April 25, 2017

Can Your Business Afford to Pay $85,000,000?

By Paul Bieber

Twenty-First Century Fox could afford it. And they did pay. And they are even losing more with the loss of advertising revenue. But what the heck, you are not in that league. But you could get hit with similar claims and have to pay $8.5 million, or even $850K. What then?

There are some large companies in our industry, companies that understand what a billion dollars is. Mostly though, we are a conglomeration of smaller, family-owned companies that have fewer than fifty employees. (No research on this, just my honest best guess.) Could you survive with a court suit costing you $850K? Or would that put you under? The size of your company will tend to dictate the size of the suit. This is a basic law of business. You will get sued up to the value of your company, plus whatever your insurance coverage may be. Wait a minute. ‘Why will I get sued?’ you say. Here’s why Fox paid out so much.

In a sexual discrimination suit, one where a supervisor promises a better job, or higher income, or a job benefit in exchange for sexual favors, the company is just as liable as the sexual procurer. You knew nothing about it; you only found out about it when the suit was served. The law is unequivocal, you, the owner are just as liable as the person doing the bad deed. Even the slightest hint of a sexual quid pro quo can land you in hot water. We live in a litigious society today. Most people have heard of the fiasco at Fox. Is there someone in our company who has held back speaking up, but now has the courage? How can you prevent this or limit your liabilities? Read on…

You prevent this by having a strongly worded sexual harassment statement in your employee handbook, and enforcing its terms. Sexual harassment can be a man harassing a woman, or a woman harassing a man. It can be a man harassing a man, or a woman harassing a woman. Your statement should include that harassment is absolutely prohibited in the company. If found out, the harasser is subject to disciplinary action, up to and including termination. If you don’t terminate, by the way, you are just looking for more trouble. Next, set up a private hotline direct to your desk alone, where employees can call you and discuss a situation. If you are not big enough for that special phone line, then set up a locked mail box outside your office door where a note can dropped. Check it daily. “That’s what the personnel department is for,” you say. Right, they can help, but you will pay the piper if they don’t do a quick and thorough job.

Immediately interview all involved, or call your attorney to do this, or call me. Some outside, neutral person is usually best. Check your insurance. General liability does not cover this claim; you need a separate rider on your policy for this. I recommend this for everyone, with a high deductible to make it affordable. Got the insurance? Ask the agent for the for the best path to take or who to call for the investigation.

Person A complains for the first time on Monday. On Tuesday, person B is found to be a manager who offended person A. By Wednesday I would have fired person B. This will help limit your damages. Acting promptly will save you in court. If you don’t fire person B and it happens again, you might as well turn over the keys to the front door to person A, who was harassed.

Have a quarterly meeting with the whole company and re-emphasize your policy of no tolerance for sexual harassment. Train and retrain people what this means. A computer wallpaper with an offending message, a tool calendar with a mostly naked lady, or sending bad jokes on your company email are all events which will land you in deep trouble. 

There will be instances which you cannot prevent. But your swift and decisive actions will help. By the way, if you find there is no sexual harassment after someone files a complaint, this may be just someone trying to get someone else in trouble. A thorough and complete investigation will tell you this.