How Harassment Allegations Can Bring Down an Entire Company

HR Dive

David W. Garland, Member of the Firm and Chair of the firm’s National Employment, Labor & Workforce Management Steering Committee, authored an article in HR Dive, titled, “How Harassment Allegations Can Bring Down an Entire Company.”

Following is an excerpt:

The impact of the sex harassment allegations against Harvey Weinstein – which surfaced last October – cannot be overstated. The birth of the #MeToo and #timesup movements has perhaps forever changed the view and treatment of sex harassment allegations in the workplace.

As we have previously written in this column, the impact of sex harassment on a company’s future — especially if the allegations involve its founders and leadership — can threaten the financial viability and even the very existence of the company. Harvey Weinstein’s behavior and the subsequent events at the company he founded leave no doubt about that.

On Feb. 13, following the numerous high-profile allegations against Weinstein, New York State Attorney General Eric Schneiderman filed a lawsuit in New York Supreme Court against The Weinstein Company LLC, The Weinstein Holding Company LLC, Weinstein and his co-CEO brother, Robert. The lawsuit sought injunctive relief, restitution and disgorgement under a New York law that provides for such “[w]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business.” It came on top of other lawsuits accusing the company of aiding and abetting Weinstein’s behavior. Schneiderman claimed jurisdiction because the company is headquartered in New York.

The lawsuit made numerous allegations against Weinstein for his behavior and against his brother and others for failing to take appropriate action to prevent Weinstein’s conduct. It specifically alleged that the company’s board of directors failed to investigate credible evidence of Weinstein’s harassment and his misuse of corporate resources to facilitate his egregious behavior – and to prohibit it. The lawsuit further alleged that the board should have taken steps to prevent Weinstein’s misconduct and should have terminated his employment when it came to light. And the lawsuit took aim at non-disclosure agreements used by the company to prevent law enforcement, the public and other employees from learning about the settlement of sex harassment claims against Weinstein.