Sexual Harassment, Discrimination & Wrongful Termination
This article was published in "The Outlook", a California magazine for accountants.
Written by David H. Greenberg, Attorney At Law.
When television and newspapers announced the Texaco racial discrimination lawsuit, Texaco shares fell $1,000,000,000.00 on the New York Stock Exchange. Texaco quickly settled for $176,000,000.00.
When television and newspapers announced that the Denny's restaurant chain was sued by customers and employees for racial discrimination, the case was eventually settled for $100,000,000.00.
Chevron recently settled a class action case based on sex discrimination.
The United States Army is inundated with over five thousand claims of sexual harassment and that's after only two weeks of opening their phone lines!
There is hardly a public company or governmental agency that has not been sued for either sexual harassment, discrimination or unlawful termination.
The cases we read and hear about are only the tip of the iceberg. Lawsuits for sexual harassment, discrimination and unlawful termination are one of the fastest growing areas of litigation. While court filings for auto accident cases have dropped by fifty percent over the last five years in California, filings in the area of sexual harassment, discrimination and unlawful termination have doubled.
Every business has substantial exposure to these types of claims. Most companies are not insured for this exposure.
The first step in protecting your firm and your clients from the risk of litigation for these claims is for management to understand the law.
Most employers and employees do not realize that California is an "at will" state. In basic terms that means that an employee works at the will of the employer. Subject to certain exceptions, you can terminate an employee for no reason, without notice. They can be your best employee. They can have the most seniority. It does not matter.
You can terminate a woman, a person over forty years of age, an Asian, an African-American, a disabled person, a pregnant person, a religious person, a gay or lesbian, or a foreigner. You just cannot terminate an employee because they are a woman, over forty years of age, Asian, an African-American, a disabled person, a pregnant person, a religious person, a gay or lesbian, or a foreigner.
The point is, the motive for the termination is the governing factor in a lawsuit for discrimination. Just about any employee falls within a protected category. Even a white male Protestant under forty born in the United States, with no disability and who is heterosexual falls into a protected category. I have just such a case ready to go to trial now. The person worked in a hospital in the emergency room where there were a number of gay employees. The gay employees continually harassed my client and made passes at him. The employer did nothing to stop this conduct. As I said, just about any employee falls into a protected category.
Does this mean that even though California is an "at will" state, you cannot terminate anyone? Of course not. You can even terminate someone because you simply do not like them. However, you cannot terminate them because of what they are.
It follows that if everyone can fall under a protected class, and motive for termination is the basis for litigation, then establishing and proving a benign motive is the most essential element for protecting a company from a claim of discrimination.
Although we have spoken of termination, the employer should be aware that the law applies to all terms and conditions of employment; keep in mind that as many discrimination claims arise from failure to promote as failure to hire or termination.
What is sexual harassment?
Some things are obvious. Sexual harassment can extend to the level of assault, battery, rape and intentional infliction of emotional distress.
Can something be sexual harassment on the job that would not be sexual harassment in a different environment?
Yes! Why? Because the employee has to be on the job. They have to take orders from the boss.
Just to say that sexual harassment is offensive does not define the problem. Something can reasonably be offensive to one person and not at all offensive to another person.
First, the conduct must be offensive. If two employees have a good time exchanging sexual jokes, it would not be sexual harassment. If one employee kept telling another employee sexual jokes that the second employee found offensive, it would be sexual harassment. If two employees dated and engaged in consensual sex, this would not be sexual harassment. If one of the two then wanted to terminate the relationship, and the other used the unequal relative terms and conditions of employment of the work place to further the relationship, this would be sexual harassment.
Jokes, pictures, touching, leering, unwanted requests for a date have all been found by courts to be sexual harassment. Sexual harassment can be between people of the same sex. Sexual harassment can be a woman harassing a man. I have a case in the courts right now where a woman supervisor hired a young boy as a stock clerk because she wanted to have sex with him. There is another case on appeal in California where the female chief financial officer required her male subordinate to have sex with her as a condition of his employment. The jury awarded the male plaintiff $900,000.00 in damages against the company.
