Sexual harassment cases pose serious financial and brand risks. Ty Smith, president of CommSafe AI, explains why the danger is increasing.
In 2020, the city of Los Angeles paid out $1.5 million to settle an allegation of sexual harassment. In 2018 a jury in Texas awarded a complainant a little over $1 million in a suit against a private company. Also in 2018, a New York jury awarded $1.25 million in a case against a major university.
These individual million dollar penalties fail to include the cost defending these suits. It’s not uncommon that the costs of defending or settling sexual harassment claims can easily run into hundreds of thousands of dollars.
This doesn’t even take into account the damage to a company’s brand reputation (see Fox News) as well as costs hard associated with lower employee morale and productivity. One study by management consultants Deloitte estimates that just one case of workplace sexual harassment leads to four working days of lost output.
What we’ve seen so far is just the tip of the iceberg. Expect a significant uptick in sexual harassment cases exposing companies not only monetarily, but also significantly affecting brand reputation and employee morale. The reasons for this are threefold:
- Recent federal legislation prohibiting enforced arbitration for employee sexual harassment claims
- The #MeToo movement
- The new norm of remote and hybrid work environments
The End of Forced Arbitration
Up until recently, it has been hard to calculate the actual economic impact of sexual harassment and sexual assault claims as many settlements are confidential and unreported due to forced arbitration clauses in employee contracts. That’s about to change, now that President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 this past March. The key feature of the legislation is that employment agreements cannot waive the right to participate in public court actions to settle disputes of sexual harassment or sexual assault. Moreover, all re-dispute arbitration arrangements are now legally void should someone want to pursue the claim in court.
So what happens now is that at the very least companies must now review previous employment contracts for any pre-dispute arbitration clauses and amend them to comply with the new legislation. More significantly, previous arbitration settlements may be re-opened and possibly litigated, posing additional financial and brand reputation risks. At the very least, going forward claims of sexual harassment and sexual assault against private companies, municipalities and universities are headed for greater exposure in the public spotlight.
#MeToo
In the past victims may have been hesitant to risk public exposure themselves. According to Francesca Gino, behavioral scientist and Tandon Family Professor of Business Administration at Harvard Business School, HR departments tended to discount complaints against powerful executives to avoid media attention; consequently, employees were fearful to make complaints that might alienate management and likely not lead anywhere.
This has changed somewhat thanks to the #MeToo movement, which has helped encourage survivors of sexual harassment and sexual violence to pursue action against their attackers. Companies have also instituted policies to encourage workers to speak up, that HR will follow up on complaints and prevent retaliation for making complaints.
It goes without saying that sexual harassment is intolerable. The psychological damage to the victim is immeasurable. The costs to your business are measurable, both in terms of direct costs related to lawsuits a well as indirect costs on employee morale, talent retention and productivity.
Yet, it happens. Now thanks to the new legislation banning enforced arbitration agreements, we’re about to see just how much more it has happened. And thanks to changes in workplace environments following the pandemic, expect to see it continue to happen, despite best efforts by employers to implement policies strictly prohibiting sexual harassment.
The New Norm of Remote and Hybrid Work Environments
Even before the pandemic and the upsurge of working from home, email and messaging communications are a primary means of employee interactions. The continuation of remote work in some form, even in a hybrid model, ensures even greater online reliance.
This raises some interesting questions regarding an organization’s responsibilities to prevent sexual harassment. How can an organization possibly determine if someone is being sexual harassed in email conversations?
Think people are too smart to engage in sexual harassment where there is an obvious, to use an anachronism, “paper” trail? Think again. According to one study, 25 percent of surveyed workers reported being sent at least one sexually obscene email or text message from a co-worker or supervisor. And as just one example, a recent harassment case involved text messages that contained photos of a sex toy.
Monitoring employee emails and texts is an overwhelming, if not practically impossible, task. Not to mention the “Big Brother” aspect that employees are likely to feel that there is some authority constantly looking over their shoulders.
Further complicating the problem is that the seeming anonymity of online communications makes some people feel they can act out in ways they might not in actual in-person interactions. We all know about the toxicity that exists on social media.
Also, in a remote workplace, there isn’t an HR office down the hall where someone can feel safe to discuss any concerns about sexual harassment privately and in confidence. People are less inclined to take action in virtual workplaces, sometimes feeling that, given their experiences with other social media, this is just the “lay of the land” where people don’t know where to draw boundaries.
The legal waters are somewhat muddy over whether an organization can plead it had noknow way of knowing sexual harassment took place online. Particularly since there is now an unobtrusive way to detect and stop online sexual harassment before it can cost you.
For these reasons, workplace harassment is less likely to be detected today than in the pre-pandemic, work in the office model. Consequently, organizations are allowing toxic behavior to slowly permeate throughout the organization, unwittingly allowing behavior that depresses morale and destroys brand reputation. And that could easily wind up in court, providing public disclosure with potentially high financial risk.
A Vision of a Safe Online Workplace
I served my country as a Navy SEAL. My job was to protect people. When I transitioned to the private sector, my passion for protecting people continued. It’s why I founded what became CommSafe AI, a technology company that developed a first-to-market software tool to flag in real-time language in employee email and text messaging that potentially indicates sexual harassment.
To be clear, the CommSafe AI software tool doesn’t supplant the HR professional or the Diversity manager. Rather, it further empowers HR professionals and Diversity managers to determine if sexual harassment is taking place in online employee communications, and, most importantly, take actions to stop it before it escalates into a pubic court case and significant monetary award.
It’s not a defense legally for companies to say that they had no way of knowing sexual harassment took place online. Or to hide behind pre-arbitration clauses.
Nor is it a moral defense. There is a way for companies to protect themselves and their employees.
It’s simply the right thing to do.
