The Economic Costs of Sexual Harassment; E. Larson

Sexual harassment lawsuits such as the ones brought about by the Del Laboratories secretaries and employees of Mitsubishi make headlines nationwide, but too many companies and organizations still think "that can't happen to us." But it can-and an entire industry has sprung up in the last half decade to help businesses avoid the nightmare of a sexual harassment lawsuit. Unfortunately, though, this army of ex perts may in fact be fostering sexual harass ment complaints even as it seeks to prevent them. Like the college twentysomethings persuaded by their feminist sisters that they were in fact raped, today's young business women are being·taught that behavior they would have once considered boorish or inappropriate should be rendering them vicMs. Larson has written on women's business issues for Investor's Business Daily, American Enterprise magazine, and the Knight-Ridder Financial News Service. An earlier version of this article appeared in the Spring 1996 issue of The Women's Quarterly.

timized and helpless-and in desperate need of huge financial compensation. Like the concept of" date rape, " the term "sexual harassment" didn't even exist two decades ago. It joined the American lexicon with the publication of Lin Farley's Sexual Shakedown: The Sexual Harassment of Women on the Job (1978) and Catharine MacKinnon's Sexual Harassment of Work ing Women (1979). MacKinnon, the well known feminist law professor, was largely responsible for convincing the legal commu nity and social theorists that sexual harass ment is a form of sex discrimination-thus implying it is as reprehensible a crime as racism. Complaints began to arrive at the Equal Employment Opportunity Commission slowly. Women fileda total of3,661 charges in 1981, and that figure rose gradually throughout the decade, reaching 5,623 in 1989. With the nineties, however, came an explosion. From 6,127 cases in 1990, the numbers skyrocketed to 14,420 in 1994.

Evidence from state agencies mirrors the surge at the EEOC. The Kansas Human Rights Commission received only 75 com plaints of sexual harassment in 1991, for example. That figurejumped 261 percent by fiscalyear 1995 to reach a record 271 reports of alleged harassment. Lawyers point to several reasons for the increase in complaints filed. In the 1986case Meritor Savings Bank v. Vinson, the 568 hostile-environment argument was upheld for the first time. This dramatically in creased an employer's liability: the plaintiff was no longer required to prove she had been subjected to a quid pro quo situation (e.g., "have an affair with me or you're fired"). As the hostile-environment argu ment caught on, complaints that would once have been considered frivolous were sud denly accorded legal merit. Then came 1991 and Anita Hill. In the three weeks after the Clarence Thomas hearings, the EEOC saw a 23 percent surge in complaints of sexual harassment filed with its offices. The 9 to 5 National Association of Working Women received 200 calls in the average week before Anita Hill stepped forth; after Hill's allegations, they were fielding 200 calls a day.

That year was a banner one for sexual harassment lawyers and radical feminists for other reasons as well. The "reasonable woman" standard was created in Ellison v. Brady (the standard was affirmed by the U.S. Supreme Court in 1993),and the Jack sonville Shipyards case resulted in the in clusion of workplace pinups as proof of a hostile environment. Potential Litigation The high and continually rising numbers of complaints of sexual harassment filed means that the potential for litigation is serious for U.S. businesses, especially since the compensatory and punitive damages awarded to complainants have also risen sharply in recent years. A quick look at cases over the last two decades shows the steep climb in awards. In what is considered the first sexual harassment case, Barnes v. Train in 1974, a woman working as the administrative assis tant to the director of the Environmental Protection Agency's Equal Opportunities Division filed suit alleging that her position was abolished after she refused to engage in an "after-hours affair" with the director.

The District Court dismissed the case be cause, although Barnes was discriminated against, the discrimination was based not 569 on the fact that she was a woman but that she refused to engage in sexual relations with her boss. The decision was reversed on appeal. Barnes was awardedjust $18,000in back pay as damages for lost promotions. The rise in awards over the years that followed seems directly proportional to the decline in seriousness of the complainants' charges. The 1990 settlement in Bihun v. AT&T In/ormation Systems, for example, was for $2 million. This small fortune was awarded to a personnel manager who suf fered mental distress after receiving unwel come advances from her supervisor, taking time off from work to recover, and finding her job eliminated when she returned. To day, Wal-Mart Stores is appealing a 1995 court ruling that awarded $50 million in punitive damages to a receiving department worker who charged that her supervisor was verbally abusive and liked to joke about her figure.

