Consensual Relationship Agreements as a Defence against the Employer’s Vicarious Liability in Sexual Harassment Cases

A survey of 1,000 professionals conducted by the Harvard Business School revealed that 94 per cent of them worked at least 50 hours a week, while almost half worked for more than 65 hours.[1] It was believed that the advent of modern technology would reduce the number of working hours, but the evidence points to the contrary. A White Paper issued by the Centre for Creative Leadership reveals that professionals, executives and managers who use smartphones for work end up working for about 13.5 hours every workday.[2] Given that people are spending more time in offices than ever before, and with the corresponding decline in personal time and space, it is not surprising that there has been a steady increase in office romances. This is also partly due to the increasing representation of women in the workforce. A survey conducted by the international recruitment firm, Ranstad, reveals that about 57 per cent of global respondents indicated that romantic relationships occur in the workplace, with the percentage increasing to about 70 per cent in countries like Malaysia, India and China.[3]

However, this increase in the number of romantic relationships at the workplace poses a serious threat of sexual harassment lawsuits when things turn sour. This is often the case when the relationship is described as initial rejection and later acceptance or initial acceptance followed by later rejection.[4] In such cases, the originally consensual relationship is subsequently described as an unwelcome sexual advance or a request for sexual favours for a quid pro quo, especially when the relationship was between a superior and a subordinate. This poses a serious problem for employers as a number of jurisdictions around the world hold the employer vicariously liable for sexual harassment, apart from the harassing employee.

Meaning and Key Ingredients of Sexual Harassment

In the European Union, Article 2(1)(d) of the Directive 2006/54/EC defines sexual harassment as follows:

Where any form of unwanted verbal, non-verbal or physical conduct of a sexual nature occurs, with the purpose or effect of violating the dignity of a person, in particular when creating an intimidating, hostile, degrading, humiliating or offensive environment

The legislative intent behind the Directive is that sexual harassment is contrary to the principle of equal treatment between men and women and therefore, violates the dignity of the individual.[5] The two broad categories of sexual harassment are ‘quid pro quo’, i.e. the grant of benefits in return for sexual favours and ‘hostile work environment’, i.e. harassment of a sexual nature which leads to a hostile or abusive work environment.[6] It should be noted that sexual harassment is not limited to sexual activities and can include the differential treatment of employees on the basis of gender.[7]

One of the key ingredients in proving an allegation of sexual harassment is that the conduct must be unwelcome. The US Equal Employment Opportunity Commission defines unwelcome conduct as one which ‘the employee did not solicit or incite it, and in the sense that the employee regarded the conduct as undesirable or offensive.’[8] Some of the factors to be considered in determining whether the conduct was unwelcome are whether the plaintiff had willingly participated in the alleged conduct, whether the plaintiff informed his/her supervisors that such conduct was unwelcome and the time gap between the alleged incident(s) and the plaintiff’s complaint.[9]

The burden of proving that the actions were unwelcome lies on the plaintiff.[10] However, whether the conduct was unwelcome is a difficult question of fact and requires evidence to be judicially tried through a trial. This becomes more problematic when an employee initially consents to the relationship, but subsequently ceases to participate and claims that the alleged conduct constitutes sexual harassment. The plaintiff could have accepted certain conduct in the course of the relationship, which becomes unwelcome at its termination. However, this poses a heavy evidentiary burden to prove.[11] In the European Union, there is a reversed burden of proof wherein once the plaintiff has established a prima facie case, the burden of proof shifts to the defendant to show that there was no sexual harassment.[12]

Employer’s response to office romances

Even though the relationship is between the concerned employees, any claim for sexual harassment may have serious financial implications for the employer. The potential costs of sexual harassment claims are substantial for the employer, with one study estimating that on average, a large American Fortune 500 company spends around $6.7 million per annum on sexual harassment disputes.[13] For example, the law firm of Baker and McKenzie had to pay damages of $3.5 million to a secretary who experienced sexual harassment.[14] Apart from the legal costs and compensation/damages, studies reveal that employees who were subjected to sexual harassment took more time off work than other employees, adding to the employer’s hidden business costs.[15] More importantly, such incidents reduce employee morale and concentration, leading to reduced output and increase in frequency of mistakes. All these factors reduce the employer’s profits and hurt the business in the long run. Further, the absence of a specific sexual harassment policy dealing with office relationships may be perceived to indicate implicit consent for sexual harassment in the workplace.[16] Therefore, it is important for employers to monitor workplace relationships to prevent any sexual harassment.

It is argued that making the employer vicariously liable offers a great incentive for them to implement strict sexual harassment policies and also to implement stringent punishments for wrongdoers. The employer can be held liable if he/she was negligent in formulating appropriate policies or was aware or should have been aware of the conduct, but did nothing to stop it.

