Sexual Harassment in the #MeToo Era and Minimizing Risk

Date: November 16, 2018

By: Jennifer S. Jackman, Esq. 

Originally published by Association of Corporate Counsel National Capital Region

The number of sexual harassment claims reported to the EEOC, as well as the amounts recovered by the EEOC and in jury awards, are on the rise. In 2015, 6,870 sexual harassment complaints were filed with the EEOC. Between 2010 and 2016, private employers paid nearly $700M to employees arising from harassment claims filed with the EEOC. As of October 2018, the EEOC had already filed 41 sexual harassment lawsuits – a more than 50% increase since 2017. Similarly, as of October 2018, sexual harassment charges filed with the EEOC in 2018 increased by more than 12% from 2017 and the EEOC has already recovered nearly $70M in sexual harassment claims in 2018 – an increase from the $47.5M it recovered in 2017.

What do sexual harassment claims cost a company? There are the obvious costs of the settlement (if resolved) and attorneys' fees, but there are many other indirect costs. These include increased insurance premiums, increased labor costs due to turnover, absenteeism from work, and, what is seen even more now, severe reputational damage. If the media takes hold of a claim, this can result in a public lashing, which can directly affect the profits and value of the company. 

Given the significant cost associated with sexual harassment claims, organizations need to be proactive in addressing and preventing sexual harassment. There are multiple steps companies can take to minimize risk, including:

  • Strong Harassment Policies with Proper Reporting Channels

Companies should carefully review their harassment policies to ensure they prohibit retaliation, provide for confidentiality, and implement proper reporting channels. Once the policy is approved, it should be published to staff on an annual basis. In addition to having harassment policies in a handbook for employees, organizations should consider adopting a Code of Conduct for the Board of Directors that includes a prohibition against harassment.

  • Proper Training of Staff, Managers and the Board of Directors

In order for policies to be effective, companies must train their employees, managers and staff. Staff needs to understand what conduct is prohibited and what to do if they witness or become the victim of harassment. Board members, executives, and managers are held to a higher duty under the law and should receive separate management training that clearly defines their duties and obligations in handling harassment claims, in order to minimize risk not only to the organization, but to themselves.

  • Executive Agreements

Given the potential exposure to organizations for sexual misconduct/harassment by executives, employment contracts should expressly include harassment as one of the types of “cause” that allows for termination of employment.   

  • Consensual Relationships

Harassment claims often arise from consensual relationships that have gone bad. Re-evaluating whether your organization should allow consensual relationships is advisable. If such relationships are allowed, there should be parameters implemented and notice to the organization of such relationships should be required.

  • Avoid Retaliation

Companies must be proactive in preventing retaliation of employees who complain of harassment or participate in investigations. Actions an organization takes to “protect” an employee must be carefully considered to ensure they do not provide a basis for retaliation.

  • Avoid Taking Action that Could Be Deemed Discriminatory

Similarly, disciplinary actions taken by an organization against an accused in response to the complaint could be seen as gender discrimination. For example, an organization that prohibits a male executive from working with or meeting with female employees in response to a complaint of harassment could face a gender discrimination claim if this action leads to fewer interactions with key employees, and thus, fewer promotions, salary increases, etc.

  • Promptly and Properly Investigate

The only thing worse than not having a sexual harassment policy is having a policy and not following it. When a complaint of harassment is received, it must be promptly investigated in accordance with company policies.

  • Take Action

Once the investigation is complete, if there is a finding of inappropriate conduct, the organization must take prompt and appropriate action. Consideration should be given to whether the harassment was intentional and whether the person is a repeat offender. Action must, however, be taken to endeavor to stop the conduct from occurring in the future.

  • Obtaining and Maintaining EPL and D&O Insurance

While companies can take steps to minimize potential harassment claims, they cannot eliminate the risk altogether. Accordingly, it is imperative to have appropriate insurance coverage that provides a defense and indemnifies the organization and its Board members against such claims. Understand what a “claim” is under the policy and ensure proper notification is given to the insurer when a claim is made.

The #MeToo movement brought with it an increase in reporting of sexual harassment. Employers should invest the time and resources to review the organization's culture, ensure they have proper policies, and appropriately train staff, managers and Board members. When a concern is raised, organizations should promptly investigate and take appropriate action. 

Whiteford, Taylor & Preston can work with you to ensure that your investment in time and resources effectively minimizes risk.