#MeToo: Is Your Company Covered?

Q.  Are there any steps we should take to protect our company from liability in the #MeToo era?

A.  A year ago, sexual assault allegations against movie mogul Harvey Weinstein rocked the entertainment industry and quickly led to the rise of the #MeToo movement, sparking an upsurge of reports and claims of sexual harassment in workplaces across America. In many cases, the alleged misconduct is not new. But the intensity, tone, and tenor of the claims — and the sheer volume of allegations — has been dramatically different and has had significant effects on businesses caught in the cross-hairs.

Public sentiment has also shifted: A CNN poll conducted in December 2017 found that nearly 70 percent of Americans described sexual harassment as a “very serious problem.” That’s almost double the 36% of Americans who expressed similar views in a CNN/Time poll conducted in 1998. As high-profile, credible women have come forward in virtually every industry, more women have been emboldened to share their stories.

Alleged perpetrators are not the only ones being called to account; so are other corporate actors who allegedly enabled, covered up, or failed to prevent the wrongdoing. Sexual harassment claims against high-ranking corporate actors can expose companies to enormous costs, including reputational harm, consumer boycotts, drops in market capitalization, loss of corporate opportunities, and legal expenses for internal investigations, government proceedings, employment lawsuits, securities class actions, and shareholder derivative suits.

It’s vital that businesses and individual directors and officers understand their potential exposure to loss arising out of sexual misconduct claims and the availability and limitations of their insurance coverage.

Read Full Article Here.

Pamela S. Palmer and Susan K. Lessack*

* This publication was prepared by Marsh in conjunction with Pepper Hamilton LLP. Copyright © 2018 Marsh LLC. All rights reserved. It is reprinted here with permission.

Delaware Passes Sexual Harassment Law Which Includes Training Mandates for Employees

Q.  Does Delaware have any laws requiring employers to train employees on their harassment policy?

A.  Yes. On August 29, 2018, Delaware enacted a sexual harassment law aimed to broaden protections for workers against sexual harassment. Among other things, the law requires employers to provide sexual harassment prevention training to all employees, with supervisors receiving additional training.  The law also instructs employers as to the content of the training.

Specifically, employers in Delaware with 50 or more employees must provide interactive training and education to employees regarding sexual harassment training. Such training shall be provided to new employees within one year of hire, and thereafter every two years, and to existing employees within one year of the effective date of the Act and thereafter every two years.  The training must include all of the following:

  1. The illegality of sexual harassment;
  2. The definition of sexual harassment using examples;
  3. The legal remedies and complaint process available to the employee.
  4. Directions on how to contact the Department.
  5. The legal prohibition against retaliation.

In addition, employers must provide supervisors with interactive training that includes: (i) specific responsibilities of a supervisor regarding the prevention and correction of sexual harassment; and (ii) the legal prohibition against retaliation. New supervisors must receive training within one year of employment and every two years thereafter, and existing supervisors must receive training within one year of the effective date of the Act (January 1, 2020), and every two years thereafter.  If an employer already provided training that meets the requirements of the law, the employer is exempt from training until January 1, 2020.

In addition to the training requirement, the new Delaware law provides that an employer is responsible for the sexual harassment of an employee when (1) the supervisor’s sexual harassment results in a negative employment action of an employee; (2) the employer knew or should have known of the non-supervisory employee’s sexual harassment of an employee and failed to take appropriate corrective measures; or (3) a negative employment action is taken against an employee in retaliation for the employee filing a discrimination charge, participating in an investigation of sexual harassment, or testifying in any proceeding or lawsuit about the sexual harassment of an employee.

A “negative employment action” is defined broadly as “an action taken by a supervisor that negatively impacts the employment status of an employee.” It is unknown whether courts will interpret this to mean an “adverse action” that affects the terms or conditions of employment, or some broader type of “negative action,” such as a “hostile work environment.”  An action broader than what has been traditionally defined as a “adverse action” could significantly expand the situations in which employers can be held liable under the Act.

A Delaware employer can avoid liability based on a non-supervisory employee’s action if the employer: (1) exercised reasonable care to prevent and correct any harassment promptly; and (2) the employee unreasonably failed to take advantage of any preventative or corrective opportunities provided by the employer.

Notice Requirements for Employers

To comply with the notice requirements of the law, employers must distribute an information sheet, created by the Delaware Department of Labor, which includes information regarding employees’ right to be free from sexual harassment in the workplace.  New employees must receive the notice upon hire (beginning January 1, 2019).  Current employees must receive the notice by July 1, 2019.  The notice can be distributed electronically or physically.