Some employers have formal policies to ban romances in the workplace, but evidence indicates that this has no deterring effect on office romances and only prevents their disclosure.[17] On the other hand, some employers do nothing at all as they believe that such office romances would ensure employees’ loyalty to the company and also increase their efficiency.[18] However, with the increasing risk of sexual harassment lawsuits, most employers require the employees to disclose their relationship. Also, the concerned employees may be transferred so that they are not working in the same department or be the immediate superior/subordinate of each other.

Interestingly, the dynamics of a superior−subordinate relationship creates further complications for the employer. The degree of economic power and control that a supervisor exercises over his/her subordinate raises the question of whether their romantic relationship could ever be based on genuine consent. If the subordinate refuses the superior’s advances, it may lead to negative work reviews and a hostile work environment. On the other hand, if a superior terminates his/her relationship with the subordinate, then a positional sexual harassment suit may be used as a weapon to seek revenge. Apart from the problem of sexual harassment, a superior−subordinate relationship creates a negative perception of sexual favouritism and dampens employee morale and productivity. Consequently, the employer has to play an important role in negating the effects of a superior−subordinate relationship.

Consensual Relationship Agreements as an Employer’s Defence to Potential Sexual Harassment Claims

The Consensual Relationship Agreement[19] was formulated to overcome the organisation’s potential legal issues that may arise from a relationship between co-workers and to guard against a possible sexual harassment claim if the relationship goes sour. The Agreement provides that the relationship is consensual and mutual, and in case of a disagreement, the parties will resort to in-house mediation and arbitration, rather than go to court. Such an Agreement ensures that the employers are sensitive to the employees’ concerns and at the same time, ensures that office productivity, morale and efficiency are not negatively affected. More importantly, even if an allegation of sexual harassment is subsequently made and it reaches court, the alleged harasser and the employer can always rely on the Agreement to show that the relationship was consensual.[20]

Advantages of the Consensual Relationship Agreement

Even though the Consensual Relationship Agreement does not grant the employer absolute immunity from a charge of sexual harassment, it does protect him/her to a great extent as the judge and the jury can be shown that the concerned employees had entered into a consensual relationship.[21] More importantly, it discourages both people in the relationship from going to court as they had disclosed that their relationship was consensual, thereby limiting the chance of succeeding in a trial.

To further safeguard the employer’s interests and to avoid claims of sexual harassment, the Agreement can provide a clause whereby the employee would indemnify the employer for any compensation paid due to the employee’s actions.[22] Not only would this act as a further deterrent to the employee from making sexual harassment claims, but would also protect the employer’s financial interests in case the company was required to pay compensation in a sexual harassment suit.[23]

At the same time, employees are also in support of the Agreement as it is a more positive and less punitive measure for permitting their relationship. More importantly, it shows the employer’s willingness to accommodate and adapt to the employees’ changing needs, without having any negative consequence on employees’ careers or relationships.[24]

Problems with the Consensual Relationship Agreement

It is argued that the Consensual Relationship Agreement violates the privacy of the individuals involved and coerces them to enter into the Agreement, irrespective of their consent or desire to do so. Many authors also challenge the validity of such an Agreement on the grounds that there is no valid consideration and it, in a way, indicates bias against people in a relationship within the organisation.[25] This is more so when the concerned employees refuse to sign the Agreement and may consequently be discriminated against or even discharged from employment. More importantly, it is legally and ethically uncertain whether an employer should regulate the relationship between his or her employees.[26] The Agreement attempts to regulate a couple’s relationship in the workplace, which may negatively affect their self-esteem and dignity, as well as their colleagues’ morale. The Agreement also fails to consider the negative impact that the relationship may have on the co-employees, who may feel they are being treated unfairly due to the perceived special status of the dating co-workers.

More importantly, there are important privacy concerns regarding such an Agreement, especially if the disclosure involves a homosexual relationship or an extra-marital affair. It is also important to bear in mind that such disclosure is usually made only after the relationship is more serious rather than the initial stages, when there is more likely to be an accusation of sexual harassment. However, employers justify this invasion of privacy on the basis that they have a duty to ensure a well-organised, secure and professional work environment.[27]

The validity of such an Agreement in itself may be in question, especially in the case of a superior-subordinate relationship with the inevitable unequal bargaining power. The Agreement may not indicate real consent as it is possible that the superior may have coerced his/her subordinate into signing it. The Agreement may provide an escape route to the superiors who engage in sexual harassment and thereafter coerce their subordinate into signing the Agreement, showing that the sexual act was not harassment but was consensual.

