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Elite Manufacturing just ended the most profitable of its five years in business. Sales were doubling yearly and the company was expanding rapidly. But one employee’s behavior ground Elite’s progress to a halt.

Susan had recently joined Elite as an $8 per hour clerk. Crying, she walked into her boss’s office with a complaint about Ken, a production supervisor. Ken made comments about Susan’s body from her first day on the job, but Susan said nothing because she didn’t want to cause trouble. When Ken grabbed her breasts, however, she complained immediately. Elite reacted swiftly. Ken was strongly reprimanded and told to leave Susan alone. Elite thought the matter was closed.

Two weeks later Susan quit, then sued Elite for sexual harassment. During the lawsuit, Elite learned that Ken had previously attacked two other female employees. Worse yet, a company manager had heard rumors of these attacks well before Susan complained and had done nothing. Elite also learned that after Ken was reprimanded, he repeatedly threatened to hurt Susan.

Elite’s profit margin was wiped out in the next year as it paid tens of thousands of dollars in attorney fees and nearly $500,000 to Susan to settle before trial. Elite lost market momentum as numerous employees were pulled away to testify in the case and wild rumors circulated among employees. Elite has yet to recover.

Although Elite is a fictitious company, the facts above are a composite of actual cases involving differently named parties.

Sexual harassment lawsuits can be crippling to a growing business. Between 1991 and 1995, plaintiffs won about half of the approximately 50 sexual harassment trials in California. The average jury award in those cases was roughly $350,000. Today, the average award has skyrocketed to nearly $1 million per case.

Most of the hundreds of sexual harassment cases filed each year are settled out of court. While usually less expensive than going to trial, settling can still be costly. The average settlement for recent California sexual harassment cases is nearly $250,000.

What went wrong for Elite in the example above? Management did not properly respond to Susan’s complaint by investigating and taking action designed to stop any further harassment. As a result, a single complaint of misconduct turned into a profit-destroying disaster. As many businesses are learning the hard way, the best defense to a sexual harassment lawsuit is advance preparation and education.

What is sexual harassment? It is unwelcome and offensive visual, verbal or physical conduct of a sexual nature which affects the terms or conditions of a person’s employment.

Just a few of the many situations which might rise to the level of unlawful sexual harassment are: unwanted sexual advances, offers of employment benefits in exchange for sexual favors, leering and sexual gestures, offensive sexual jokes or pranks, and touching.

Although management might not think certain conduct is harassment, the jury must take the viewpoint of what a “reasonable woman” would find offensive (or a reasonable man if the victim is male). While it might seem that certain conduct is welcomed (e.g., a woman laughs at repeated crude sexual jokes and propositions), sexual harassment plaintiffs sometimes prove that they did not object for fear of losing a job or other employment benefit.

Companies can dramatically decrease the odds of a costly sexual harassment lawsuit by implementing a sexual harassment policy and educating employees and managers and by promptly responding to all complaints with a thorough investigation and appropriate corrective action.

If an investigation reveals that harassment occurred, the harasser should be disciplined and possibly fired. In severe cases, companies should consider paying to send the victim to counseling. Not only is this a humane gesture, it may block later claims for emotional distress or punitive damages.

Minimally, the alleged harasser should be warned, instructed to read the employer’s policy against harassment and, if possible, re-located away from the alleged victim.

Richard S Amador is a partner with Sanchez & Amador, LLP, and specializes in employment and business litigation.

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