Kali T. Wellington-James

New York Employers Must Comply with New Sexual Harassment Requirements, Beginning October 2018

Q: I am a New York employer.  How do the upcoming New York State and New York City sexual harassment requirements affect me?  When is the deadline to comply?

A: New York State and New York City have new sexual harassment policy and training requirements for employers.  The New York State requirements go into effect on October 9, 2018 (policy must be adopted by October 9, 2018 and training must be completed by January 1, 2019).  The New York City requirements (training only) go into effect April 1, 2019.  The New York State requirements apply to all employers, and the New York City requirements apply to employers with 15 or more employees in New York City.

The City and State training requirements are similar, so employers that do not yet meet the City threshold of 15 employees should consider complying with the City requirements regardless. That way, should the employer reach the 15 employee threshold, it will already be in compliance.

New York State requires that all employers implement a written anti-harassment policy by October 9, 2018. Employees should sign acknowledgments, and employers should keep the acknowledgments on file for at least three years.  The policy must have a number of elements:

  • State that sexual harassment is a form of employee misconduct and sanctions will be enforced against individuals engaging in sexual harassment and against supervisory and managerial personnel who knowingly allow sexual harassment to continue;
  • Provide examples of prohibited conduct;
  • Include information about the federal and state statutory sexual harassment provisions and remedies applicable to victims of sexual harassment, as well as a statement that there may be applicable local laws;
  • Include a standard complaint form;
  • Include a procedure for the timely and confidential investigation of complaints that ensures due process for all parties;
  • Inform employees of their rights of redress and administrative and judicial forums for adjudicating sexual harassment complaints; and
  • State that retaliation against individuals who complain about sexual harassment or who testify or assist in any proceeding under the law is unlawful.In addition to the above policy requirements, the laws also require annual sexual harassment training. New York State requires that all employees must be trained by January 1, 2019. New York City requires that all employees be trained by April 1, 2020 (one year from the effective date of the law). Employers with employees in New York City must comply with both laws, and thus must complete training by January 1, 2019. The training must be interactive and include:
  • An explanation of what constitutes sexual harassment;
  • Examples of conduct that constitute unlawful sexual harassment;
  • Information about federal and state statutory provisions concerning sexual harassment and available remedies;
  • Information about rights of redress and all available forums for adjudicating complaints;
  • Information about supervisor/managerial conduct and additional responsibilities;
  • Information about internal and external complaint processes; and
  • Information about bystander intervention (New York City specific).Both the City and State require annual training. New employees must complete sexual harassment training within 30 days of beginning work. The training must be interactive, which means the program should include questions for employees and allow employees to ask questions. While a live trainer is the most effective form of training, training can be web-based, so long as it is sufficiently interactive.To prepare for the new requirements, employers should update (or create) compliant sexual harassment policies, and get written acknowledgments of the policy from every employee, and also prepare to meet the requirements for sexual harassment training. New York State has released a model policy and training materials. However, they are still open to public comment until September 12, and may be subject to change.  Employers who would like assistance with policy or training compliance or who have additional questions should contact counsel

–Jessica Rothenberg

Employer May Not Have Affirmative Defense to Harassment Claim even if Employee Fails to Report Harassment

Q:  Does my company have an affirmative defense to a sexual harassment claim if the company has a policy for reporting sexual harassment and an employee never makes a report of sexual harassment under that policy?

A:  Earlier this summer, in a case called Minarsky v. Susquehanna County, the United States Court of Appeals for the Third Circuit (governing employers in Pennsylvania, New Jersey, Delaware, and the Virgin Islands) ruled that “a mere failure to report one’s harassment is not per se unreasonable,” even though the Third Circuit had previously “often found that a plaintiff’s outright failure to report persistent sexual harassment is unreasonable as a matter of law.”

In Minarsky, Thomas Yadlosky was the former Director of the Susquehanna County Department of Veterans Affairs. Over the course of many years, he made unwanted sexual advances toward his part-time secretary, Sheri Minarsky.  Minarsky never reported the conduct, but the County was aware of Yadlosky’s inappropriate behavior regarding two other County employees and had warned him on at least two occasions to stop.  On a nearly weekly basis, Yadlosky engaged in conduct that was clearly inappropriate, including: attempting to kiss Minarsky on the lips, attempting to embrace Minarsky from behind, massaging Minarsky’s shoulders, calling Minarsky at home to ask personal questions; and sending sexually explicit messages from his work email account to Minarsky’s work email account. To make matters worse for Minarsky, she and Yadlosky worked in a building separate from many other County employees. Minarsky testified that she feared speaking up to Yadlosky or protesting the harassment because Yadlosky would become “nasty,” and had warned that Minarsky should not trust county administrators.

