Steer Your Clients Away from Unnecessary Risks of Sexual Harassment

Despite a heightened awareness, sexual harassment still is pervasive in the workplace.

Any instance of sexual harassment is regrettable for the distress it causes the victim. It also means grief for the employer—and for the companies that insure them. Resolving a sexual harassment allegation can be very costly in terms of time and money. It also can disrupt and divide a workforce for months.

A company can be liable if it has been negligent in preventing sexual harassment by its workers. Those instances of harassment can occur through actions, spoken words, or writing—either at the work site or away from it. The seeming privacy of computers, e-mail, and the Internet also has created new channels for employee harassment.

Mid-sized and small companies are particularly vulnerable to these situations. They usually do not educate their employees regarding the “don’ts” of workplace behavior as well as the larger firms do. Smaller firms frequently have staffs that are more close-knit and have fewer inhibitions regarding banter, jokes and pranks. Their managers often lack formal training on how to prevent sexual harassment or how to respond to complaints.

Companies can also be subject to liability for the behavior of non-employees in some situations. In one actual event, a large-volume customer made sexual remarks to a female sales representative and groped her. After he left, she complained to her sales manager about the customer’s behavior.

The manager obviously did not want to confront, and possibly lose, a major customer. Still, the manager needed to react. But how? Possible choices were:

• Do nothing and hope the problem is soon forgotten.
• Advise the employee that if she had acted more professionally, the problem might not have occurred.
• Ensure that only a male sales representative serves that customer in the future.
• Warn the customer that another episode will not be tolerated.
• Report the incident to the company’s human resources department (or the equivalent) and let them handle it.

The correct choice, at least initially, was the last one. Unfortunately, companies are just as likely to make any of the other choices.

It would be very tempting to do nothing. Though that sometimes works, it does not solve the customer’s underlying disrespect of the employee. Inaction can encourage the customer to repeat the episode; and aside from the personal tragedy to the employee, the liability for the company could be extreme. A jury likely would conclude that the second assault might not have occurred if the employer had not ignored the initial harassment.

Admonishing the employee to act professionally in the future also may work in the short term. After all, the sales representative may not want to lose the customer any more than the manager does. But the problem is magnified if the manager later has to reprimand, demote or discharge the female employee for a legitimate reason. The employee might sue, alleging she was fired in retaliation for complaining about sexual harassment (an illegal termination). Failing to investigate the initial complaint can create the inference that the company’s subsequent actions toward the employee were less than aboveboard.

Assigning the customer to another sales representative could create the appearance that the manager is retaliating against the female employee for making a complaint about sexual harassment. That could cost the female sales representative a commission when all she really wanted was for the customer to treat her with respect. And, as mentioned above, it is illegal to retaliate against anyone who has made a complaint or participated in a sexual harassment investigation.

Reprimanding the customer obviously is not a bad thing to do, but it doesn’t replace an investigation for several reasons. Basically, if there were no witnesses, the employer has no way to know that the female employee is being truthful. The employee could have her own reasons to lie about the incident. Companies always should conduct their own investigation to determine the truth. They may not be successful in that quest, but they will have followed (what always should be) their company policy—to investigate all sexual harassment complaints, no matter how small the claim. Besides being the right thing to do, a thorough investigation can be a defense to a sexual harassment claim. And if the employee does not complain about the harassment and then sues later, companies can show that they would have investigated had they known.

Referring the problem to the human resources department can never be a bad decision. Their investigation will remind all employees that they will be held accountable for their behavior. And it allows the company to emphasize the type of behavior it expects expect from its workers.

Employers can save themselves many difficulties if they install the policies and practices necessary to prevent sexual harassment claims. As a condition of insurance, or to quality a company for favorable rates, insurers can require an audit of a company’s human resource policies to determine if it has:

• An Equal Employment Opportunity statement.
• A policy describing the types of behavior that are forbidden in the workplace, along with the potential penalties for violations.
• An “open door” policy to encourage employees to make sexual harassment complaints without fear of retaliation. Employees should have the option to register their complaints to more than one person. The policy also should outline how a subsequent investigation will unfold. This helps employees understand the process and managers to be consistent in its application.
• A method to ensure that every employee receives a copy of these policies. Confirmation of those notifications should be kept in employee personnel files.
• Procedures or software to monitor telephone, computer and Internet usage. To avoid invasion of privacy claims, employees should be required to sign a statement acknowledging the company’s right to monitor their use of computers and the Internet.
• Periodic sexual harassment awareness training for all employees. This does not need to be expensive or time consuming, but should be held on a regular basis so that employees fully understand what behavior is not acceptable.

Companies with such policies and practices are much easier to defend in lawsuits. Of course, companies must make genuine efforts to follow and enforce those policies.

Obviously, not all do. Since 2000, the Equal Employment Opportunity Commission has handled more than 25,000 sex discrimination charges each year. During the 1990s, U.S. employers paid about $1 billion to resolve such claims, much of it coming from their insurance companies.

Sexual harassment costs a typical Fortune 500 company $6.7 million per year, or $282 per employee, while meaningful preventive steps cost only $200,000, or $8 per employee. Clearly there is a cost incentive to avoid employee lawsuits. This can be done by a little preventive maintenance.

Insurance companies should insist that their insureds enact good sexual harassment policies, educate their employees about them, train their managers, and above all, act decisively in the event of a complaint.

Art Lambert is a partner of Epstein Becker Green Wickliff & Hall in the labor and employment practice. He can be reached at (214) 397-4330 or alambert@ebglaw.com (www.ebglaw.com).