United States: Managing Sexual Harassment Risks: Top 10 Mistakes Employers Are Making In The #Metoo Era

Since October 2017, the #MeToo movement has been encouraging individuals to speak up if they have experienced sexual assault or sexual harassment – especially in the workplace. As a series of high-profile men in the entertainment and other industries have been accused of inappropriate sexual conduct, their employers have been faced with difficult decisions about how to respond to these allegations. Hasty investigations have been conducted, shareholder lawsuits have been filed, executives have been fired, settlements have been paid, and corporate and individual reputations have been tarnished.

As allegations continue to spread to other industries, all employers need to take a hard look at their operations to determine whether they are making mistakes in how they are handling complaints, investigations, policies, training, written agreements, and insurance coverage. Employers who realize that they have become complacent in these areas should take proactive steps to fix these mistakes now, before they become the subject of #MeToo allegations, themselves.

Mistake 1: Thinking a lack of complaints to HR is necessarily a good thing

Often, senior executives are tempted to measure the quality of their company's work environment by the number of complaints that Human Resources receives. This can be a costly mistake when it comes to complaints of workplace harassment. Studies show that between 25 and 85 percent of women have been sexually harassed in the workplace (depending on how "sexual harassment" is defined). But according to the U.S. Equal Employment Opportunity Commission ("EEOC"), 70 percent of individuals who experienced sexual harassment never report it to their employer. Why? There are several reasons, ranging from fear of retaliation to fear that they will not be believed or that nothing will be done. However, in this #MeToo era, we are seeing more and more women overcoming their fears and making allegations of harassment – whether publicly in social or traditional media or through internal channels. Plaintiffs' firms are reporting a huge increase in the number of calls they are receiving about sexual harassment, and the EEOC has stated that visits to its website doubled after the Harvey Weinstein story broke.

Because the number of harassment reports is not an accurate indicator of how much harassment is going on in the workplace – and because the number of harassment claims has been rising precipitously in recent months – companies cannot rely on the fact that they have had few complaints of harassment in the past to conclude that they do not have a problem today. Companies need to take other steps (such as conducting surveys of employees or assessments of the work environment) to determine whether harassment may be occurring in the workplace. It's also critical that companies set a "tone at the top" and convey a clear message that harassment will not be permitted and that allegations of harassment will be promptly investigated and appropriate action taken. Companies also need to check their policies and reporting structures to make sure they are appropriately inclusive and offer employees multiple avenues for reporting allegations of harassment.

Mistake 2: Failing to conduct a prompt, thorough investigation of all harassment complaints

All companies know that a complaint of sexual harassment must be investigated – partly because it may provide the employer with a legal defense to claims of a hostile work environment, but also because it's the right thing to do. But sometimes, we see employers make mistakes in how they handle complaints that can actually create more exposure for the company. For instance, we have seen lower-level supervisors dismiss complaints of same-sex harassment as mere "horseplay," promise to keep an employee's complaint confidential, or decide to investigate an employee's complaint by bringing in the employee to meet with the accused and try to just "work things out."

We have also seen companies make the mistake of not devoting enough resources to conduct a thorough investigation on a timely basis. Large companies may have trained investigators in HR or Corporate Security who can quickly meet with the complaining employee, interview witnesses, review documents and electronic evidence and prepare a report of their findings. Smaller HR departments may not have the expertise or the bandwidth to conduct a thorough investigation within a tight timeframe. Moreover, if the complaint involves executives, clients, multiple individuals, or complex allegations, the company may decide that it needs the expertise or the political cover of engaging a third party to investigate. The company will also need to decide whether it would be advisable to conduct the investigation under the protection of the attorney-client privilege, by engaging outside counsel to conduct or oversee the investigation.