Nearly four years into her employment with the County, Minarsky (with the encouragement of her physician) eventually drafted an e-mail to Yadlosky demanding that he stop his conduct. She also confided in a co-worker regarding Yadlosky’s conduct.  The co-worker mentioned the conduct to another employee, a supervisor overheard this conversation, and the supervisor reported the conduct to the Chief County Clerk. The Chief Clerk then interviewed both Minarsky and Yadlosky, and Yadlosky admitted to the allegations. Yadlosky was immediately placed on paid administrative leave, and then terminated.  Minarsky alleged that she continued to feel uncomfortable in her role despite Yadlosky’s termination, however, because her workload increased and her new supervisor asked about what happened with Yadlosky and “who else she had caused to be fired.”

Under pertinent United States Supreme Court case law, an employer has an affirmative defense to a claim of harassment if the employee has not been subject to any adverse employment action (e.g. termination, demotion, etc.) and the employer can show that (a) it exercised reasonable care to avoid harassment and to eliminate it when it might occur, such as with a written harassment policy, employee training, by conducting a prompt and thorough investigation of any complaints, and promptly taking “remedial measures” reasonably calculated to address any inappropriate behavior, and (b) the employee failed to act with reasonable care to take advantage of the employer’s safeguards and otherwise prevent harm that could have been avoided.

In Minarksy, the trial court granted summary judgment in favor of the County, concluding that the employer proved the affirmative defense as a matter of law because the County maintained an anti-harassment policy and Minarsky had not complained about Yadlosky’s behavior.  On appeal, however, the Third Circuit disagreed and reversed the trial court.

The Third Circuit acknowledged that the County maintained a written anti-harassment policy of which Minarsky was aware. The Court disagreed, however, with the trial court’s conclusion that this fact, standing alone, satisfied the first prong of the affirmative defense. The Third Circuit held that there were factual questions about whether the County acted reasonably to prevent Yadlosky’s behavior and to take prompt remedial measures when it learned of his prior conduct toward other women.   According to the Court, the County had evidence that “Yadlosky’s conduct toward Minarsky was not unique,” and had “seemingly turned a blind eye toward Yadlosky’s harassment.” The Court concluded that a jury should determine whether the County had acted reasonably.

Even more disturbing for employers, the Third Circuit also concluded that there was a factual issue for the jury to decide on the second prong of the affirmative defense, even though it was undisputed that Minarsky failed to report Yadlosky or otherwise utilize the County’s reporting process. In an apparent nod to the #MeToo movement, the Court recognized the current climate of “national news regarding a veritable firestorm of allegations of rampant sexual misconduct that has been closeted for years, not reported by the victims.” The Court noted that, in many of these instances, “the harasser wielded control over the harassed individual’s employment or work environment,” and “the victims asserted a plausible fear of serious adverse consequences had they spoken up at the time that the conduct occurred.” Given this climate, and the facts of the case, the Court wrote that “a jury could conclude that [an] employee’s non-reporting was understandable, perhaps even reasonable.”

Per the Court: “Workplace sexual harassment is highly circumstance-specific, and thus the reasonableness of a plaintiff’s actions is a paradigmatic question for the jury, in certain cases. If a plaintiff’s genuinely held, subjective belief of potential retaliation from reporting her harassment appears to be well-founded, and a jury could find that this belief is objectively reasonable, the trial court should not find that the defendant has proven the second [element of the affirmative defense] as a matter of law. Instead, the court should leave the issue for the jury to determine at trial.”

Some lessons for employers?

  1.  Do not count on the affirmative defense recognized by the U.S. Supreme Court. The only way to eliminate the risk of lawsuits from sexually harassed employees is to actually prevent sexual harassment, and failing that, to take strong action when it occurs. It is not nearly enough for employers to merely have an anti-harassment policy in place. An ineffective or unutilized policy is just as bad as having no policy at all.
  2. Train your employees and managers on company harassment and non-discrimination policies. Foster a work environment that encourages individuals to make reports of harassment or discrimination when they observe inappropriate behavior and then investigate all allegations of discrimination and harassment. Consider creative ways to encourage employees to come forward, such as a method for reporting misconduct anonymously, and a strong non-retaliation policy and environment.
  3. Do not wait for somebody to make a complaint. If managers or human resources personnel are aware that inappropriate conduct is taking place, the company should take affirmative steps to stop the harassment (even if the victim does not want the company to be involved or does not want to “get the harasser in trouble”).
  4. When an investigation concludes that an employee engaged in unlawful harassment, take strong action. Termination may not be the appropriate remedial action in every case.  Minarsky v. Susquehanna County shows, however, that any action short of termination will leave the company exposed – at least to a jury trial—for any unlawful harassment by that employee in the future.
  5. If you currently have an unaddressed serial harasser in the workplace, partner with legal counsel to determine appropriate next steps.

