Introduction: With the diversity of people who work in organizations, sexualized conversations and activities may occur.  Very few business owners would intentionally allow sexual harassment; however, determining the line between normal adult interactions and sexual harassment can be challenging. The coupled with the ongoing business concerns of entrepreneurship, it is understandable that many business owners may simply rely on a policy or initial training as a basic safeguard. Especially in small to medium sized businesses, it is far too easy for senior-level managers to dismiss the issue of sexual harassment in the workplace in order to focus on things they view as more “important” issues.

The potential costs of sexual harassment and/or of a claim against a business can be substantial. If an employee feels that they have been sexually harassed, he or she can file a complaint with the Ontario Human Rights Tribunal (“HRTO“) under the Ontario Human Rights Code. The HRTO will give the company the opportunity to respond. After the response the matter will likely proceed to mandatory mediation and then a tribunal hearing. An employee may also include a sexual harassment claim in the Superior Court along with a claim of wrongful dismissal.

The costs associated with this type of a complaint could include potential legal costs and monetary damages if the HRTO finds that sexual harassment has occurred; along with business costs, such as harmful consequences to employee morale.

Legal Costs: Legal costs to defend an action can easily reach tens of thousands of dollars if the matter proceeds to a hearing. In our experience, many applicants to the HRTO do not have legal counsel, increasing the business’s costs in order to prepare and fight the matter effectively. Such costs are also very fact specific. Corporate records and training programs will need to be examined extensively to form a defence. Other employees and managers will need to be interviewed and may need to take time off to testify. The interactions, including personal relationships between employees, may be scrutinized and brought out on the public record. Further, significant research will need to be done to assess potential liability and measures of damages if an employer is found guilty of sexual harassment. All of these actions require close review by a qualified lawyer and as each step passes the legal fees add up.

Unlike actions in Ontario civil courts, the HRTO has no powers to award costs.  In many civil cases, if you get sued and it turns out that you did nothing wrong, you can claim some of your legal costs against the other party. However, in sexual harassment cases before the HRTO a successful employer cannot claim costs back against the employee. This means that even if a company is found to have done nothing wrong, it will still have to pay all legal costs associated with defending the claim.

Potential Damage Awards: Businesses often want to know the possible financial exposure for a sexual harassment claim. A person who proves to the HRTO that their rights have been infringed is entitled to compensation for wage loss arising out of the discriminatory acts. The purpose of compensation is to restore the person as far as reasonably possible to the position that he or she would have been had the discriminatory acts not occurred. Damage awards are not to punish the employer.

In a 2013 HRTO case, the tribunal surveyed recent case law and found that awards typically range from $12,000 to $50,000 in cases where sexual harassment in the context of employment is found. In determining the amount of damages the tribunal observed:

In the cases on the low end of the spectrum, the Tribunal generally found that there were few incidents, the incidents were of a less serious nature, and/or the incidents did not include physical touching. In cases on the high end of the spectrum, the Tribunal generally found that there were multiple incidents, the incidents were of a serious nature, there was a serious physical assault, and/or there was a reprisal or a loss of employment related to the incidents.

Damage awards can be significant to businesses and thus, if there is a chance that sexual harassment has taken place, careful examination of the facts must be performed in order to assess potential exposure.

Additionally, the HRTO has a broad range of remedial powers which permits it to reinstate employees and order that an employer take positive action to promote compliance with Human Rights Code such as creation of workplace policies or conduct training.

Business Costs: Business costs can often be as high as the legal costs, albeit less quantifiable. Business disruption and morale issues often arise and business owners need to carefully consider how the other staff may view such an incident or claim. Effects can include staff leaving, other’s not working as hard, a change of focus in the business from the current vision and goals to discussions of the alleged actions, feelings of dissatisfaction and potentially additional claims being raised. There is also the cost of workplace investigations.

In addition to the internal costs to a business, there can be significant reputational costs that can be incredibility harmful. Decisions made by the HRTO are placed on the public record, meaning that anyone can access them.  The decisions often contain detailed facts about the operations and culture of a business. This information is then available online to all of a company’s possible stakeholders including potential employees, clients, suppliers or business partners. Further, if the matter proceeds to a hearing, the case will likely generate significant discussion among potential witnesses and could easily be leaked throughout the industry.

Conclusion: Many employers have a sexual harassment section in an employee handbook or policy manual. With the complexity of today’s business environment it is all too easy to turn the corporate mind away from sexual harassment after this initial consideration.

The most important takeaway for any business person is that it can be very expensive to defend a claim against you, regardless of whether or not the business is at fault. The costs include the quantifiable legal fees to defend an action with no option to recuperate costs and high potential damage awards, in addition to possible significant business costs. The good news is that there are steps that a business can take to reduce those claims and mitigate potential loss.