Mistake 3: Ignoring the potential impact of consensual relationships

Let's be clear: consensual relationships at work are not illegal and do not constitute sexual harassment. But there are still several risks associated with such relationships. First, the relationship may not be quite as consensual as the higher-ranking employee thinks it is. Second, there is a risk that when the relationship ends, one party will want it to continue – leading to a harassment or retaliation claim when it does not. Third, there can be morale problems among other employees, if one employee in the relationship shows favoritism toward the other. Fourth, there is a significant risk of decreased productivity among the employees involved in an office relationship, and even among other employees in the work group. Finally, a consensual relationship can create an environment where public displays of affection or sexual advances are seen as acceptable – a situation that can lead to non-consensual behaviors among other employees.

While these risks are tangible, employers who try to regulate consensual relationships among employees quickly find that there are several challenges to doing so. Such regulation may be viewed by employees as a privacy intrusion, and may drive relationships underground. HR employees charged with enforcing a policy prohibiting or limiting consensual relationships may be extremely uncomfortable doing so, and the policy may end up not being enforced. Despite these challenges, employers need to consider the best way to tackle the issue of consensual relationships. The most common approach is to develop a romantic relationships policy. Such policies can range from a complete prohibition on "fraternization" at work to a policy that only limits relationships between certain classes of employees (e.g. managers and staff) or that requires employees to report relationships. What employers should not do is ignore consensual relationships and their effect on the work environment.

Mistake 4: Continuing to do the "same old" harassment training

Employers have been doing harassment training for years. Sometimes it's just for managers, sometimes it's online, and sometimes, it even involves hired actors. But almost always, harassment training involves teaching participants the elements of a sexual harassment claim, providing examples of prohibited and permitted behaviors, and explaining how to report a claim of harassment. This traditional type of compliance-based sexual harassment training makes companies feel like they are doing something to address the problem of harassment, and they provide the company with some protection in the event that a claim of hostile work environment is filed. There is just one problem with this training: there is little evidence that it actually works.

In a 2016 report, the EEOC concluded that the effects of traditional sexual harassment training might be mildly positive in some instances, is often neutral, and in some circumstances, may actually be counterproductive. Studies that the EEOC reviewed indicated that such training did little, if anything, to reduce the amount of sexual harassment in the workplace. And the EEOC was unable to find evidence that harassment training, by itself, increased the likelihood that harassment would be reported. Accordingly, the EEOC now recommends that employers consider revamping their existing sexual harassment training. The EEOC says that to be effective, training should not be canned or "one-size-fits-all" and should be delivered in person, by qualified and interactive trainers. The EEOC also recommends that companies consider offering other types of training endorsed by the EEOC, such as "bystander intervention" training. Bystander intervention training teaches employees to recognize potentially problematic behaviors, recognize the barriers to intervention, understand why they should step in and take action, and provide them with tools for effective intervention – either "in the moment" or "after the fact." Employers who do not provide any training to their employees will have difficulty explaining that decision in the event that harassment complaints are raised – whether in the courts or in the media.

Mistake 5: Trusting confidentiality provisions to protect the company's dirty laundry

Most employers will not settle a claim of harassment without requiring the employee to sign an agreement promising to keep the allegations confidential. Companies who have entered into such agreements with employees may believe that those employees' claims have been put to rest and can safely be disregarded. However, in this #MeToo era, more and more employees (and their attorneys) are finding ways to avoid the confidentiality restrictions they agreed to long ago.

Sometimes, the employee may claim that the employer breached the confidentiality provision first – thus releasing the employee from his or her restrictions. Other times, the employee's attorney may help the employee file a complaint with the EEOC or a state agency – actions that are carved out of confidentiality restrictions as a matter of law. In still other cases, the employee simply decides to speak out despite the confidentiality provision – effectively "daring" the employer to try to make an issue out of it. Several states have introduced bills that would bar employers from including confidentiality provisions in agreements settling claims of sexual harassment or assault. Given this new environment, employers would be well-advised to review their prior settlements with employees, and decide whether any steps need to be taken to prepare for the possibility that old allegations resurface. They also need to evaluate whether there is a pattern of behavior by one particular individual that needs to be addressed to protect other employees in the workplace.

