How to Defend Your Company Against a Discrimination or Harassment Lawsuit

What do you do if your company is getting blamed for one bad actor’s decisions, when it really isn’t the company’s fault? The answer lies in your corporate policies. 

Risk management is fundamental to every organization, and those risks can come from anywhere. Environmental disasters, security breaches, third-party vendors, you name it — but one of the most dangerous risks to a company can come from the inside in the form of a wayward employee. 

A wayward employee detaches themselves from the positive culture of their workplace and expends time and energy to negatively impact those around them. This can manifest in sexual harassment, racially-motivated discrimination, or fraud and market abuse. 

So what do you do if your company is getting equal blame for the bad actor’s decisions, when it really isn’t the company’s fault? What if you have every possible defense in place to protect your employees, yet the wayward employee still managed to inflict harm?

If this is the case, don’t despair. There are ways to protect yourself and your company’s reputation from a lawsuit, bad press, and a negative company culture. 

Prove Yourself to the Judge

It takes a measure of bravery for employees to report workplace wrongdoing. Whether that is through open-door reporting or an anonymous third-party case management system, what really matters is that the company listens. Not only that, but they must make real changes to protect that employee from future incidents. 

When someone decides to take legal action against the person who wronged them in the workplace, the lawyer chosen will often cast a wide net to find who is to blame. This means the company will often be sued alongside the perpetrator, shining the spotlight on the culture under which the perpetrator got away with their actions.

The question then becomes this: Did your company do everything it could to protect the employee in question?

You may think this is hard to prove, but luckily the Department of Justice has explicit guidelines to follow to ensure that your compliance program is strong enough to hold up in court. 

When determining if your company is at fault, there are three fundamental questions the prosecutor will attempt to determine the answer to: 

• Is the corporation’s compliance program well-designed?

• Is the program being applied earnestly and in good faith?

• Does the corporation’s compliance program work in practice?

Essentially, you need to be able to answer these questions affirmatively and with great confidence for your program to be considered strong enough to survive prosecution.

Once you have shown that your corporate compliance program is well-designed and currently implemented within your company culture, it should take focus off your company, allowing the court to zero in on the real issue of the wayward employee.

Prove Yourself to the Media

Your company’s reputation in the public eye is almost as important as a successful defense in a lawsuit. You may be able to quickly recover from a settlement, but recovering from a bad reputation can be a much more challenging pursuit. 

News articles and broadcasts about workplace discrimination and harassment can be like catnip to your competitors,customers, and potential prospects. If your company is portrayed negatively, it gives your competitors license to dismiss your company as a threat. But if the story is positive, it may strengthen your current customers’ loyalty, and your company will gain respect in the eyes of the public, potentially driving to new customers. 

The way it goes is entirely up to your organization and how you respond. Consider these headlines:

[Company] faces another racial harassment lawsuit involving assault

Lawsuit: Muslim [Company] worker faced discrimination, told to keep quiet

[Company] to pay $370,000 to settle EEOC sexual harassment lawsuit

[Company] workers say sexual harassment and retaliation persist

[Company] worker sexually harassed by manager, lawsuit says

Each of these are real headlines found that can be found with a quick Google search.

If given the ammunition, news outlets and commentators will jump at the chance to pin the wrongdoing on your company as a whole, ignoring the details of the bad actor. This is especially true if you have done nothing to prove that you had the best intentions of preventing such an incident. 

However, if you have taken the steps mentioned earlier to bolster your compliance program, the tone of those headlines may change. If you were truly doing everything you could to protect your employees, they might read something like this instead:

[Employee] fired for sexual harassment, [Company] doing an internal review

[Company] lets go of dozens of employees as result of anonymous report investigation

[Company] reinstates employee after wrongful termination by supervisor

The difference here is that the spotlight is now on the perpetrator, and the company is being presented as reflective and willing to enact change. Of course, this will only be the case if that is your company’s real intention. Surface-level efforts to simply protect your reputation can be clearly apparent and may backfire. The only bulletproof defense is putting the truth behind your statements.

Prove Yourself to Your Employees

A discrimination or harassment lawsuit can rattle your employees. They may feel unsafe, unable to trust the company to protect them. They may even begin to become suspicious of their coworkers and teams, unsure of their intentions. 

If you lose the lawsuit and are heavily criticized in the media, it could irreparably damage your company culture, making it more costly to recruit new employees and keep existing staff. 

If you win the case and prove your good intentions to the media, your employees will be more likely to believe that they are in good hands. Even in the best case,the allegations made may still have a negative impact. Internal communication will have to happen quickly, emphasizing that you intend to do everything you can to make sure this never happens again. 

This effort may start with an intensive internal review, in which you welcome anonymous feedback from all your employees and develop a strategy to utilize that data to make positive changes. 

Wayward employees are more common than you may think. A lot go unreported and can destroy your company culture from the inside. But if you follow the compliance policy guidelines provided by the DOJ, and truly try to protect those who work for you, your company’s reputation and well-being will strengthen and change for the better. 

Steve Brown

As Head of Business Development, Steve Brown is responsible for helping drive growth at Star, with a focus on go-to-market planning, data and vendor partnerships, channel sales, new markets, and mergers and acquisitions. Steve joined Star in April 2021, and brings with him 25 years of experience advising financial firms on regulatory compliance. Prior to joining Star, Steve was Director of Broker-Dealer Client Services at Compliance Risk Concepts LLC, a senior director at PwC, and Head of Fixed Income and Capital Markets Compliance at U.S. Bancorp Investments, Inc. Steve began his career at Wachovia, where he was Head of Global Investment Banking Compliance and Control Group, and is considered a pioneer in the control room space—having established the bank’s first formal control room function.

Read more