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Sexual harassment settlements: 'cost of doing business'

By Emanuella Grinberg, CNN
updated 9:18 AM EDT, Thu November 3, 2011
GOP contender Herman Cain denies that he sexually harassed two former National Restaurant Association employees.
GOP contender Herman Cain denies that he sexually harassed two former National Restaurant Association employees.
STORY HIGHLIGHTS
  • Legal costs, damage control are main incentives for confidential settlements, lawyers say
  • Settlements usually range from 4 to 5 figures, compared with possible million-dollar verdicts
  • "Even if the company is right in principle, it's more cost-effective to settle," expert says
  • With settlements, employers shield themselves from real accountability, professor says

To read more and see Robin Meade's interview with Herman Cain, go to HLN's new digital destination, HLNtv.com.

(CNN) -- When it comes to the bottom line, there are a few reasons that an employer might pay to sweep sexual harassment allegations under the rug instead of fighting them in the courtroom or the court of public opinion.

Legal costs and damage control top the list, employment attorneys and workplace policy experts say. Even if the allegations seem baseless, it's the cost of doing business, a quick fix to shield an employer from further allegations, boycotts or worse. But, on the flipside, settlements come with the risk of enabling someone to reoffend.

GOP presidential contender Herman Cain finds himself addressing allegations of inappropriate behavior, made by two former female employees of the National Restaurant Association when he led the organization in the 1990s. Cain said he was falsely accused and that a thorough investigation found the claims had no basis. He acknowledged Monday night that there was a settlement, contradicting a statement earlier in the day in which he said he had no knowledge of a settlement.

"My general counsel said this started out where (an accuser) and her lawyer were demanding a huge financial settlement. I don't remember a number," Cain said on Fox News. "But then he said because there was no basis for this, we ended up settling for what would have been a termination settlement."

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Citing multiple unnamed sources, POLITICO first reported the organization reached a settlement with the women to leave their jobs in exchange for their silence. Employment attorneys and workplace policy experts say it's a common practice for businesses and organizations to strive to reach confidential settlements on sexual harassment claims.

"They're extremely common, and many of them are done prior to any lawsuit being filed, which is why the press doesn't know about them," said Los Angeles attorney Gloria Allred, who has made her name representing allegedly wronged women from all walks of life. "The purpose is to avoid litigation and keep it confidential, because once it's filed it becomes public record."

The women, whom POLITICO did not identify, reportedly received five-digit settlements. If true, a figure at the low end of that range could be a "nuisance" payoff, the cost of making a baseless matter go away, Allred said. On the high end of five digits, it could be a hefty payout that equates to a silent acknowledgment of wrongdoing, she said.

On average, confidential settlements range from four to five figures, she said, which still pales in comparison to a potential jury award at trial. The website of Allred's law firm boasts of verdicts from $5 million to $18.4 million.

The confidentiality clause is also an attractive near-guarantee that the matter will stay secret, unless someone is subpoenaed to discuss the terms in a court of law or before a congressional committee, she said. (Or unless someone leaks it to the press.)

But there are greater collateral effects of concealing real instances of harassment, said David Yamada, Suffolk University law professor and director of the New Workplace Institute in Boston.

"Employers become complicit in shielding themselves and the individual harassers -- many of whom are management level or supervisors -- from genuine accountability," he said. "If the confidential settlement does not result in any concrete discipline or discharge of the harasser, there's a decent chance it will happen again to another employee."

Case law defines sexual harassment as unwelcome sexual advances that have the "purpose or effect of interfering with an individual's work performance or creating an intimidating, hostile or offensive working environment." Judging wrongdoing can sometimes be difficult, though a few U.S. Supreme Court cases in the past decades have attempted to clarify the scope of conduct for which employers are liable.

Such allegations are expensive and time-consuming to defend against, said Caren Goldberg, a human resources management professor at American University who testifies as an expert witness on employment law.

There are legal fees to take into account, as well as the cost of tying up your executive and others employees in hours, maybe even days of depositions. There is also the risk to reputation and the expensive matter of going into damage control if a publicity nightmare strikes, she said.

"Sometimes, even if the company is right in principle, it's more cost-effective to settle than fight on a principle. It's the cost of doing business," she said. "It doesn't take many attorney hours to incur five digits' worth of fees. That could be a low-cost settlement right there that makes the problem go away and swears everyone to secrecy."

Sexual harassment can begin with a tangible action, like being demoted or denied a promotion, in connection with unwelcome conduct. Or it can be the result of a sexually hostile work environment, through overt propositioning or comments and innuendo so "severe or pervasive" that it makes life at work unbearable, said Washington-area employment discrimination attorney Debra Katz. Her firm recently helped a salon employee win a $2.3 million jury award in a sexual harassment and retaliation suit against one of the Beltine's top-rated salons.

Usually an alleged victim, who could be a man or a woman, contacts a private attorney to examine whether the conduct rises to the level of sexual harassment. From there, an employee can decide whether to proceed through mediation, or to file a lawsuit or complaint with the Equal Employment Opportunity Commission, which establishes a public record trail.

Employers can defend themselves by showing they tried to prevent and correct any sexually harassing behavior and that the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise, Katz said. But doing so can take months and thousands of dollars in legal fees.

"It may be a one-time proposition with no touching, and may not meet the legal standard, but that's still potentially embarrassing," she said. "Rather than fight that, a far more reasonable course of action is for an employer to pay and have the situation go away."

"More importantly, these cases tend to be magnets, they attract more and more allegations, and that's one reason employers settle cases," she said.

Even if a settlement hides allegations of wrongdoing, there are discreet lessons contained in the process itself, Allred said.

"You're teaching an employer a lesson in the language they understand: their bottom line. They now know about how much it costs them to condone sexual harassment in their workplace, and sometimes that's their best incentive."

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