Investigations of Harassment Require Thoroughness and Prudence

By John Lowe

In a new twist on the importance of investigating alleged harassment in the workplace, an Ohio jury recently awarded nearly a million dollars to the alleged harasser. The alleged harasser's suit was based on a claim of defamation, and alleged that the company, and two management personnel, had failed to fully investigate the allegations of sexual harassment before they terminated him and informed the company's employees about the basis for his termination. The case is important for two reasons: (1) it underscores the importance of promptly and thoroughly investigating allegations of harassment, and (2) it serves as a good reminder to be prudent in discussing why an individual's employment has been terminated.

A female employee of a well-known, national corporation complained to the company that her supervisor had verbally sexually harassed her. Soon thereafter, the employee, who received negative evaluations from the supervisor, filed a discrimination action against the corporation and the supervisor.

The day after the employee's lawsuit was settled, the defendant corporation terminated the supervisor and held several meetings with groups of employees to reinforce the company's sexual harassment policies. In those meetings, management personnel told employees (including the supervisor's father-in-law) that the supervisor had been discharged for sexual misconduct and described, in some detail, his alleged misconduct.

The supervisor brought suit for defamation against the corporation and two senior management personnel, claiming that the defendants had acted with reckless disregard for the truth and had failed to properly investigate the allegations of sexual harassment. At trial, the defendants contended that the statements about the supervisor were true and that they were made after a careful investigation.

The jury returned a verdict of $735,000 ($100,000 in compensatory damages; $500,000 in punitive damages; $135,000 on a loss of services claim by the supervisor's wife), plus an award of prejudgment interest ($23,500) and attorneys' fees ($147,000) for a total judgment of $905,500. [Source: No Risk Verdict Research.] The verdict is currently being appealed.

It is not unusual for a company to pay for its failure to thoroughly investigate complaints of sexual or racial harassment, but that liability almost always comes from a claim by the victim of the harassment after the company fails to take corrective action. This case demonstrates that a company has exposure to liability as soon it receives a complaint of harassment — whether or not it takes corrective action. The company's best defense against this "Catch-22" liability is a thorough, well-documented investigation that can later be used to defend the company's corrective action or its decision not to take a corrective action.

Moreover, this case demonstrates an old legal maxim that is just as true outside of the employment arena: nothing is true until it is proven in a court of law. Because the case brought by the victim of the alleged harassment was settled, a court did not conclusively determine whether or not the alleged harassment had occurred. Therefore, when the senior management personnel stated in meetings that the harassment had, in fact, occurred, the supervisor was free to try to convince a jury that he had not harassed the employee and that he had been damaged by statements to the contrary.

In the end, the lesson from this recent jury verdict is to conduct thorough, complete, well-documented investigations whenever you receive a report of harassment, but when speaking about the company's harassment policy, do not highlight alleged behavior of any current or former employee — no matter how strongly you believe their alleged conduct occurred — lest you be named as a defendant in a defamation suit and forced to prove that the harassment actually occurred.

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