Sexual Harassment and Corporate Liability


Having sexual harassment policies in place is no guaranty that your clients or their employees are adequately protected. After all, many businesses still make common mistakes particularly when it comes to investigating claims of harassment and discrimination. For example, they may fail to maintain confidentiality to remind parties about policies regarding retaliation.

If you represent corporate clients, it's important to ensure that their policies, both in writing and in practice, sufficiently protect their employees and reduce risks of liability. This is especially important considering the prospect of multi-million dollar verdicts. Read on to learn more about sexual harassment in the corporate workplace and ways to protect your clients.

What's the Law on Sexual Harassment?

While there may be applicable state laws in your client's jurisdiction (e.g. wrongful termination laws), if your client or company has 15 or more employees, it will also be subject to EEOC enforcement under Title VII. EEOC complaints normally involve a formal investigation and findings and could also lead to a federal lawsuit being filed by an employee or by the EEOC itself.

Generally, to succeed on a federal claim of sexual harassment, an employee must show:

  1. Unwelcome harassment of a sexual nature,
  2. That the harassment affected a term, condition or privilege of employment, and
  3. A basis for employer liability.

There are primarily two types of sexual harassment cases depending on whether the employee experienced any resulting tangible employment actions such as termination, failure to promote or hire, reassignment, or lost wages. In these cases, employers are automatically liable for sexual harassment. However, in cases where no tangible employment action exists, an employee can still sue for creation of a hostile work environment in which case an employer is liable, unless:

  • It took reasonable and prompt action to prevent and correct harassing behavior, and
  • The employee unreasonably failed to utilize preventive or corrective opportunities

Employees can also make a claim for retaliation if they experience adverse treatment related to their complaint. Successful complaints can lead to recovery of lost wages, punitive damages, attorney's fees, and other job-related losses. It can also result in reinstatement or promotion as well as an order requiring an employer to develop more comprehensive sexual harassment policies.

Mitigating Corporate Liability

Upon receiving a complaint of sexual harassment, an employer should promptly investigate and take reasonable actions. Regarding the offender, this can include:

  • Oral or written warning or reprimand
  • Transfer or reassignment
  • Demotion
  • Reduction of wages
  • Suspension
  • Discharge
  • Training or counseling
  • Ongoing monitoring

Employers can also take actions to address the harm to the victim, such as:

  • Restoration of leave taken due to harassment
  • Removal of negative evaluations associated with the harassment
  • Reinstatement
  • Apology by the harasser
  • Monitoring to ensure no retaliation
  • Correction of other harassment-related harm, which may include further compensation for losses

Corporate Liability for Third Parties

There are situations when employees are sexually harassed by customers or other third parties rather than by other employees. This is often referred to as third party sexual harassment and can lead to employer liability. As an example, a case in 2011 involved the employee of a vending machine company who was sexually harassed by hospital employees when stocking machines. In that case, the Fourth Circuit determined that the vending machine company could be held liable under a negligence standard for the actions of non-employees.

In addition to the growing case law on third party sexual harassment, there's also a federal regulation directly on point stating that employers can be responsible for the acts of non-employees if they:

  • Know or should know of the harassment, and
  • Fail to take immediate and appropriate action.

If third parties are creating hostile work environments for your client or company, you and your client should still take prompt action to remedy the situation. In these situations, employers should investigate the complaint as if the offender were an employee and take reasonable steps to protect their employees, even if it may harm business relationships. After all, the cost of keeping a harassing customer may be a multi-million dollar jury verdict.

Further Resources

For more information on prevention strategies, see the EEOC's guidance for employers as well as FindLaw's article, on corporate prevention of sexual harassment. For more information on the investigation of sexual harassment complaints, see FindLaw's article on investigation of sexual harassment complaints. Also, to help inform your clients about the increasing risks of sexual harassment through social media, see the EEOC's additional guidance regarding social media.