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Managing the Risk of Sexual Harassment in (and outside of) the Workplace

Updated: Nov 16, 2020

By Michael Rodman, CPCU

It is hard to believe that in today’s business environment, sexual harassment still takes place. This article discusses preventative steps that may help avoid claims and keep a company’s hard-earned reputation intact.

One would think that decades after sexual harassment and sexual abuse cases emerged from the dark recesses of quiet, if not secret, settlements between businesses and victims, company policies and anti-sexual harassment training would have put the brakes on the problem. However, instead, we are seeing more and more evidence that people with “power” in their companies have continued to victimize subordinates and those whose career goals could be aided by those “powerful” people.

Consider Cosby, Fox News/Roger Ailes/Bill O’Reilly, Weinstein, and the “me too” women who are now speaking out. There is a problem, and it should be addressed within all organizations, large and small.

The employer, the victim’s manager, and the perpetrator may be liable for not only ordinary damages, but also punitive damages if the behavior of the perpetrator should be deemed particularly detrimental to the victim’s work environment and job opportunities. Even worse, if this particular type of behavior were pervasive within the organization, a class action suit against the employer could result with significant financial and reputational damage to the business.

In addition to sexual harassment in the workplace, an employer could find itself embroiled in an expensive lawsuit if an employee should harass a vendor or customer at an offsite location such as a trade show or the vendor’s or customer’s office. So what should an employer do to reduce the likelihood of sexual harassment?

  • Create an Anti-Sexual Harassment Policy Statement stating that the company’s goal is to have a workplace and workforce that is free of sexual harassment of employees and other persons and that such behavior is illegal and will not be tolerated

  • Distribute a copy of the Policy Statement annually (and to new hires at the time of employment) and require that each employee sign off on having received a copy of the Statement

  • Conduct annual training of all employees on the company’s Policy Statement, what behaviors are unacceptable, and on the company’s complaint procedure

  • Establish a complaint procedure that will be included in the company’s published Employee Guidelines and in the annual training session, instructing employees who believe they have been the victim of sexual harassment of the right to file a complaint with the company and how and to whom the complaint should be made

  • Ensure that every complaint is promptly and thoroughly investigated in a manner that reasonably maintains confidentiality and that if the investigation determines that behavior contrary to company policy has occurred, such behavior will be eliminated and the offending person will be appropriately disciplined.

It is important to note that it is also illegal to retaliate against persons who make complaints or against witnesses. Accordingly, an employer should have an Anti-Retaliation Policy in place and all employees should be informed that all retaliation claims will be taken seriously by management.

These preventative steps can be very helpful in defending a sexual harassment lawsuit, especially since in some states punitive damages are not insurable. Speaking of insurance, most Employment Practices Liability policies cover claims of sexual harassment, insuring the costs of investigation and defense as well as settlements and judgments. In the event of a claim, or knowledge by a company executive of a situation that could give rise to a claim, it is recommended that the insurer be put on written notice, carefully following the notice requirements within the insurance policy. Be sure to follow up for acknowledgment of receipt of notice from the insurer and work with the adjuster regarding appointment of defense counsel if the insurer has the duty to defend the insured. If choice of counsel rests with the insured, be sure the rates charged are approved by the insurer in advance so that there will not be a dispute later.

Hopefully, by following the recommended preventative steps, claims will be avoided and the company’s hard-earned reputation will remain intact.

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