Sexual Harassment: A Financial Risk to Business

In today’s business environment, sexual harassment is quite common inflicting heavy economic loses in many business establishments in America due to lawsuits. This harassment is a form of sex discrimination that violates Title VII of the Civil Rights Act of 1964. In 1991, congress amended the act allowing victims to seek punitive and compensatory damages to employers who were found guilty. Since then, cases of sexual harassment filed in courts were on the rise until now causing executives to settle their liabilities in millions of dollars. It eats up the resources of companies wherein the money could have been spent to more useful activities in meeting goals and objectives. In 1996, Mitsubishi paid $43.5 million to 400 workers in a class action suit while in 2000 CBS Broadcasting, Inc. gave $8 million to 200 female employees. Tolerating sexual harassment increases financial risks to the business community. Despite widespread publicity about the perils of sexual harassment, surveys demonstrate that many businesses operating in the United States have yet to address the problem. Moreover, recent news reports indicate that sexual harassment has reached the highest levels of management. Although businesses know it exists, they appear unsure of what to do about it. As a result, the specter of employer liability for sexual harassment continues to loom over the workplace (Roberts & Mann, 1997, ¶1).

In addition, the image of companies is adversely affected. According to social scientists, employees experiencing sexual harassment usually develop stress and other health or psychological problems that could affect their job performance as well as job satisfaction. As a result businesses mostly suffer from low productivity caused by absenteeism and high turnovers of employees. With laws protecting the victims against sexual harassment, it is imperative that companies have programs that discourage such unlawful behavior. Employers are responsible for providing good working environment for their workers. To maintain such an environment, they need to address the problem with a policy that explicitly prohibits sexual harassment in the workplace, set up grievance procedures and hold trainings for employees so that they would know their rights at the same time familiarize themselves on the issue.

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What Is Sexual Harassment? The US Equal Employment Opportunity Commission (EEOC) defines sexual harassment as unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitutes sexual harassment when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance or creates an intimidating, hostile or offensive work environment (EEOC, 2007, ¶2). There are two types of sexual harassment, the quid pro (Latin word for “this for that”) and hostile working environment. Quid pro is more direct wherein the harasser asks for sexual favors in exchange for promotion or threatens to discharge the victim if she refuses to his sexual advances. On the other hand, an environment is considered hostile when the victim is exposed to sexually charge working conditions like receiving sex jokes or remarks, offensive language, requests for sex, sexual e-mails, and pornographic materials. In a landmark decision in 1986 Meritor Savings Bank v. Vinson, The Supreme Court declared hostile environment harassment illegal and held employers liable.

Each year EEOC receives an average of 15,000 complaints but the government agency said many incidents, about 70%, still go unreported. Although both genders are affected by sexual harassment, Personnel experts estimate that 90% of the working women experience this aggravation in the workplace. Many victims are reluctant to confront the problem for fear of losing their jobs as a result of retaliation from the harasser. They are often labeled as troublemakers or just seeking attention. Their private life will be scrutinized if they go public that could lead to disgrace, damaged reputation, and loss of self-esteem. Many suffer in silence. A research by the Equal Rights Advocates reveals that most harassers are immediate supervisors of the victims or those with higher authority. As women continue to invade the workforce in great numbers dominated by men, they are likely to encounter harassment in their jobs. Sexual harassment tends to occur most often in “gender hierarchies” in which men hold power over women either as their organizational superiors or because women are present in small numbers in a traditionally male job or workplace. This dominance of men over women in the workplace is not likely to disappear soon (Kadue & Lindemann, 1992, p. 6).

The Impact of Sexual Harassment on Businesses. Unresolved complaints of sexual harassment present a growing danger to many business organizations as companies run the risk of losing their good name, efficiency, employees, and financial capital not to mention bad publicity. This kind of improper conduct in the business environment incurs so much labor costs and brings down the morale of employees. Victims often file sick leave, report late for work, and find other excuses just to leave their duties affecting business operations. They become unproductive and lose their skills. Managers are forced to pay overtime benefits to their understaffed sections in order to catch up as well as claims of medical and insurance. If they can no longer handle the problem, employees resign resulting to higher turnover rates. This compels companies to spend on recruiting, hiring and training the needed workers to replace those who left.

Sexual harassment also generates conflict among the employees, which could affect productivity and competitiveness. Victims display uncontrolled anger and hostility towards other employees. More often they are no longer happy with their jobs having developed negative attitudes towards the whole company. Their work life is disruptive. They find it hard to trust others and always uneasy around people. The existence of sexual harassment would lead employees to believe that the organizations they work for have poor ethical standards. Sexual harassment creates a hostile, intimidating environment that makes good job performance, effective communication and teamwork difficult, if not impossible, for all employees within the firm (Shirakawa, 2002, p. 5). Clearly, this criminal behavior is bad for business and should be prevented. Having a policy against sexual harassment would bring savings to most companies. Without a policy, a corporation is set to loss $6.7 million annually according to the Working Woman Magazine. Between 1978 and 1980 the federal government incurred loses of $189 million due to effects of sexual harassment. From 1985 to 1987, the financial damages reached $267 million. This is an expensive problem, which is sad to say still happening and employers need to know their obligations and liabilities at the same time respect the rights of their workers.

Addressing Sexual Harassment in the Workplace. To defend themselves against legal actions arising from sexual harassment, employers must take immediate measures to avoid further damage to their businesses. They need to institute a comprehensive written anti-harassment policy or handbook to be discussed to all employees and apply appropriate sanctions to offenders. This policy could be posted in strategic areas of the company for everyone to see and perhaps even employees could be given copies for them to understand fully the implications of sexual harassment. This guiding principle will discourage such misconduct and promote better working environment where everyone enjoys equal opportunities. Companies must be committed to create and maintain a harassment free workplace.

In other words, employees must be educated about sexual harassment, its meaning and effects, the different types (verbal, non-verbal, and physical), penalties, proper way of reporting harassment to management, and one’s duty if he/she sees harassment in the workplace. There must be a grievance committee and procedures to hear allegations of harassment in the company so that victims are guided accordingly, encouraged to come out, and assured of confidentiality. According to courts liability can be avoided if two conditions have been met: (1) The employer has a policy discouraging sexual harassment, and the employee failed to use an existing grievance procedure and (2) the sexually harassing situations are rectified as soon as the employer becomes aware of them (Dobbin & Kelly, 2006, p. 14).

Another important factor in eliminating harassment is an effective on-going training for all employees including management, which must be based on current working conditions. This sort of in-house program will enhance employees’ knowledge about the issue through lectures, group discussions, dramatizations, and role-playing. Both employers and employees must be aware of the economic consequences of harassment in the business. Sexual harassment is very offensive and degrading. It is the role of employers to ensure safety of its employees and not ignore complaints of harassment. After drafting the necessary standards and procedures, executives must be able to enforce the policy to show their commitment on zero tolerance of sexual harassment. They have to make sure that those complainants do not face retaliation at the same time protect the rights of the accused. Resolving the problem right away would lessen disruptions in business operations and costs as well.

Implementing rules to avert harassment takes significant amount of resources and time but the outcome is irreplaceable with productive and motivated employees, a good reputation in society, high retentions of skilled workers, and a secure financial income. It is well documented that companies with strict anti-harassment policy experience lesser class suits if there is any. Several case studies have proven the harmful effects of sexual harassment to the business environment. It will take the cooperation and commitment of everyone to stop this criminal act.