The Economic Cost of Sexual Harassment in the Workplace

Workplace sexual harassment imposes severe consequences outside of the courtroom. Its impact is far-reaching and affects victims, perpetrators, bystanders, employers, and government agencies. The actual economic costs of workplace sexual harassment are hard to quantify because there are direct and indirect expenses. Some expenses include lost productivity, healthcare, investigations, and litigation.

In a 2015, the U.S. Equal Employment Opportunity Commission (EEOC) received about 28,000 allegations of sexual harassment from employees working for private employers or state and local government employers. That number accounted for one-third of the 90,000 charges of employment discrimination received that year. It’s a staggering number and expected to increase with movements like #Metoo and other social media campaigns that encourage speaking out about sexual harassment. For example, in 2015, the EEOC conducted a survey and found that about 75 percent of participants had experienced problematic or offensive forms of unwelcome sexual behavior but didn’t label those advances as “sexual harassment.”

Workplace Sexual Harassment Defined

Federal laws prohibit discrimination based on a person’s sex. Sexual harassment is a type of discrimination based on gender and a violation of Title VII of the Civil Rights Act of 1964.

Sexual harassment includes unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. However, harassment does not have to be of a sexual nature to constitute illegal conduct. Offensive remarks about women, in general, and comments that reflect disparaging attitudes based on sex or gender can constitute sexual harassment.

The harasser can be the victim’s supervisor, a supervisor in another area, a co-worker, or someone who is not an employee of the employer, such as a client or customer.

The law doesn’t prohibit simple teasing or an isolated incident that is not serious. However, once the comments or teasing becomes so frequent and severe that it creates a hostile or offensive work environment, the conduct becomes illegal.

Direct Costs of Workplace Sexual Harassment

1. Litigation, Lawyers, and Settlement Expenses

If a person is sexually harassed in a workplace, they are entitled to sue the employer for damages. In a lawsuit, those damages can include lost wages, vacation and sick pay, medical expenses (including counseling or therapy), and a myriad of other costs. Also, depending on the severity and pervasiveness of the sexual harassment, the victim may seek punitive damages.

In fiscal year 2020, the EEOC estimates that employers paid out $137 million to employees alleging harassment. That number excludes charges filed with state and local Fair Employment Practices Agencies.

Indirect Costs of Workplace Sexual Harassment

It is difficult to quantify the indirect loss. Previous work by the Merit Systems Protection Board (MSPB) discusses research estimating the economic costs of sexual harassment in the workplace. Also, the indirect effects aren’t just shared with the victim. If other employees see persistent sexual harassment, they are also less likely to seek promotions or encourage others to pursue employment at their company.

1. Decreased Productivity: Employees who suffer sexual harassment are often less productive. Many victims may take time off work to seek counseling or therapy, or other medical treatment. If the victim is present at work, the impending stress of a harasser can cause the victim to be less productive. Some behaviors include avoiding the harasser at work, which diminishes the victim’s ability to perform their regular duties effectively.
2. Increased Turnover: Turnover expenses will vary based on the industry. However, sexual harassment in the workplace can decrease the length of time an employee remains with the company. It can also increase training expenses and any other costs associated with hiring.
3. Reputational Damage: If an employer allows sexual harassment in the workplace, it can cause severe damage to the employer’s reputation. Skilled employees will not want to work in such an environment. Also, if the public becomes aware, the employer can jeopardize its branding.

Contact an Employment Attorney

If you feel you have been the victim of workplace sexual discrimination, please contact our employment attorneys at Law Offices of Jeremy Pasternak. You can schedule a consultation online or by calling us at 415-693-0300.