This is Not Your Father’s Employee Handbook -New York Law Journal, Volume 234, Number 41, August 29, 2005

 By: Paul F. Millus

Not long ago, an employment handbook contained policies covering topics such as dress codes, payroll issues, time and leave, and all manner of benefits afforded to the workforce. Most smaller companies did not utilize written policies, as word of mouth sufficed to communicate such matters to employees. However, as workplace litigation has increased dramatically, handbooks containing detailed non-discrimination policies have become a necessity. Even in smaller companies, the need to communicate precise terms and conditions of employment is great, not merely for the edification of the employees, but of equal importance, for the protection of the employer.

The U.S. Department of Justice has reported that employment discrimination cases in federal courts alone nearly tripled from 8,413 in 1990 to 21,032 in 2000.[i] In 2003, the EEOC reported a total of 81,293 charges filed. Further, from 1997 through 2003, the median jury verdict in all types of employment practice liability cases increased from $133,691 to $250,000. [ii] Compounded by the amount of attorneys fees that a plaintiff’s attorney may be entitled to, the costs associated with such litigation become daunting. It was after the Supreme Court decisions in Faragher v. Boca Raton, 524 U.S. 775, 808 (1998); Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998), that handbooks with exacting anti-harassment polices became critical for the protection of employers. But are drafting such polices enough?

Faragher and Ellerth

Simply put, these cases hold that an affirmative defense to a workplace discrimination claim can be established if (1) the employer exercised reasonable care to prevent and promptly correct any harassing behavior, and (2) the employee unreasonably failed to avail himself/herself of the protections afforded by the employer. [iii] If the harasser is a supervisor, no affirmative defense is available if the harassment culminated in a “tangible employment action” such as demotion, failure to promote, termination, and/or change of compensation. Accordingly, at the outset, a comprehensive anti-discrimination policy should contain (i) a general statement that the company will not tolerate discrimination; (ii) a brief definition of what constitutes harassment in the workplace; (iii) who is covered under the policy; (iv), how, when and to whom to report a complaint; (v) an appeal process; and (vi) the type of remedial action that could be undertaken.

The Supreme Court gave employers an opportunity to avoid liability and deter costly lawsuits with a well-crafted anti-discrimination policy. In the first instance, a policy must clearly enunciate that the employer will not tolerate harassment of any kind or retaliate against an accuser. Moreover, the policy must provide a reasonable way of reporting and investigating complaints. Yet, having a well-written policy is not enough. Actions do speak louder than words, and a handbook that “talks” about addressing complaints without a procedure in place to investigate and correct the harassment will not be sufficient.

Talk is Not Only Cheap, It Is Ultimately Expensive

A policy that tracks the law is a starting point toward litigation health. However, in Kolstad v. American Dental Ass’n, 527 U.S. 526 (1999), the Supreme Court held that punitive damages are available under Title VII in cases where “the employer has engaged in intentional discrimination and has done so ‘with malice or with reckless indifference to the federally protected rights of an aggrieved individual.’ ” However, the employer can avoid punitive damages if it has made “good faith efforts to enforce an anti-discrimination policy.” The Court provided little guidance as to what constitutes “good faith efforts.” It also did not address whether the alleged failure to enforce an otherwise valid policy would negate the availability of a Faragher/Ellerth affirmative defense in addition to potentially subjecting the employer to punitive damages. Yet, it is reasonable to assume that, as a result of Kolstad (and perhaps as a matter of common sense) combining a written anti-harassment policy with documented efforts to (i) educate employees about the policy and (ii) address actual complaints of discrimination, will not only avoid the imposition of punitive damages, but also basic liability as well.

There have been no cases in the Second Circuit Court of Appeals on point which hold that a failure to train or educate employees regarding the terms of the anti-harassment policy will, in and of itself, prevent the assertion of a Faragher/Ellerth defense. However, a recent Second Circuit case is instructive. In Petrosino v. Bell Atlantic, 385 F.3d 210 (2d Cir. 2004), the court denied Bell Atlantic’s motion for summary judgment even though it proved the existence of a corporate policy prohibiting harassment and also demonstrated that it had established an “Ethics Hotline” allowing employees to report incidents of harassment. Even without a reference to Koldstad, the court concluded that a fact finder could determine that Bell Atlantic had failed to “adequately investigate and promptly correct the complaint of harassment,” because plaintiff stated that when she called the hotline, her request to discuss the matter with a female counselor was denied, even though Bell Atlantic could demonstrate that the plaintiff refused to return follow-up calls from investigators. Thus, at first blush, it would appear that even the best laid plans and good faith efforts to draft cohesive policies will not prevent or put a stop to litigation, leaving the Faragher/Ellerth defense as almost pointless.