Conclusion

Even though the employer’s interference in his employees’ relationships is not desirable, the heavy cost of sexual harassment damages makes it inevitable that the employer would need to guard her-/himself against an office relationship going sour. Apart from the threat of punitive damages, an office relationship can have serious negative consequences on the office environment, employee morale and the professional work culture. Consequently, employers are compelled to insitute serious measures to counter sexual harassment at the workplace, one of which is a Consensual Relationship Agreement. Such an Agreement can reduce the employer’s threat of being sued for sexual harassment by showing that the concerned employees had disclosed that their relationship was consensual and therefore, there would be no question of sexual harassment. Even though this appears to be a novel solution to a complex problem, it poses serious problems one of which is the violation of the employees’ privacy. Such an Agreement may also be misused by a superior to coerce his/her subordinate into signing the Agreement. Despite the problems, there is no doubt that the Consensual Relationship Agreement can mitigate the potential compensation to be paid by the employer and act as a viable defence against sexual harassment claims.

Bibliography

Articles, Books and Reports

• Borden S, ‘Note, Love’s Labor Law: Establishing a Uniform Interpretation of New York’s “Legal Recreational Activities” Law to Allow Employers to Enforce No-Dating Policies’ (1996) 62 Brooklyn Law Review

• Chambers HL, ‘(Un)Welcome Conduct and the Hostile Work Environment’ (2002) 53 Alabama Law Review

• Chen A and Sambur J, ‘Are Consensual Relationship Agreements a Solution to Sexual Harassment in the Workplace?’ (1999) 17 Hofstra Labor and Employment Law Journal

• Conklin M, ‘Love on the Job: Liaisons Can Be Tricky, But Good For a Company’ Rocky Mountain News(22 February 1998)

• Deal J, ‘Always On, Never Done? Don’t Blame the Smartphone’ (Center for Creative Leadership, August 2013) <http://www.ccl.org/leadership/pdf/research/alwayson.pdf> accessed 1 March 2015

• Decker AE, ‘Women In Corporate Law: Rewriting the Rules’ (1996) 4 American University of Gender and the Law

• Edison-Smith L and Oliver LB, ‘Corporate Affairs: Libido in the Workplace’ [1997] North Dakota Employment Letter Law

• European Commission, ‘Harassment Related to Sex and Sexual Harassment Law in 33 European Countries’ (2012) <http://ec.europa.eu/justice/gender-equality/files/your_rights/final_harassement_en.pdf>

• Fraser D, ‘Office Romance Heats Up in Canada’ <http://blog.randstad.ca/news/bid/185591/Office-Romance-Heats-Up-in-Canada>

• Hodgin D, ‘Lawyers Try to Define Terms of Endearment’ [1998] Recorder

• Kline S, ‘Sexual Harassment, Wrongful Discharge, and Employer Liability: The Employer’s Dilemma’ (1993) 43 American University Law Review

• Kramer GM, ‘Limited License to Fish off the Company Pier: Toward Express Employer Policies on Supervisor-Subordinate Fraternization’ (2000) 22 Western New England Law Review

• Meyer B, ‘Firms Set Guidelines for Cupid’s Arrows: More Companies Taking Steps to Address Dating and Nepotism’ The Buffalo News(15 February 1998)

• Morewitz SJ, Sexual Harassment and Social Change in American Society(Austin & Winfield,US 1994)

• O’Neill JLM, ‘If You Love Me Dear, Please Sign Here: Will the “Love Contract” Play a Role in Protecting Employers from Sexual Harassment Liability?’ (2006) 40 The John Marshall Law Review

• Pagnattaro MA, ‘What Do You Do When You Are Not At Work?: Limiting The Use of Off-Duty Conduct As The Basis For Adverse Employment Decision’ (2004) 6 University of Pennsylvania Journal of Labor and Employment Law

• Radford MF, ‘By Invitation. Only: The Proof of Welcomeness in Sexual Harassment Cases’ (1994) 72 North Carolina Law Review

• Rubenstein B, ‘You Can’t Immunize Yourself but You Can Prepare a Defense’ [1998] Corporate Legal Times

• Segal JA, ‘Where Are We Now? Sexual Harassment in the Workplace’ [1996] HR Magazine

• The U.S. Equal Employment Opportunity Commission, ‘Policy Guidance on Current Issues of Sexual Harassment’ (19 March 1990) <http://www.eeoc.gov/policy/docs/currentissues.html> accessed 3 March 2015

• Weitzman AH, ‘Employer Defenses To Sexual Harassment Claims’ (1999) 6 Duke Journal of Gender Law & Policy

• ‘Why Is Everyone so Busy?’ [2014] The Economist<http://www.economist.com/news/christmas-specials/21636612-time-poverty-problem-partly-perception-and-partly-distribution-why> accessed 28 February 2015

Cases

• Meritor Say. Bank v. Vinson, 477 U.S. 57, 62 (1986)
• Weeks v. Baker & McKenzie, 943043, 1994 WL 774633

[1] ‘Why Is Everyone so Busy?’ [2014] The Economist<http://www.economist.com/news/christmas-specials/21636612-time-poverty-problem-partly-perception-and-partly-distribution-why> accessed 28 February 2015.

