The #MeToo movement has heightened awareness of workplace harassment, a pervasive problem and one of the most-discussed issues in recent history. What has gotten less attention, however, is the extent to which such misconduct harms not just victims, but their employers, too.
Sexual harassment claims are ugly. They’re also costly, wresting millions of dollars from companies annually in the form of legal expenses and settlements. Business owners whose companies experience claims also face hidden costs, including reputational damage and lowered morale.
Sexual harassment lawsuits are on the rise, and it is not inexpensive to address them. A business owner may encounter hundreds of thousands – or even millions – of dollars in legal fees to settle or defend a sexual harassment claim. In some cases, a single claim could be enough to kill a small company.
It is difficult to reliably calculate total legal costs related to harassment because many settlements are confidential, but it’s not uncommon for companies to spend upwards of $100,000 to defend against a claim – and even more if a case goes to a jury trial.
Another indicator of costs involved is how much the Equal Employment Opportunity Commission recovered for sexual harassment victims through litigation and administrative enforcement – almost $70 million in 2018, up from $47.5 million in 2017. These figures are not court-awarded judgments and do not include litigation expenses.
Organizations that experience sexual harassment are likely to suffer reputational harm, resulting in a more negative public perception and decreased brand value. That can cost companies where it hurts the most – the bottom line – but also can hinder their ability to recruit top candidates for open positions.
In the wake of workplace harassment claims, gossip is sure to follow. That, in turn, can lead to distracted employees and lower overall morale. A victim may suffer psychological consequences that make it difficult for them to concentrate on their work, especially if the perpetrator is still employed at the organization. They may call in sick or otherwise miss work to avoid interacting with the accused. Other employees may be distracted, as well – by the rumor mill, by an impending or ongoing investigation into the claims, and by factions that may form in support of the accused or the accuser.
Employees also may question or disapprove of how employers handle a claim, diluting loyalty and productivity. Further, management and HR representatives will be compelled to spend time conducting internal investigations, diverting their focus away from day-to-day business needs. And, if a case proceeds, all parties involved will periodically miss work for depositions or other legal proceedings.
When employees feel unsafe or unsupported at work, they are more likely to leave the company. Sometimes, victims leave their positions without lodging a sexual harassment complaint because they fear being disbelieved, ostracized, or retaliated against for making such a claim.
Employees accused of sexual harassment often are terminated, consistent with the disciplinary standards set forth in increasingly common zero-tolerance harassment policies. Learn more about zero-tolerance policies in this blog post.
Potentially expensive legal fees notwithstanding, sexual harassment costs are largely indirect and occur whether or not a lawsuit is filed. Absenteeism, higher turnover, reduced trust in management, impact on company culture, and management attention diverted from business-related activities can create even higher long-term liabilities for companies than visible costs like attorney fees do.
These considerations make clear that, if sexual harassment claims occur, employers should take them seriously and address them quickly and appropriately. Even more important, employers should endeavor to create a workplace culture that prevents sexual harassment from occurring in the first place.
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