Sexual Harassment Lawsuits: How to Protect your Company

By now, employers should all realize and understand that sexual harassment is illegal. However, what employers might not be aware of is that the U.S. Supreme Court issued two rulings in June of 1998 that expanded what is termed sexual harassment; expanded the responsibility that employers have to provide a work environment that’s non-hostile; and did away with harassed employees having to prove that their company holds some responsibility or that their career suffered from lack of promotion, firing, demotion, or such. Employers are now directly responsible for employee behavior, thereby giving harassed employees more recourse in bringing about legal actions against employers.

Work-related harassment and discrimination cases have been steadily climbing since the Civil Rights Act of 1991 allowed for trial by jury, compensatory damages, and punitive damages in legal cases involving discrimination. According to the EEOC, there were nearly 7000 sexual harrasment complaints in 2015. 

Any employer that’s ever been involved in a sexual harassment suit can attest that the cost to settle or defend a sexual harassment lawsuit can be jaw dropping. The cost to defend and settle a sexual harrassment lawsuit can easily run serveral hundred thousand to several million or more. 

What Constitutes Sexual Harassment?

The first step in protection is understanding what is defined as sexual harassment. State and federal law prohibits behavior that involves an employee in authority basing professional expectations or decisions regarding a subordinate employee being willing or unwilling to exchange sexual acts. The following are examples of such behavior:

* Altering expectations of job performance when a subordinate repeatedly refuses advances for a date or sexual encounter.

* A superior demanding sexual acts in order for a subordinate to receive a raise or promotion.

* Disciplinary action, including termination, of a subordinate that refuses sexual advances or ends an existing romantic relationship.

However, sexual harassment doesn’t always involve a subordinate/authority figure relationship. An offender can be anyone from a coworker to a customer or business vendor. The offender can be male or female, as can the victim. Furthermore, the victim doesn’t even need to be the employee actually harassed. Anyone that’s affected by the harassing or offensive behavior can be termed a victim; for example, an employee that overhears two other employees discussing a taboo subject. The two employees directly involved might not be offended, but if the overhearing employee is offended, then it can constitute sexual harassment.

Verbal, visual, physical, or written…any behavior that causes another employee to view the work environment as hostile, are unwanted, or focus on the sexuality or gender of another person may constitute as sexual harassment. Specific examples of such would be teasing, suggestive objects or pictures being displayed, and repetitively requesting sexual acts or dates verbally or in writing.

Protection With Employment Practices Liability Insurance (EPLI)

After knowing what constitutes sexual harassment, businesses can further financially protect themselves with employment practices liability insurance (EPLI). This is an insurance to protect employers when an employee makes the claim that their legal rights have been violated.

While policies vary, EPLI generally doesn’t cover criminal or civil penalties and punitive damages. EPLI does generally cover settlements, judgments, and incurred legal costs arising from an array of incidences – wrongful termination, employment contract breaches, employment and promotion failures, wrongful disciplinary actions, wrongful emotional distress infliction, negligent employee evaluations and discrimination. Some plans automatically include sexual harrassment as well, however other plans may not or you may be required to get a special endorsement for sexual harrassment. This is why it is very important to know exactly what your EPLI covers by reading the policy contract. 

Coverage is specific. So, before purchasing a policy, decide who should be covered. For example, should full and part-time employees, contracted persons, supervisors, department heads, subsidiaries, company divisions, and so forth be covered or not?

One other note about EPLI is that it’s mandatory for employers to report incidents within a reasonable amount of time. Some policies may feature an ERP (extended reporting period) or prior acts. The length, cost, and availability varies by carrier.

Purchasing EPLI has been challenging for small companies in the past. However, the 2004 rate increases have somewhat plateaued. Some rates have even decreased. Keep in mind that EPLI cost is figured based on the business type, employee numbers, and past lawsuits associated with the business.

Prevention Of Harassment Lawsuits

Prevention is the cornerstone in decreasing the risk of a sexual harassment lawsuit. Prevention steps include the following key elements:

* If the business has EPLI, any incident should be reported immediately.

* Create, communicate, and enforce a zero-tolerance policy for workplace sexual harassment.

* Have an effective harassment complaint process in place and take immediate, consistent, and appropriate action when a complaint is made.

* Thoroughly document all complaints and the following investigation and actions.

 

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