[2] Jennifer Deal, ‘Always On, Never Done? Don’t Blame the Smartphone’ (Center for Creative Leadership, August 2013) <http://www.ccl.org/leadership/pdf/research/alwayson.pdf> accessed 1 March 2015.

[3] Dayana Fraser, ‘Office Romance Heats Up in Canada’ <http://blog.randstad.ca/news/bid/185591/Office-Romance-Heats-Up-in-Canada>.

[4] Allan H Weitzman, ‘Employer Defenses To Sexual Harassment Claims’ (1999) 6 Duke Journal of Gender Law & Policy.

[5] For details see Council Directive 2006/54/EC of 5^th July 2006.

[6] See Meritor Say. Bank v. Vinson, 477 U.S. 57, 62 (1986).

[7] Henry L Chambers, ‘(Un)Welcome Conduct and the Hostile Work Environment’ (2002) 53 Alabama Law Review.

[8] The U.S. Equal Employment Opportunity Commission, ‘Policy Guidance on Current Issues of Sexual Harassment’ (19 March 1990) <http://www.eeoc.gov/policy/docs/currentissues.html> accessed 3 March 2015.

[9] See Perkins v. General Motors Corp., 709 F. Supp. 1487, 1499 (W.D. Mo. 1989)

[10] Mary F Radford, ‘By Invitation. Only: The Proof of Welcomeness in Sexual Harassment Cases’ (1994) 72 North Carolina Law Review.

[11] Lisa Edison-Smith and Leslie Bakken Oliver, ‘Corporate Affairs: Libido in the Workplace’ [1997] North Dakota Employment Letter Law.

[12] European Commission, ‘Harassment Related to Sex and Sexual Harassment Law in 33 European Countries’ (2012) <http://ec.europa.eu/justice/gender-equality/files/your_rights/final_harassement_en.pdf>.

[13] Sara Kline, ‘Sexual Harassment, Wrongful Discharge, and Employer Liability: The Employer’s Dilemma’ (1993) 43 American University Law Review.

[14] See Weeks v. Baker & McKenzie, No. 943043, 1994 WL 774633

[15] Stephen John Morewitz, Sexual Harassment and Social Change in American Society (Austin & Winfield,US 1994).

[16] Jonathan A Segal, ‘Where Are We Now? Sexual Harassment in the Workplace’ [1996] HR Magazine.

[17] Brian Meyer, ‘Firms Set Guidelines for Cupid’s Arrows: More Companies Taking Steps to Address Dating and Nepotism’ The Buffalo News (15 February 1998).

[18] Michele Conklin, ‘Love on the Job: Liaisons Can Be Tricky, But Good For a Company’ Rocky Mountain News (22 February 1998).

[19] Also known as a ‘Love Contract or ‘Dating Contract’

[20] Bruce Rubenstein, ‘You Can’t Immunize Yourself but ou Can Prepare a Defense’ [1998] Corporate Legal Times.

[21] Alison Chen and Jonathan Sambur, ‘Are Consensual Relationship Agreements a Solution to Sexual Harassment in the Workplace?’ (1999) 17 Hofstra Labor and Employment Law Journal.

[22] Amy E Decker, ‘Women in Corporate Law: Rewriting the Rules’ (1996) 4 American University of Gender and the Law.

[23] Jessica Lynn Mok O’Neill, ‘If You Love Me Dear, Please Sign Here: Will the “Love Contract” Play a Role in Protecting Employers from Sexual Harassment Liability?’ (2006) 40 The John Marshall Law Review.

[24] Gary M Kramer, ‘Limited License to Fish off the Company Pier: Toward Express Employer Policies on Supervisor-Subordinate Fraternization’ (2000) 22 Western New England Law Review.

[25] Deanna Hodgin, ‘Lawyers Try to Define Terms of Endearment’ [1998] Recorder.

[26] Seth Borden, ‘Note, Love’s Labor Law: Establishing a Uniform Interpretation of New York’s “Legal Recreational Activities” Law to Allow Employers to Enforce No-Dating Policies’ (1996) 62 Brooklyn Law Review.

[27] Marisa Anne Pagnattaro, ‘What Do You Do When You Are Not At Work? Limiting The Use of Off-Duty Conduct As The Basis For Adverse Employment Decision’ (2004) 6 University of Pennsylvania Journal of Labor and Employment Law.