Anyone following the case of embattled San Diego Mayor Bob Filner knows this much: sexual harassment allegations can be ugly, and they can be costly.
The 70-year-old mayor is being sued by one woman for sexual harassment and faces allegations of improper conduct from more than a dozen others. Filner has denied the charges, but he completed a two-week therapy program after acknowledging that he had disrespected and intimidated women.
This week, Filner was in closed-door negotiations with his accuser as well as representatives of the city of San Diego. The City has refused to pay Filner’s legal bills and threatened to sue him if it is forced to make a payment as part of the lawsuit.
Filner previously asked San Diego to pay his legal bills claiming the city had never provided him with the sexual harassment training required under California law. On top of the legal bills, the recall initiative currently underway to remove Filner could cost taxpayers more than $3 million.
While the brouhaha is San Diego is playing out more publicly than most, legal and HR experts say that sexual harassment can be expensive for any organization, both in terms of hard costs associated with fees and settlements and soft costs of low morale and increased turnover.
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“An investigation can tear a department apart,” says Patricia Nemeth, a labor and employment attorney with Nemeth Burwell, in Detroit. “People start taking sides, and gossiping about what’s going on and what’s going to happen. It’s a huge drain on productivity.”
Sexual harassment is a cost that many companies will have to face at some point: A 2010 study by the Society for Human Resource Management found that more than a third of companies had dealt with sexual harassment claims within the past two years.
If the claim can be handled via an internal investigation and remedy, a company may be able to contain the costs, but things get expensive quickly if the employer files suit.
“If a lawsuit is brought forward, the company is going to smoke a $100,000 bill in legal fees and investigations even if you win,” says Peter Stark, a consultant who specialized in helping companies prevent sexual harassment.
While most cases are settled out of court, companies that are found guilty at trial can face eye-popping verdicts. Federal law caps settlements for large companies at $300,000 (not including lost wages and legal fees), but state laws are often more generous to the accuser. If a judge finds egregious behavior, a seven-figure settlement is not out of the question.
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In 2011, UBS Financial Services was ordered to pay more than $10 million to a former sales assistant who said she was harassed by a supervisor. The firm of high-profile sexual harassment attorney Gloria Allred (who is representing the accuser in the Filner case) boasts multiple multi-million dollar settlements.
The Equal Employment Opportunity Commission received 11,300 sexual harassment charges in 2011, and settled about 1,400 of them for a total of $52 million. For employers, the best protection against such settlements is to train employees on harassment, and to take allegations seriously so that they don’t turn into lawsuits.
“Unfortunately, there’s always going to be harassment,” says Patricia Wise, an attorney with Niehaus & Associates, and author of Harassment in the Workplace: Sexual, Racial and Religious Complaints. “The best thing a company can do is address it when it happens, and that means investigate it and eliminate it to avoid liability.”
Only three states — California, Maine, and Connecticut — require that employers conduct regular sexual harassment training, but experts say all employers should hold such exercises. The SHRM report found that 59 percent of companies require employees undergo training at least once every two years.
The cost for an online program can be less than $50 per employee. In-person sessions can have a higher price tag, but are still a bargain compared to legal fees and settlements in the case of a claim. After all, a policy isn't very good if employees can't understand it.