The transition from an "after-hours af fair"-to "verbally abusive" behavior as the definition of what constitutes sexual harass ment mirrors a shift in our moral worldview. As Ellen Frankel Paul has noted, we have gone from punishing behavior that is objec tively wrong to that which is subjectively offensive. As the courts' sensitivity to su persensitive women has expanded, the av erage amount being awarded to plaintiffs has skyrocketed to reach $250,000 today. The $18,000awarded to Ms. Barnes, whose treatment few would not consider genuine sexual harassment, is pocket change by comparison. While relatively few women filing com plaints actually get a shot at this legal lottery (the EEOC ended up litigatingjust 50 cases in 1990), the numbers available regarding how much all of this alleged harassment costs companies in terms other than court awards and legal fees are staggering indeed.

Of the women who feel they have been sexually harassed, more than 25 percent use leave time to avoid the situation. At least 15 percent leave their jobs. Nearly half of them try to ignore the harassing behavior and suffer a 10percent drop in productivity as a result (moreover, their friends who are 570 THE FREEMAN • AUGUST 1996 aware of the situation suffera 2percent drop in productivity as well). One estimate puts the grand total to U.S. businesses for sexual harassment at $6.7 million annually in ab senteeism, employee turnover, low morale, and low productivity. A 1988 study, how ever, found that sexual harassment in fed eral offices cost the government about $267 million in turnover and lost productivity over two years. Clearly such costs are diffi cult to quantify, but even the more conser vativeestimates availableare extremelyhigh. And attempts at pinning down the vague costs of things like productivity are just the beginning of what U.S. businesses are pay ing for the thousands of sexual harassment claims filed every year. A 1992 study, for instance, found that 21 federal departments paid $139 millionsimply to process the 6,883 complaints filed with the EEOC the previ ous year.

Facing the Problem Faced with the surge in sexual harassment cases nationwide, employers are adopting a two-pronged approach to the problem. Their offensive strategy is to "re-educate" their employees so that the sexism and thoughtlessness that results in sexual ha rassment in the workplace is eliminated. Their defensive approach is to line up legal experts to review their companies' harass ment policies in preparation for the inevita ble harassment charge and, more recently, to purchase a new type of business insur ance designed to help them through a sexual harassment case without being financially destroyed. Thanks to the overall rise in employment discrimination cases (up 2,200 percent in the last two decades), sales of general employment-practices liability insurance have been on the rise in recent years. But companies ranging in size from a dozen workers to more than 10,000 employees are now purchasing sexual harassment liability insurance. Invented in the aftermath of Anita Hill"s allegations against Clarence Thomas, such policies have only started catching on very recently. Although President Clinton's policy was a personal rather than corporate one, the information re leased last spring about his use of $900,000 in liability insurance to cover the costs of Paula Jones's sexual harassment case against him willundoubtedly boost the sales of such policies for businesses.

Premiums for this new type of business liability insurance range from $1,500 to $25,000 annually, depending on many fac tors including turnover rates and whether the company has faced sexual harassment charges before. Coverage ranges from $250,000 to $25 million and includes court awards and defense costs-although not necessarily punitive damages. The first to introduce liability policies to cover sexual harassment specifically was Lexington Insurance, in March 1992. Chubb Insurance Company followed suit, but until as recently as 1994 the two had the field pretty much to themselves. By the middle of that year, sales of the policies had risen 25 percent, and companies like Reliance National and New Hampshire Insurance were joining the trend. Company officials will not reveal exactly how many of the sexual harassment policies have been sold, but Chubb has said its business has been at least doubling every year. Business is cer tainly good enough that today there are about a dozen insurance companies jockey ing for their share of clients. Although less than half of the Fortune 500 companies now have sexual harassment coverage, insur ance company officials predict it will be come a standard part of most business insurance portfolios within the next two or so years.

