Company loses stockholder suit over harassment charges
Businesses are responsible for creating and maintaining a safe and harassment-free work environment for their employees. A business’s failure to promptly and thoroughly respond to allegations of sexual harassment may not only result in liability to the business itself but may also extend personal liability to officers responsible for day-to-day operations of the business organization.
This was the case when employees of McDonald’s Corp. declared that, when it came to the company’s workplace culture, they were not “lovin it.”
From 2016 to 2020, several McDonald’s employees filed complaints with the U.S. Equal Employment Opportunity Commission and filed suit alleging sexual harassment occurring at McDonald’s headquarters and restaurants due to a “boys’ club” atmosphere characterized by drinking excursions, flirting, and an emphasis on hiring “young, pretty girls” to work in administrative roles at the corporate office.
Consequently, McDonald’s stockholders brought a derivative action against the corporation’s global chief people officer, alleging that he breached his fiduciary duty of oversight by allowing a corporate culture of sexual harassment.
The Delaware Court of Chancery denied the global chief people officer’s motion to dismiss, reasoning that the officer owed the corporation a fiduciary duty of oversight. This duty requires officers to adopt an “internal information and reporting system that is reasonably designed to provide senior management and the board itself timely, accurate information … concerning both the corporation’s compliance with law and its business performance” and not ignore “red flags” about issues relative to the officers’ duties when they arise.
The court found that the stockholders sufficiently alleged facts from which a reasonable inference could be drawn that the global chief people officer had violated this duty by “permitting a toxic culture to develop at the company that turned a blind eye to sexual harassment and misconduct.”
The court cited examples, such as the HR department ignoring complaints about the conduct of co-workers and executives; employees fearing retaliation for reporting complaints; employees staging a walkout in over 30 cities in protest of sexual harassment; and a one-day strike by employees protesting the company’s culture of sexual harassment.
The decision is yet another reminder of how important it is for New Hampshire businesses to have a road map to respond to allegations of sexual harassment. Here are five tips to assist businesses in fulfilling their duties:
1. The first step in preventing and responding to sexual harassment is to have a clear and concise policy that should define sexual harassment according to state and federal laws, explain the process for reporting complaints, the process the business will undertake to investigate complaints, and potential consequences for violating the policy. It is important that all employees receive training on the company’s anti-harassment policy.
2. All employees should feel comfortable reporting incidents of harassment. Designating a specific person and/or office for reporting allegations of sexual harassment can help ease any discomfort and ensure that all complaints are adequately responded to.
3. If a complaint is made, it is important to promptly conduct a thorough and impartial investigation that should be consistent with the company’s antiharassment policy and include an interview of the complainant, the alleged harasser and any witnesses. The findings should be documented and a determination made as to whether the behavior constituted harassment. If the investigation determines that harassment occurred, take appropriate action, up to and including termination, and taking steps to prevent future harassment. Information resulting from the investigation should only be shared with those who have a need to know, steps should be taken to prevent retaliation against the complainant.
4. The anti-harassment policy should be regularly reviewed and updated to ensure it remains effective in preventing and responding to incidents of harassment. Consult with your legal counsel if necessary.
5. Providing ongoing training and education for employees on the issue of sexual harassment can help to create a workplace culture that is respectful and free from harassment. This can include workshops, seminars and other training programs that focus on preventing and responding to incidents of harassment. This ensures that employees are well aware that the company culture has no tolerance for sexual harassment.
Sexual harassment is a serious issue that can have a significant impact on a business as a whole. HR professionals have a responsibility to create and maintain a safe and harassment-free work environment, and to respond promptly and effectively to any complaints of sexual harassment.
Vineesha Sow, an associate in the Litigation Department of McLane Middleton, works out of the firm’s Boston office.
HR professionals have a responsibility to create and maintain a safe and harassment-free work environment, and to respond to any complaints of sexual harassment.
