Sexual Harassment Nightmare at a Small Business

Sexual harassment lawsuits are a difficult thing to deal with. Here are examples of what I went through and what I should have done as a small business.



There’s almost nothing worse than a sexual harassment lawsuit filed against your small business.

For me, it happened when I owned a small chain of salons. One of my employees was doing a wash on a client and the unthinkable happened. I wasn’t there so I don’t know exactly what transpired, but the end result was a harassment suit filed against my business.

What I do know is what I, the business owner, went through. It turns out my experience isn’t that different from other small businesses in the same situation.

  • Digging for paperwork. As a small business owner, when a harassment claim lands on your desk, your first instinct is to start looking for paperwork. Plain and simple, you freak out. I started tearing the place apart, checking to see if my insurance would cover this. I read every article I could find regarding “how to handle a harassment case.” I’m not sure I ever slept.
  • Finding a lawyer. Eventually you regain your wits and call a lawyer. For me, this wasn’t a one-and-done task, though. Attorneys and legal assistants wanted to hear all about the case before they would decide whether they wanted to take it or not, which meant I was re-telling the story. A lot.
  • Paying legal fees. Lawyers want to be paid. The meter starts running the moment they say “I do.”
  • Living in meetings. My favorite part of being a business owner was spending time with our customers. Guess what I didn’t have time for? Yup, work. I spent so much time in meetings that attending to my real job was just a dream. I had meetings with each employee in the shop that day, phone meetings and in-person meetings with lawyers, meetings with the employee accused of sexual harassment to learn his side of the story. Forget about growing your business; when your small business has a sexual harassment claim, you just want to keep it from shutting down.
  • Earning a reputation. Word gets around. When a harassment claim is filed against your business or someone associated with your workplace, you lose customers. There is no way around this.
  • Deciding what to do about the employee. Through all of this, you also have an HR challenge. I had to decide whether I should keep the employee, put him on leave or let him go. Taking the wrong action could result in another lawsuit, but, honestly, there’s no one-size-fits-all solution here. It all depends on the situation.
  • Paying a settlement. Eventually your case either goes to court or you end up settling with the accuser/victim. We did the latter, which involved even more back and forth with my attorney (everything gets billed to you) and a cash settlement. All of this was in addition to our other expenses: my lost time, customer attrition, employee productivity, legal fees, etc.

Everything about the situation was a nightmare and a headache. I realize now that a big part of the problem was that I was trying to handle everything myself (not the legal proceedings -- but everything else). But that’s how I ran my business -- I was a hands-on owner. Turns out there are better ways.

What I should have done when my small business had a harassment suit

I’ve written about hiring and employee terminations and how much easier the process is when you’re working with a PEO (Professional Employer Organization). Guess what else is easier? Responding to harassment allegations or any type of employment-related lawsuit. Here’s what would have been different.

  1. A full-service PEO would have launched an investigation. If I had been working with a full-service PEO like, I would have picked up the phone, told my rep what happened, and would have handled things. They would have launched an internal investigation (I was supposed to do that?). They would have given me advice on how to handle the employee. They may have even advised me on an attorney.
  2. A PEO would have ensured I knew about EPLI and how to get it. Before the harassment ever happened, a PEO would have educated me on being smart about running my business. A little knowledge about EPLI (Employment Practices Liability Insurance) would have been invaluable.
  3. A full-service PEO could have helped with manager training. You know the best way to avoid a sexual harassment lawsuit at your business? Prevent them. Train your managers and ensure everyone understands what’s right, what’s wrong, and what prevention looks like. While not every PEO does this, some, like, will assist with employee training.
  4. A full-service PEO could have helped with my employee handbook and policies. I laughed when I wrote this one -- I didn’t have an employee handbook! But it’s a good idea for businesses, regardless of size, to have one., for example, can conduct a review of policies, make recommendations, and provide sample language. In my situation, having a policy might have helped me figure out what to do about the accused employee. It would have also informed my own employees on how to report harassment and what they should do.
  5. A PEO would have saved me time, money and hassle. If you know anything about PEOs, this goes without saying. Your PEO might handle payroll, benefits administration and workers’ comp. Some of them, like, also answer questions from employees, conduct manager trainings, provide paperless onboarding (so I know for certain that an employee has read the policies and understands them, and I have a record of everything), handle risk management, and a whole lot of other things you might only get with an internal HR team. These are all great services, but until my company was hit with a sexual harassment claim, I never really knew how “over my head” I was. If I had someone to go to for advice and answers, someone who knew exactly what to do and who took action quickly, I would have spared myself a lot of hassle, stress, effort and probably a few other things, too.


Facts and figures about workplace harassment

  • 75% of U.S. workers have been affected by discrimination or harassment as victim or witness
  • 29.4% of discrimination suits filed in the U.S. in 2016 were sexual, including harassment
  • $125,000 is the average cost for small business to defend a discrimination suit
  • 11.7% chance that a U.S. small/medium businesses will face a discrimination lawsuit

Insurance Journal

Image credits

Take my advice - don't wait to look into a PEO before your small business runs into employment nightmares. Start today by getting a free quote from! Simply book a consultation and our business development team will be in touch with you shortly.

Similar posts