Sexual harassment liability insurance does have its critics, though-many of them from the corps of experts in prevention and re-education who believe that the best way for a company to protect itself is by hiring them to stop sexual harassment from occur ring in the first place. But try telling that to someone like Bill Buckingham. "I'll get even," were the last words the president of Buckingham Com puter Services Inc. heard when he fired a female employee for not doing her job. He THE ECONOMIC COSTS OF SEXUAL HARASSMENT 571 and his company, a computer consulting business with some 40 employees, were sued for sexual harassment and wrongful discharge. "Her comment was that I touched her on the back, which I had, " Buckingham told Inc. magazine at the time. "We're a pretty close-knit company, and there was no ques tion that I had patted people on the back. Nothing sexual. I'd tell people they were looking sharp today, ask if that was a new dress, stuff like that. That's basically what the suit was based on."

The ex-employee demanded more than $100,000to settle the case. Since that figure represented a year's profit to his company, Buckingham tried to fight. He gave up after a year-and-a-half battle and $25,000in legal costs. The most vigorous of prevention programs would not have saved Bucking ham from such a suit, but sexual harassment liability insurance would have been a finan cial lifesaver. There is no national clearinghouse for information on the sexual harassment indus try, but sampling some of the different items these entrepreneurial experts offer gives a good extent of the enormous, and growing, business they have on their hands. Because many consultants combine sexual harass ment training with their entire "diversity training" programs, the numbers for sexual harassment programs, as high as they are, are still conservative. Sexual harassment prevention consultants provide a myriad of services to the business, smallor large, seekingto minimizeworkplace problems. They will write a sexual harass ment policy and the procedure for enforcingit tailored to specific companies' needs. They provide general staffseminars on what sexual harassment is, how to avoida sexualharasser, and what to do if you feel you have been sexually harassed. They provide seminars specifically geared to the management per sonnel who are responsible for investigating and dealing with harassment charges. And they offer additional trainingfor management so they themselves can conduct future work shops within their company.

Such seminars range from four or so hours to two days and cost upwards of several thousands of dollars each time. And that's just the beginning. As the 9 to 5 Guide to Combating Sexual Harassment suggests: "Training should be ongoing, not a one-time session, and presented on paid time." Sex ual Harassment on the Job, another guide for employers, recommends that companies serious about combating sexual harassment have employees complete a Sexual Harass ment Survey every six months. And don't forget that every new employee-especially in management-must go through the awareness and prevention program if the company wants to minimize its risk. For the smaller companies that cannot afford real-life consultants, there are numer ous books, manuals, and videotapes to help them. Videotapes can range from $50 to $200for a 24-hour rental. The Seattle-based Pacific Resource Development Group, one of the best known in the business, offers audiocassettes beginning at about $13.00; a videotape, Shades of Grey, for about $1,500; and a monthly newsletter for $120 annually. The company's annual sales ex ceed half a million, and its director, Susan Webb, has trained about a dozen other folks (at $5,000a head) to go into the harassment prevention consulting business themselves.

Consulting firms aren't the only ones getting in on the action. Law firms are also expanding their programs to include sexual harassment prevention. The San Francisco based firm of Littler, Mendelson, Fastiff, Tichy & Mathiason, one of the largest em ployment law firms in the nation, has gotten into the business of helping companies avoid sexual harassment lawsuits. A typical one day seminar for 30 or so people costs from $1,500 to $3,000. With the majority of Lit tler's cases now relating to sexual harass ment, this one firm alone has a tremendous market for its prevention seminars. An excerpt from one sexual harassment guide indicates the extent to which these legions of experts are advising companies to go: To maximize options for the complain ant, the policy must allow for several 572 THE FREEMAN • AUGUST 1996 different channels. The procedure should not require the complainant to report the problem to her supervisor, since that person may be the harasser. At least one option should be to complain to an em ployee through an affirmative action com mittee, women's committee, or other committee. If feasible, designate an om budsperson to counsel victims. . . . Man agement should designate one or more specially trained employees who will carry out investigations .... Follow-up should also be done with harassers-even if they are asked to resign-to make sure they understand what was wrong with their behavior.

As these recommendations indicate, an aggressive program requires the employer not just to support the sexual harassment industry directly but to create actual sala ried positions for in-house harassment ex perts . Yet the threat of lawsuits is so great that, according to the Society for Human Resource Management, three-quarters of the companies in a recent poll had imple mented some form of the many costly pre vention steps now being recommended. Among the major corporations known for their "enlightened" sexual harassment pro grams are AT&T, Coca Cola, Avon, Texas Industries, and Harley-Davidson. DuPont company maintains a toll-free sexual harass ment hotline. Four staff members trained in sexual harassment and rape prevention are assigned to the hotline and carry beepers 24 hours a day. The company assigns one man and one woman to investigate each case. Corning Inc. picks up the tab for employees who wish to speak with a confidential out side consultant.