Lee E. Tankle

 

New Maryland Law Requires Employers to Gather Information on Settlement of Sex Harassment Claims

Q.  Are there any laws related to settlement of sex harassment claims in Maryland that I should be aware of?

A.  In response to the many high-profile scandals in the news, several jurisdictions have enacted anti-sexual harassment legislation. To date, Vermont, New York, and Washington passed anti-sexual harassment laws. Maine, North Carolina, Ohio, and New Jersey introduced similar statutes in state legislatures. The new legislation aims to reduce sexual harassment in the workplace by prohibiting waiver provisions in employment contracts, preventing non-disclosure and other provisions in sexual harassment settlement agreements, and providing new avenues for employee reporting and disclosure. Maryland is the latest state to say “#MeToo.”

On May 15, 2018, Maryland Governor Larry Hogan signed into the law the Disclosing Sexual Harassment in the Workplace Act of 2018 (the “Act”). Designed for transparency, the Act prohibits jury trial waivers and also imposes reporting requirements related to settlement of sexual harassment claims by Maryland employers.  Unlike many of the other laws, the Maryland law does not expressly prohibit nondisclosure provisions in settlement agreements.

The Act takes effect October 1, 2018.

Prohibition on Waivers

The Act prohibits Maryland employers, regardless of size, from requiring employees to arbitrate sexual harassment claims. The Act renders mandatory arbitration provisions as void against public policy. In addition, the Act prohibits an employer from taking any adverse action against an employee because the employee refuses to enter into any agreement containing an invalid waiver.

As we have written previously, mandatory arbitration provisions are favored under the Federal Arbitration Act, despite state law to the contrary. In fact, in a recent United States Supreme Court opinion, Epic Systems Corp. v. Lewis, the Court confirmed previous rulings in favor of mandatory arbitration of employment claims, upholding the validity of class action waivers in arbitration agreements signed by employees.  It is therefore likely that the prohibition on mandatory arbitration clauses will be attacked on the grounds that it is preempted by federal law. Similar state statutory provisions prohibiting mandatory arbitration have been found to be preempted.

Reporting Requirement

The Act also requires Maryland employers with 50 or more employees to submit a survey to the Maryland Commission on Civil Rights containing the following information:

  1. the number of settlements made by or on behalf of the employer after an allegation of sexual harassment by an employee;
  2. the number of times the employer has paid a settlement to resolve a sexual harassment allegation against the same employee over the past 10 years of employment;
  3. the number of settlements made after an allegation of sexual harassment that included a confidentiality provision; and
  4. information on whether the employer took any personnel action against the employee who was the subject of the settlement.

Employers must submit the first survey on or before July 1, 2020 and a second survey on or before July 1, 2022. The Commission will collect the employer-provided data and publish aggregate data on its publicly-accessible website, as well as provide, upon request, responses of individual employers to requirement number. 2.

Employer Action Items

With respect to the waiver prohibition aspect of the new Act, Maryland employers will have to decide whether to remove any provisions in employment agreements mandating arbitration of harassment claims, or take the position that the Maryland Act is preempted by federal law.

In addition, Maryland employers with 50 or more employees should prepare to comply with the survey requirements of the Act by coming up with a method to track and gather internal information on sexual harassment claims and settlements, as well as ensure that personnel files of the subjects of those sexual harassment claims are retained in order to complete the Commission survey.

Employers also should monitor for any future regulations or other guidance issued by the Commission that clarifies the Act’s employer reporting provision. For example, the Act does not address if the survey includes current and former employees and settlements outside of Maryland. Nor does the Act provide for any penalties or enforcement mechanisms if an employer fails to comply with the mandatory reporting requirements.

— Tracey E. Diamond and Sara Mohamed*, 2018 Summer Associate

* Ms. Mohamed was a 2018 Summer Associate, resident in the Philadelphia office. She is not admitted to practice law.