The Cost of Sexual Harassment in the Workplace
By now, you’ve probably lost count of how many prominent celebrities, CEOs, and politicians who have publically faced allegations of some form of sexual harassment in the wake of revelations over former Hollywood producer Harvey Weinstein’s decade’s long pattern of sexual misconduct towards women with whom he worked.
A FastCompany published just two months after the original Weinstein allegations went public has a list of over 60 powerful men accused of some form of sexual misconduct—that’s about 1 high profile case each day.
Unfortunately, as we will see as this article progresses and we dive deeper into EEOC (Equal Employment Opportunity Commission) data and other research on the subject, these “celebrity” cases are only the tip of the iceberg when it comes to sexual harassment in the workplace.
Within the Civil Rights Act of 1964, Title VII is the part of the law that lays out the legal parameters prohibiting discrimination in the workplace on the basis of any “protected class”, including sex (i.e., gender). So, it is not news that discrimination in the workplace is unlawful. What is newsworthy of late is just how prevalent harassment continues to be more than 30 years after the U.S. Supreme Court decreed that workplace harassment is a form of unlawful discrimination.
In addition, until 1991 the damages that could be awarded in sexual harassment cases were limited to recouping back-pay and lost wages, and reinstatement in their previous position if the victim had been fired for bringing the claim.
Today, although cases of sexual harassment remain significantly underreported (by 75% according to the EEOC), when sexual harassment claims do go to court, the plaintiff can now pursue damages that would include “future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses” as well as punitive damages in certain circumstances.
This is the number of sexual harassment complaints lodged with the EEOC in 2015. What is surprising about this number is that it has not risen all that dramatically, even looking back a full quarter century. The EEOC received 5,607 complaints back in 1992, right about the same time that, as explained above, Title VII expanded to allow far greater damages to be collected by victims of sexual harassment than ever before. Interestingly, the early 1990’s also had its own share of high profile sexual harassment claims that went public (e.g., Bill Clinton/Paula Jones and Clarence Thomas/Anita Hill).
However, despite the fact that these revelations about key political figures of the era came coupled with an increase in financial consequences for the perpetrator and financial benefits for the victims, without an accompanying cultural shift, reports of sexual harassment have remained fairly steady (and still highly underreported).
Given the recent focus on this topic in both social media and news media, it will be interesting to see whether 2017 pushes a true culture shift at workplace across the country and the impact that will have on EEOC numbers moving ahead. Will it reduce the underreporting and increase the EEOC totals?
Or if employers are being more proactive about shutting down harassment before it starts, perhaps the EEOC numbers will decrease? As of today, there are far more questions than answers, but if this is really the beginning of a new era in the American workplace, the EEOC data will continue to be an excellent bellwether.
$125,000 (up to $168 million)
The most easily calculated cost for employers, and probably the most asked about cost when it comes to handling sexual harassment claims in the workplace, are the legal bills.
Assuming that the claim is settled out of court, the average harassment claim will typically run an organization anywhere from $75,000–$125,000.
If it goes to court, employers are often looking at more like double those numbers, again in legal fees alone. And, if the employer is found liable in the case, well, that price tag can get pretty big in a hurry. The largest sum ever awarded in a sexual harassment case hit a whopping $168 million in 2012 (although it should be noted that there were other complicating factors in terms of other charges in this case that likely inflated this number).
With legal costs that can escalate exponentially, it quickly becomes clear how important it is for employers to both take sexual harassment claims seriously, as well as to create a workplace culture that doesn’t allow them to occur in the first place.
A severe lack of research on the economic impact that sexual harassment in the workplace has on companies where it occurs makes putting a dollar figure on anything but the legal bills challenging. However, one study from 1988 (yes, the most recent data available on this topic is from a study conducted almost 30 years ago), estimated that the average Fortune 500 company loses $6.7 million per year due to sexual harassment.
But what goes into that $6.7 million number?
- Absences: Victims call off work to avoid interacting with the perpetrator before, during, and after a formal complaint is filed. Once the allegations come to light, Hiscox insurance reports an average of 275 days for a harassment claim to be settled (and this is for unsuccessful claims that simply settle). For cases that do see a court room, any and all parties involved (including any witnesses) may absent from work periodically for court proceedings, investigations, depositions, etc. And of course, personal time may also be taken for any number of reasons connected with the emotional or physical damage caused by the alleged harassment.
- Turnover: Victims quit, because they don’t think their employer will believe them if they bring these issues to their attention from the start. Victims quit, because they feel ostracized by co-workers after bringing a case of sexual harassment to light. Victims quit, because they are unhappy with how their employer handled their sexual harassment claim. Others in the organization leave for any of the same reasons—employees talk, and if someone doesn’t feel safe or don’t like how a case was handled, it will not positively impact turnover numbers in the long run. And of course, on the other side of the equation, those against whom the allegations are filed (can, depending on the disciplinary standards set out in the harassment policy) get fired.
- Low productivity: Employees gossip about the harassment case, overall morale is low (How could this happen at our company? Why didn’t they do more to stop this? Am I safe at work?), victims suffer psychological damage that makes it difficult for them to concentrate on their work (especially if the perpetrator is still employed with them), and HR has to spend time conducting internal investigations that could be spent elsewhere if this problem didn’t exist.
More recent research finds that 80% of women who reported either unwanted touching or a combination of other forms of harassment changed jobs within two years. And, we all are well aware of the cost of employee turnover
Basically, sexual harassment makes it harder for everyone in the company to get their work done in ways big and small, and that (not legal bills) is what will likely cost the employer the most money in the long run.
Despite all of the facts and figures thrown out above, another damaging price that both employers and employees pay when it comes to instances of sexual harassment in the workplace, does not come with a dollar amount attached. For the employer, reputation is far and away the primary indirect financial concern.
For those involved in the harassment directly, whether that’s victims, perpetrators, or witnesses, the damaging nature of the harassment itself and the claims brought to light will undoubtedly have long lasting negative consequences.
From the cost of psychological and emotional damage to career ending (or stunting—in the case of victims who do not come forward or those that come up against an employer that does not take their claims seriously) blowback to bringing down morale among the entire workforce when a toxic workplace culture fraught by sexual harassment is allowed to continue unchecked, these more abstract costs truly cannot be quantified.
Nonetheless, it is precisely these more subjective measures that are perhaps the most critical part of the overall calculation when it comes to determining the true costs of sexual harassment in the workplace.