WHO CAN BE LIABLE FOR DISCRIMINATION AND HARASSMENT
Under Title VII the Federal Civil Rights Act, only companies of a certain size can be held liable for discrimination and harassment. The company must have 15 or more employees for each working day of 20 or more calendar weeks in the year of, or preceding, the unlawful act.
Under California Law, all companies are liable. A company with just one employee is subject to the California anti-discrimination law, called the Fair Employment and Housing Act.
This tends to be a catch-all phrase for being fired "unjustly". As we have shown, even a good worker can be terminated. We know a worker cannot be fired for a discriminatory reason or because of sexual harassment.
What are some of the other reasons for which a worker cannot be terminated?
If a worker has a contract, he or she must be terminated according to the terms and conditions of the contract. If the worker is a member of a union, he or she can only be terminated under the terms and conditions of the union contract. The contract may spell out the reasons for termination and the method of termination; i.e., progressive discipline. If an employee has a written employment agreement, the terms and conditions of that agreement must be followed. However, few employees have written agreements. Usually they cover only corporate officers in the company.
However, a company may have an implied or expressed contract, rather than a single written contract. If the company has a policy for progressive discipline before termination, the company must follow that policy before terminating an employee. If the boss tells employees things like, "you always have a job here," they may have converted that employee from an "at will" status to a "can only be fired for cause" status.
An employer cannot terminate an employee in retaliation for the employee following the law. If you ask the employee to lie or not do something they are legally required to do regarding a governmental agency, they are protected from being terminated for obeying the law. You cannot terminate an employee because she is pregnant. You cannot terminate an employee because they asked you to obey the law. You cannot terminate an employee because that employee tried to help another employee enforce their legal rights. You cannot slander or libel an employee or ex-employee. You cannot terminate an employee for requesting their rights under the Family Care or Family Medical Leave Act.
This type of litigation generally provides for all types of damages allowed under the law. An employer can be held liable for punitive damages as well as damages for emotional distress, past and future loss of earnings, attorney's fees and costs.
In a recent case, an African-American salesman in Los Angeles was discriminated against in a variety of ways. He was refused the best territories and not given the commendations that other top salespeople received. Other employees made racist comments to him like "Ooga booga jungle jungle." The case went to trial, and the jury awarded him over eleven million dollars in compensatory and punitive damages. It should be noted that this verdict was overturned by the judge and in now on appeal.
Two years ago, a female employee at a large law firm was sexually harassed by one of the firm's partners. At trial, it was shown that the firm knew the partner had done this to other women. The Plaintiff was awarded over seven million dollars.
Many meritorious cases result in less compensation to the Plaintiff. This is particularly true when the cases settle. Because settlements are confidential, it is difficult to give an average figure for case value. My average settlement exceeds one hundred thousand dollars on behalf of employees and my average judgment on behalf of employees exceeds five hundred thousand dollars.
The plaintiff is entitled to a jury. There are very few employers on a jury. It does not take a big jump in logic to reason that the jury's identification and sympathies will certainly be with the employee.
Most companies are not insured for discrimination and harassment. The reason for this is simple. Discrimination and harassment are considered intentional acts. They generally don't happen accidentally. It is illegal for an insurance company to insure an intentional act. This is because liability insurance exists to pay the people we harm accidentally. If we could get insurance for intentional acts, it might encourage us to do harm to others, because we would know that the insurance company would pay. Therefore it is very difficult to get insurance to cover discrimination and harassment.
There are some exceptions to this rule. Under California Law, when a supervisor sexually harasses a subordinate, the company is liable, whether or not anyone else at the company knew what was going on. A recent California case held that the company can buy insurance for this kind of liability. This insurance can only cover the liability for the harassed employee's compensatory damages. The insurance cannot cover any punitive damages against the company (which only occur if someone high up in the company knew what was happening).
The other exception is also in the area of sexual harassment. It is possible for one person to sexually harass another without meaning to do anything wrong. In one case, a male supervisor at a warehouse had magazine pictures of naked women taped to the walls of his office. The women in the warehouse were frequently required to be in that office. The pictures were considered "offensive" to the women who had to see them. It didn't matter that the pictures weren't offensive to the male supervisor or the other men in the warehouse. This is an example of where harassment wasn't "intentional." Because it wasn't intentional, it might be insurable. If the male supervisor had a homeowner's policy with general liability coverage, he might have been covered.
