fastest moving area in employment law.

Other areas, for example unfair dismissal, are relatively stable. But it is in the area of discrimination where employers really have to be on the ball. We've seen the recent introduction of laws on sexual orientation and religion/belief and this year will see a major extension into the area of age discrimination.

However it's not these new' topics that I want to look at, but rather an old' discrimination topic that has recently had new life breathed into it and which could have a serious impact on employers, especially in the SME sector.

As most employers know, the amount of compensation that tribunals can award in discrimination cases is unlimited, unlike unfair dismissal law where compensation is capped. But what employers may not be aware of is that both the employer and the person doing the discriminating or harassing can be jointly liable for any damages awarded.

Employers tend to shoulder the responsibility for any compensation claims. Tribunals commonly make large awards against employers but seldom do they make awards against individuals. When they do, it is often just a few hundred pounds, in the main against the individual who has committed the act of discrimination (and who is legally deemed to have aided and abetted it). In a sense, the actual guilty person effectively gets away with it, leaving his or her employer to pick up the tab.

But last year, in a case called Way v Crouch, the Employment Appeal Tribunal said that it is permissible to make both the employer and the person who carried out the harassment liable for the full amount of compensation on a joint basis.

What's more, the financial apportionment of the award should be made on the grounds of each party's culpability, and not on their finances.

The upshot of this is that it looks as if employers will be able to ask tribunals to be tougher on harassers and make them equally responsible for paying compensation. It also means that if the employer's company has been made insolvent, the aggrieved employee can sue the harasser for the full amount of the compensation.

At the time, this case didn't get a lot of publicity but recently there's been another case before the Employment Appeal Tribunal, Miles v Gilbank, which really emphasises the potential financial cost to employers.

Ms Gilbank was a senior hair stylist at Quality Hairdressing Ltd, a company of which Ms Miles was the director and majority shareholder. When Ms Gilbank told Ms Miles that she was pregnant, the working atmosphere suddenly changed and a campaign of harassment began, orchestrated by Ms Miles.

At the tribunal, the chairman described Ms Gilbank's treatment as "downright vicious" and what she endured as an "inhumane and sustained campaign of bullying and harassment". Ms Miles made no attempt to adjust Ms Gilbank's working practices and no risk assessment was carried out.

Perhaps unsurprisingly Ms Gilbank's complaint of sex discrimination was upheld. The tribunal's award included £25,000 for injured feelings. Ms Miles and her company were made jointly liable for this compensation on the basis that she had fostered and encouraged the discriminatory treatment.

Ms Miles then appealed against the tribunal's decision to the Employment Appeal Tribunal which dismissed her appeal.

Referring to the decision in Way v Crouch (which also involved a director who was a sole manager of a company), the tribunal held that it had the power to make an award on a joint and several basis. The tribunal said "the person who made this company tick was Ms Miles,' and it was satisfied that she was covered by section 42 of the Sex Discrimination Act 1975 which says, in so many words, that someone who knowingly aids another person to do an unlawful act is treated by the law as being as culpable.

One sentence of the judge in the Employment Appeal Tribunal is worth quoting in full: "If you are a senior manager and see bullying going on in which you join and in which you foster the culture in which that happens, we unequivocally consider that this comes within the ambit of being responsible under the Act."

This case is a useful warning that both individuals and employers can be held liable under sex discrimination law. Larger employers are arguably less likely to be caught out here as they often have well-developed policies and procedures. It is the smaller employer particularly owners and managers of small businesses who are the prime candidates for awards such as this.

If any manager asks for indemnity insurance against being sued, it is against public policy and no insurance firm would be able to provide it.