The laws pertaining to sexual harassment are still evolving and can be difficult for any business owner to grasp. Recent cases and guidelines do not draw clear distinctions between permissible behavior and illegal behavior, which may subject your company to legal liability. The standards of behavior will vary, according to the specific facts of each case and the perceptions of the employee who was subjected to the alleged harassment.

The key to protecting your business against liability is to develop a stated policy regarding the type of conduct that will not be tolerated, and to maintain standard grievance procedures. All complaints should be dealt with promptly and seriously and, if harassment has occurred, remedial action must be taken.

What Companies Can Do

In order to meet their responsibilities and to protect themselves against sexual harassment claims, employers should undertake the following defensive measures:

• Maintain and enforce a written policy against sexual harassment.
• Educate all employees on the company’s sexual harassment policy and be sure that they are aware of the consequences for violating it.
• Maintain a complaint procedure that allows the victim to file a complaint with a person other than the victim’s supervisor.
• Investigate all complaints thoroughly and confidentially.
• Take appropriate action following each and every investigation.

To avoid liability for a claim, the employer must take prompt and effective action that is reasonably calculated to end the harassment. When deciding the case, the court will analyze the investigation made by the employer and the effectiveness of the remedial action taken. The court’s determination of the effectiveness of your response is often based on whether the remedial action ultimately succeeded in eliminating the harassment.

To survive this type of hindsight analysis, the employer should conduct a prompt investigation of all sexual harassment complaints. The investigation should be conducted by an officer outside the department concerned and commence within a week after the complaint is received. The investigator should then adopt the following guidelines:

• Carefully document when and how the claim first came to the attention of the company.
• Gather data to determine all relevant facts concerning the conduct in question.
• Treat all claims as valid until proven otherwise.
• Keep all discussions and information as confidential as possible.
• Involve legal counsel as early as possible in the fact-gathering process to protect against claims of disparagement or defamation.

Once the investigation is complete, you must then take appropriate steps to remedy the situation. If the claim is substantiated, you must determine what discipline is appropriate. If the harassment was severe or occurred over an extended period of time, or the harasser was previously disciplined for such conduct, then firing the harasser may be appropriate.

However, if the conduct was less severe and other means may remedy the situation, such as transferring the harasser to a different department, you should probably wait until a second offense before terminating the employee. This puts you in a better position to defend your action if the discharged employee subsequently sues you for wrongful discharge. If the employee is not transferred, you should monitor the situation to make sure the harassment does not recur.

Employees are clearly one of the most valuable assets of an emerging growth company. If they are treated unfairly in the hiring or termination process, however, they can become the largest liability. Employment agreements and personnel manuals are useful tools to define the rights and obligations of the employer and employee to each other. Owners (and their managers) are well advised to carefully structure personnel policies within the bounds of applicable labor and employment laws.