Mark A. Hanley, partner with Bradley Arant Boult Cummings in Tampa.

Given the virtual certainty that claims of sexual harassment will increase significantly in the wake of recent media coverage of accusations against Harvey Weinstein and others, employers need to remind themselves what costs are associated with sexual harassment and what practices might best minimize those costs. This article will focus on three significant types of cost:  to the individual, to the workforce and to the organization. The article will conclude with some best practice tips on how to mitigate for those costs.

The Cost of Sexual Harassment

To the Individual

An individual who is harassed at work may often experience both physical and emotional symptoms. Typical physical symptoms include feeling sick, headaches, poor sleep habits, loss of energy, weight loss or gain, and stomach problems. Emotional symptoms typically include anxiety, stress, depression, irritability, panic attacks, reduced self-esteem and lack of confidence. In addition to the physical and emotional toll of sexual harassment, studies have shown that women who feel they have been sexually harassed are 6.5 times more likely to change their job and 80 percent of those who feel harassed changed their jobs within two years. Finally, women who are harassed at work report significantly higher financial distress than women who haven't been harassed.

To the Workforce

Sexual harassment affects the entire workforce, not just the direct victim. Teamwork is important in any organization. When one team member is down, has a poor or negative attitude, is disengaged or is not “carrying her weight” (all symptoms of a harassed employee), other team members begin to take on these same characteristics. In addition, co-workers of the victim may fear being subjected to the same treatment by the harasser or, worse, that their complaints will not be taken seriously. Finally, although not quantifiable, the downtime associated with employees' talking about or speculating about who has been harassed or if they will be harassed can have an enormous effect on productivity.

To the Organization

The cost of sexual harassment to an organization generally comes in two forms: direct and indirect. Direct costs are more easily quantifiable. For example, the direct costs associated with defending a claim of sexual harassment that results in an adverse verdict generally include: court costs, expert witness fees, back-pay damages (including loss of benefits), reinstatement or front-pay, compensatory damages (pain and suffering), punitive damages, plaintiff's reasonable attorney fees, and defense costs. These direct costs easily exceed $100,000 and often exceed $500,000 or more depending on the severity of the allegations.

The indirect or hidden costs of sexual harassment are often even greater and include: reduced productivity, low workplace morale, absenteeism and high turnover. An oft-cited 1988 survey found that a typical Fortune 500 company lost $6.7 million a year because of absenteeism, low productivity and staff turnover as a result of sexual harassment. In today's dollars, that would equate to $14,017,282/year.

Still more devastating is the potential for reputational harm and loss of market share. Social media has become an important tool for consumers to broadcast their dissatisfaction with a particular product or company. Moreover, consumers are regularly exercising their purchasing power as a way to express their feelings toward a company. One publicized episode of how a company mishandles a situation can cost that company millions in reputational value. Just ask United Airlines how much it cost when they “escorted” an overbooked passenger from its plane. This same type of loss could occur if a company is viewed as not taking claims of sexual harassment seriously and “sweeping such claims under the rug.”

Mitigating the Cost of Sexual Harassment

The most effective way to mitigate the cost of sexual harassment is to prevent it from happening. A good first step in prevention is to have a written sexual harassment policy that is disseminated to all employees in the company. This policy needs to be explained to all employees upon hire.

The policy needs to encourage employees to come forward and immediately report claims of sexual harassment and assure them there will be no retaliation against them for reporting a claim. The policy should create an atmosphere where employees fear the consequences of not reporting more than remaining silent when they see harassment in the workplace. The policy should also inform employees that their complaints will be taken seriously and a prompt and thorough investigation will ensue. Finally, if inappropriate conduct is found, the company's policy must be to take prompt and effective remedial action against the sexual harasser.

In addition, the organization needs to conduct yearly training. Sexual harassment training should be tailored to your industry and, more specifically, to your company. In other words, “one size does not fit all” when it comes to sexual harassment training. Having top management participation in the training is critical. This signals to all employees that the company takes claims of sexual harassment seriously.

Policies and training alone will not stop sexual harassment. I advocate that a company go further and declare that sexual harassment is against the core values of the company. Commitment to such a policy must start from top management and work its way down to every employee in the company. Employees need to know that a workplace free of sexual harassment is as important to the company as its other core values, such as customer satisfaction, trust and loyalty. To put it simply, employees need to know and feel that top management not only “talks the talk,” but “walks the walk” when it comes to preventing sexual harassment.

Since it is impossible to eradicate all inappropriate conduct and sexual harassment from the workforce, I offer two more tips. First, a company should consider implementing a third-party hotline that encourages employees to report claims of inappropriate conduct or harassment. Such early reporting may prevent the small problems from becoming large issues. Finally, many employers are purchasing insurance to cover claims of sexual harassment and other forms of discrimination. Such policies are commonly referred to as EPLI, or employment practices liability insurance.

Conclusion

The cost of sexual harassment is just too great to be ignored. With all that is happening, now is the time for companies to step forward and make a cultural change. The change should include an announcement from top executives that preventing sexual harassment is a core value to the company. Once it has enforced cultural change and taken the other steps I have mentioned above, the organization will have gone a long way toward preventing sexual harassment from happening. The company can expect to receive high dividends for such efforts.

Mark A. Hanley is a partner and member of the labor and employment practice group at Bradley Arant Boult Cummings in Tampa. Contact him at [email protected].