Mistake 6: Agreeing to a mutual non-disparagement clause

Companies often include non-disparagement clauses in agreements with their employees, where the employee promises not to make any negative, disparaging, or unflattering statements about the company or its employees. Sometimes, employees signing these agreements ask the company to agree not to disparage them as well, claiming that such mutuality is only fair. Employers who agree to a mutual non-disparagement clause are making a mistake. Unlike an individual, a company cannot control the actions of all of its constituents, and thus is potentially exposed to liability if any one of its employees speaks disparagingly of the individual in question. Employers should push back on requests for a mutual non-disparagement clause, or should only agree to a clause that is limited to specified individuals or positions at the company and contains language protecting the employer from unauthorized disclosures.

Mistake 7: Failing to update agreements with employees

Given recent changes in the law, companies that continue to use the same employment, separation, restrictive covenant and settlement agreements that they've been using for years may be making a costly mistake – a mistake that may only be discovered when the employer goes to enforce those agreements. This is because there have been several developments in the law concerning such agreements in recent years. For instance, in 2016, the SEC issued its Bluelinx decision, which addressed the extent to which employee complaints to government agencies must be carved out of confidentiality and non-disparagement provisions. Other recent changes to the laws impacting such agreements include changes in federal and state laws regarding restrictive covenants and the law regarding tax treatment of severance. Employers who have not updated the agreements they enter into with employees to comply with these and other developments are not taking full advantage of their legal rights and may be at risk of having the provisions in the agreement – or even the entire agreement – found to be unenforceable.

Mistake 8: Not thinking about sexual harassment when drafting executive employment agreements

Most executive employment agreements provide that the executive will receive a severance payment upon termination, unless the executive was terminated for "cause." The precise definition of "cause" will differ widely, based on the priorities of the company, the executive's role, and the relative bargaining power of the parties. But in this #MeToo era, companies would be well-advised to check their existing employment agreements to ensure that the definition of "cause" includes sexually harassing behavior, either explicitly or implicitly. Companies also must consider how the "cause" determination will be made, who will make that determination, and what right the executive will have to challenge that determination.

Mistake 9: Failing to carefully consider whether to implement arbitration agreements with employees

The decision of whether to require employees to enter into agreements promising to arbitrate any claims relating to their employment is a tricky one. Over the past several decades, more and more employers are requiring their employees to sign such agreements as a condition of their employment, given that arbitration generally is more confidential, faster, and more affordable than litigation, and it avoids the risks associated with jury trials. But arbitration agreements have come under fire in recent months. All 50 state attorneys general have called for a ban on mandatory arbitration of sexual harassment claims. The Ending Forced Arbitration of Sexual Harassment Act has been introduced in Congress and similar bills have been introduced in at least six states. Moreover, plaintiffs' attorneys are becoming more creative in finding ways to evade an arbitration provision – e.g. by challenging the formation of the agreement or using state agencies to pursue claims that the employee cannot. Finally, a number of employers are concluding that the disadvantages of arbitration (including an increase in claims filed, an inability to obtain summary judgment, and the inability to appeal the arbitrator's decision) outweigh the advantages. Nevertheless, companies should carefully consider whether to require employees to enter into an arbitration agreement depending on the jurisdictions they operate in and the company's approach to resolving employee concerns.

Mistake 10: Not recognizing the limits of an EPLI policy

Employment Practices Liability Insurance ("EPLI") policies cover certain types of claims brought by employees, including claims of sexual harassment. While such policies are becoming more popular in recent years, still only 3 percent of companies with fewer than 50 employees have EPLI policies. We have found that most companies that do purchase EPLI coverage don't really understand what they are – and aren't – getting for their money until they go to make a claim under the policy. For instance, some companies are surprised to find that their EPLI policies do not cover claims brought under the FLSA, OSHA, ERISA or workers' compensation laws and defense costs are usually included in the limits of liability. Companies should ask the insurer before purchasing an EPLI policy what types of claims are covered, and whether the policy is a "duty to defend" policy or a "duty to pay" policy (which governs who gets to select the law firm representing the company in any litigation and who gets to control the litigation). Companies should also understand whether the EPLI policy covers "prior acts" arising prior to the coverage of the policy and whether there is a retroactive date. Based upon all this information, a company can decide whether an EPLI policy is a good investment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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