Sexual harassment lawsuits on rise

It’s unacceptable. It’s intrusive. And for companies that don’t address it, sexual harassment could mean the end of a once thriving business.

Companies are finding it necessary to not only address issues like sexual harassment, they are integrating policies and even purchasing insurance to protect themselves from the legal costs and other damages that can result from these suits.

“It’s becoming more and more of a concern for more employers,´ said John Neil, vice president of Boulder insurance firm Taggart & Associates Inc.

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For a small business, a sexual harassment suit could be a disaster, said Mark Clevenger, an associate at Perry Fernandez & Heard LLC Attorneys at Law in Longmont.

“Businesses could spend tens of thousands defending themselves,” he said. “Even if they settle, a suit still will cost several thousands of dollars in attorney fees.”

Sexual harassment is a form of sex discrimination that violates Title VII of the Civil Rights Act of 1964. It is defined by the U.S. Equal Employment Opportunity Commission (EEOC) as “unwelcome sexual behavior characterized not only by blatant sexual harassment, but also by any subtle sexual behavior, which interferes with work performance or creates an intimidating, offensive environment.”

Sexual harassment charges filed nationwide with the EEOC and state and local Fair Employment Practices Agencies (FEPAs) have more than doubled in the past 10 years, from 6,127 in 1990 to 15,836 in 2000, according to the EEOC. Thirteen percent of grievances in 2000 were filed by men.

Retaliation charge filings, which occur when an employer takes action against an employee who protests discriminatory conduct, also have increased, from 7,906 in 1991 to 21,613 in 2000.

The rise in retaliation reflects the difficulty in determining reasonable cause in these cases. In 7,370 of the cases filed in 2000, the EEOC determined there was no reasonable cause for discrimination. Of those that were settled successfully, victims were awarded $54.6 million.

Clevenger said there has been at least somewhat of an increase in the number of sexual harassment cases being filed at his firm, and a large part of it is due to increased awareness on the part of employees. He said employers also may be getting more attuned to making sure there is a no-tolerance policy to protect themselves from litigation.

“The expense and ill will is very destructive to the work environment. The best thing for a business to do is to have a very active no tolerance policy and communicate it clearly to the entire workplace,” he said. If an issue does arise, Clevenger said businesses need to investigate it aggressively and try to remedy it. “It’s much better to stop it from the outset than try to defend it,” he said.

At the very least, Neil said all employers needs to have guidelines in their employee manuals that address sexual harassment. For companies that want more protection, there is employment practice liability insurance.

“(EPL) is intended to pay for legal defense and damages for a variety of employment-related complaints,” Neil said. These complaints range from alleged wrongful hiring, to dismissal, to age discrimination to sexual harassment.

A number of companies offer EPL insurance, but all policies vary, and no policy covers everything. Even though his agency does not offer EPL insurance, Ray Haddock, owner of Haddock Insurance Agency Inc. in Louisville, said, “Any business with more than 10 people should consider it.”

EPL insurance covers offensive verbal statements, vulgar e-mail and the like, but according to Clevenger, it doesn’t always cover all offenses that fall under a sexual-harassment claim.

None of the policies is intended to cover defense costs or damages if the violation is determined to be a criminal or civil offense, Neil said. So any form of physical contact is not covered by EPL insurance. At that point, the offense falls into the area of assault.

Policies also vary when it comes to cost. Neil said premiums can range anywhere from $500 to $50,000 a year.

Cost depends on number of employees. A typical policy ranges between $50 and $75 per employee, so a company with 50 employees could expect to pay a premium between $2,500 and $3,750 per year.

Cost is one of the main reasons many companies, particularly smaller ones, choose not to purchase EPL insurance, according to Charles Hix, owner of Hix Insurance Associates in Boulder and Estes Park. Hix doesn’t have the insurance for his own firm of 15 employees, and he doesn’t recommend it to his clients. Of the 3,000 mostly mom-and-pop shops he serves, he said 90 percent don’t carry EPL insurance, mainly because it’s not affordable. “The cost outweighs the benefits,” he said.

More established businesses are considering this type of insurance more often than younger companies, according to Hix. The reason concerns the needs of these companies at different stages in their development. While older companies are concerned with growing their businesses and maintaining their assets, start-ups simply are looking to make a profit and only want the basics when it comes to insurance.

Hix Insurance Associates offers EPL coverage as part of a specialized insurance program. While companies must purchase EPL insurance as an additional coverage, it often is included in policies for non-profits. “The people who want it, need it,” Hix said.

The insurance is not necessarily targeted toward any specific industry, but Neil said employers who have high turnover rates or seasonal employees will have the most trouble securing EPL policies.

Officials at IBM, one of Boulder County’s largest employers, would not comment on whether or not the company had EPL insurance. Dan Willis, public relations specialist at IBM Boulder, said the company’s insurance practices are proprietary information.

When dealing with an issue like sexual harassment, Hix said the insurance is suited more toward larger firms because of the nature of the beast. While employees at a larger company may have several supervisors, employees at a smaller firm can communicate issues and claims directly with the owner, who can control the situation and take action immediately.

But if a suit is brought against the company, defense costs can hurt small businesses more than larger ones. “Employers even with the best of intentions can’t figure out a course of action that would cause successful litigation,” Neil said. “Knowing and implementing good employment practices is your best defense against this kind of claim.”

If nothing else, Hix said companies need to have a good employee manual. They also should document everything and pay attention to information provided by the U.S. Equal Employment Opportunities Commission. “The best EPL you can do is your own prevention,” he said.

For companies that cannot afford EPL insurance, Neil said it is critical that they stay up-to-date and make sure they understand all regulations. “It’s a changing climate out there,” he said. “Employers need to stay on top of regulations and follow them. It’s critical that they address issues in the employee manual and follow through. It won’t prevent suits, but it can minimize damages.”