Government Intervenes In some areas of the country, the bur geoning sexual harassment industry has not been getting a boost simply from plaintiff friendly juries, but from state legislatures as well. Since 1993 California has required all employers-regardless of size-to notify employees that sexual harassment is unlaw ful. The employer must provide examples of what constitutes sexual harassment and clearly explain how harassed employees can get in touch with the appropriate govem-. ment agencies. As one California lawyer who conducts prevention seminars said, "Employers are required to almost assist employees in their claims against them." Connecticut employers with more than 50 employees have been required since 1992to conduct at least two hours of sexual harass ment training for all management; if an employer has more than three workers, posters about sexual harassment must be prominently posted in the workplace. Other states have considered similar legislation in recent years.

This rapid growth of the sexual harass ment industry is nothing less than liberal ism's tax on the business world. The culture of victimization is becoming so embedded in the courts and, increasingly, the state legislatures, that a handful of sexual harass ment lawsuits are now seen as representa tive of the average working woman's lot and both working women and their employers are paying the very high cost. The continual rise in sexual harassment claims, even as women are poised to take over the reins at 50 percent of the small and mid-sized businesses in one recent survey (to use just one example), suggests that the sexual harassment industry itself is in large part to blame for this phantom epidemic that has employers so scared. Rather than limiting themselves to expla nations of the law, the experts are teaching women to spot lechery and lasciviousness behind every friendlYsmile. In such a world, where every man is considered a potential rapist (subtle though he may be), sexual harassment lawsuits easily become a tool for revenge. Of course, there is certainly boorish behavior going on in workplaces all across America, but for much of that, too, we can thank liberalism. The degradation of manners and proper social behavior that is the legacy of the anything-goes Sixties merely compounds workplace situations in which women are encouraged to go to the courts for every little slight.

It's time to inject a little reasonableness THE ECONOMIC COSTS OF SEXUAL HARASSMENT 573 into workplace relationships. And ironically enough, the feminist 9 to 5 Guide offers some genuine common sense in its guide lines for "How Not to Harass." First: "Until you learn otherwise, assume that a woman you don't know will not enjoy ofI color jokes or sexual advances at work." Second: "Sharpen your listening skills. If a woman's response, whether verbal or phys ical, seems negative, trust that it is. Does she avert her eyes or turn away? Assume that no means no." And third: "If you're not sure whether your workplace behavior is acceptable, ask yourself how you'd feel if your wife, daughter, or sister were witness ing your words and actions or were on the receiving end of such behavior." Yet what this feminist manual is offering are basically rules for how any civilized, courteous group of people would interact. In other words, mind your manners! It is a sad commentary on social mores when we have to tum to a workplace manual to be told how proper people behave-once upon a time such behavior was learned at home.

As with so many other liberal causesdate rape, domestic abuse, child abuse-the expansion of the crime's definition serves only to obscure genuineinstances of it. When we look back at cases such as Barnes, there is littledoubt that spotlightingthe role ofwomen in the workplace, as the women's movement certainlydid, has served to curtailsuchabuses of power. But teaching today' s youngwomen to find harassment and slights on every rung of the workplace ladder hurts everyone in the long run-most of all women. The more inroads women make into the workplace the more they will have to deal with office curmudgeons and critics, louts and loudmouths, backstabbers, brutes, and, yes, boors-as working men have always had to do. Unpleasant personalities can never be legislated away. :But when a woman is cast in with a colleague from the last of these categories, the best advice for handling him comes not from any high priced sexual harassment expert but from the pages of literature. As Cervantes once said, "The woman who is resolved to be respected can make herself so even amidst an army of soldiers. " D THEFREEMAN IDEASON UBERTY BertonBraley, CommercialPoet by Chris Baker A lthough Ludwig von Mises called the . twentieth century "the age of the dic tators and tyrants," it should also be re membered as the century that produced the greatest philosophers of freedom. One of the most tenacious and better known (but almost entirely forgotten today) of those thinkers was Berton Braley (1882-1966).