What’s an Employer to Do?

Once an employer understands that the drafting of a policy is only the beginning of the process to “exercise reasonable care to prevent and promptly correct any harassing behavior” the more protection it will enjoy. According to the EEOC, other than the creation and distribution of a policy, “other measures to ensure effective dissemination of the policy include . . . [to] provide training to all employees to ensure that they understand their rights and responsibilities.” [iv] As such, the employer must undertake to educate all employees, particularly supervisors regarding what is expected of them in the workplace in compliance with the law, and by trainers who are well-qualified in this area. The Third Circuit Court of Appeals has made it clear that conducting training sessions about the policy should be factored in when assessing whether the employer acted reasonably and thereby satisfied the first element of the Faragher/Ellerth affirmative defense.[v]

Next, the EEOC recommends that “an employer should set up a mechanism for a prompt, thorough and impartial investigation into the alleged harassment” [vi] This may include the creation of an investigation checklist. Identifying additional victims and witnesses, securing documentary evidence especially – - obtaining all of the e-mails of the accuser and the accused, and inventorying their computers, – - and possibly transferring the accused to another location during the investigation are all necessary steps. In other words, in addition to a boilerplate language that “all complaints will be thoroughly investigated,” the employer should have a written procedure in place as to how the investigation will be conducted and what action will be taken should discriminatory behavior be found. With a documented investigation policy and provable compliance, a plaintiff’s bald claim that nothing was done in response to his/her complaint will carry little weight leaving summary judgment as a meaningful avenue of recourse by an employer. [vii]

Conclusion

When can you confidently advise an employer that after all this drafting of policy and procedures, it has insulated itself from liability for workplace harassment? Perhaps never, since the willingness of the employees who are entrusted with following the extensive and expensive guidelines will be determinative. Yet an employer is well on its way to a workplace free of discrimination and will enjoy a strong litigation posture by making an effort to draft a comprehensive employee handbook and proper procedures drafted and in place from the outset.

1. U.S. Department of Justice : Bureau of Justice Statistics Special Report: Civil Rights Complaints in U.S. District Courts, 1990-1998, January 2000 NCJ 173427 and Civil Rights Complaints in U.S. District Courts, 2000, July 2002 NCJ 193979.
2. Employment Practice Liability, Jury Award Trends and Statistics, Jury Verdict Research 2004 edition.
3. The affirmative defenses in Ellerth and Faragher apply equally to all types of discrimination in the workplace whereby the policy should address all forms of discrimination including discrimination based on sexual orientation or transgender which are protected by state and New York City law.
4. U.S. Equal Employment Opportunity Commission: Questions and Answers for Small Employers on Employer Liability for Harassment by Supervisors- www.eeoc.gov/policy /docs/harassment-facts.html
5. Newsome v. Administrative Office of the Courts of the State of New Jersey, 51 2002 WL 31228037 (3d Cir. 2002); see also Shaw v. AutoZone, Inc., 180 F.3d 806 (7th Cir.1999) (Employer exercised reasonable care to prevent any sexually harassing behavior by supervisors, where it adopted anti-harassment policy . . . and employer regularly trained managers regarding policy); but cf. Dowdy v. North Carolina, 2001 WL 1408456 (4th Cir. 2001) ( the court held that "[d]istribution of an anti harassment policy provides compelling proof that the company exercised reasonable care in preventing and promptly correcting sexual harassment." and noted that it had previously rejected argument that employer "never did anything more than distribute its anti harassment policy" as "incompatible with the law of this circuit").
6. U.S. Equal Employment Opportunity Commission: Questions and Answers for Small Employers on Employer Liability for Harassment by Supervisors- www.eeoc.gov/policy/docs/harassment-facts.html
   
7. Schiraldi v. AMPCO Sys. Parking, 9 F.Supp.2d 213, 221 (W.D.N.Y.1998) (summary judgment proper when remedial measures cured problem following counseling of harasser); Nakano v. Doshi, 2001 WL 34546364 (D.Conn. Sep 30, 2001) (where there was no dispute that (i) the sexual harassment ceased when plaintiff filed her letter complaint; (ii) plaintiff was contacted by several supervisors within 11 days of her complaint; and (iii) an inquiry was conducted into the complaint that consisted of interviews a number of co-workers in the same department as plaintiff, “the totality of the circumstances” warranted a holding that “no reasonable jury could conclude that the actions taken by defendant in response to plaintiff's complaint were unreasonable or that defendant failed to act on plaintiff's complaint.”)