There are many ways for companies to become liable without knowingly doing anything wrong. The following is a list of pitfalls for the unwary. It is by no means exclusive; it is meant only as a list of examples.
Many companies have very good policies against discrimination and harassment, which are distributed in policy manuals or memoranda. The problem is that the policies are neither followed nor enforced. This makes it very easy for plaintiffs to point out that the employer was aware of the law, but broke it anyway.
"One Open Door" Policies
Open door policies are generally a good idea and are essential for giving employees a means of complaining of discrimination and harassment. Unfortunately, many such policies tell employees that they must take complaints to their supervisors first. But supervisors are often the ones discriminating or harassing! The employee is left with nowhere to go and the company is held responsible for that fact. There should always be a second open door. The best location is in a "neutral" place which is not in the chain of command, such as the Human Resources Department.
While not necessarily illegal, early-retirement benefit programs can create problems with age discrimination. Frequently new management will institute golden handshake programs to cut costs through early employee attrition. Often this is part of a general restructuring. But new management may be young management, and these programs may be viewed as a means of eliminating older workers in favor of younger ones. Even if this isn't true, if it reasonably looks like it is, it can constitute harassment and discrimination on the basis of age.
Terms of Endearment
Terms of endearment, such as "dear", "honey", and "old-timer" may all be meant in the best possible way. But they are often offensive to those who hear them. Remember, you can be liable for harassment whether or not you meant to be offensive.
In responding to a complaint of discrimination or harassment, the company's first response may be to fire the accused. But this could lead to the accused suing for wrongful termination or breach of contract. Knee-jerk reactions are not the way to handle complaints. Thorough investigations must be done. If the company does its best to make the right decision, it is more justified in making a mistake than if it rushes to judgment.
Advertising for Job Openings
A company which always advertises in the same newspaper or other medium for its job openings may find that it is always getting the same type of applicant. For example, some newspapers publish more to a white audience than a black one. Advertising in the "white" newspaper may result in all white applicants, and an all white workforce. The company can become liable for race discrimination, even though it meant no harm. If a practice of the company has a discriminatory result, the intention doesn't matter. The same is true of work-of-mouth advertising. If everyone in the company is friends with those who look like they do, there will be no diversity, and there may be liability.
Harassers Outside the Company
What happens to a saleswoman who has to see a client who sexually harassers her on every visit? The harasser isn't her employer, so he can't be liable for harassment. Her employer isn't doing the harassing, so he shouldn't be liable, either. The answer is this: if her boss knows what's going on, and keeps making her go on that sale call, he is liable. He is knowingly subjecting his employee to a harassing environment and is just as liable as if he'd harassed her himself.
Failure to Document
Often employees are fired for perfectly good reasons. But there is a tendency to give employees positive performance reviews. There is also a tendency not to put negative things in employees' personnel files. Then when the employee is fired, he or she can point to the personnel file and say, "Look at how well I was doing! The termination couldn't have been based on performance. It must have been based on some other illegal motivation." The solution is not to be squeamish. If an employee is making serious mistakes, document it. It doesn't mean you have to fire them. But if you decide to, you'll have a documented basis for it.
No company with employees is immune from claims for sexual harassment, discrimination or unlawful termination. Most companies are not insured for these claims. No area of litigation gets more press and bad public relations than employee claims against employers.
As accountants, it is your job to assist your clients in recognizing potential business liabilities and eliminating or reducing those risks as much as possible.
In this article we have presented an overview of this area of the law. In further articles, we will discuss specific topics in greater detail.
ON THE AUTHOR:
David H. Greenberg is a practicing attorney in Beverly Hills with over 35 years experience, much of which is devoted to representing employers and employees in the area of employment law. Mr. Greenberg is the founder of Litigation Avoidance Consultants (LAC), a service company that provides advice to companies on preventing litigation relating to employment matters. Mr. Greenberg has written articles, appeared on television and has testified in a congressional sub-committee on employment matters.
- For further information see David H. Greenberg, California Employment Law Attorney.