Sexual harassment liability has been significantly expanded for small businesses

The Legislature has now expanded the definition of “employer” in the context of sexual harassment claims to “a person who (A) employs one or more employees; or (B) acts directly in the interests of an employer in relation to an employee.”

The change from 15 to “one or more employees” means that essentially all businesses in Texas can now be held liable for sexual harassment. The small business exception is gone.

Expanding the definition of an employer beyond the employing entity is perhaps more significant. It now appears that supervisors and managers, as well as others acting “directly in the interests of an employer,” may now be named individually in a sexual harassment complaint and be individually liable for damages for sexual harassment.

In addition to expanding the definition of employer, the standard of liability has also changed. Under the new standard, an employer commits an “unlawful employment practice” if sexual harassment has taken place and “the employer or the employer’s agents or supervisors: (1) know or should have known that the conduct constituting sexual harassment was occurring; and (2) fail to take immediate and appropriate corrective action.”

Previously, an employer was entitled to a defense if the employer took “prompt remedial action” in response to the sexual harassment complaint. While the meaning of “immediate and appropriate corrective action” will need to be determined by Texas courts, employers could now be held to a higher standard. A standard that has no exact contours or real meaning outside of what a judge or jury decides on a case-by-case basis you should have done after the fact.

Nearly all of the legislative debates that preceded enactment of the major employment laws with small firm exemptions were animated with references to “corner” stores, entrepreneurs working out of their garage, family-owned retail and service operations, and other independent business people struggling to provide work for themselves as well as jobs for others despite stifling government regulation.

In other words, small business should not be burdened with the same regulations that big firms that can afford human resources departments and that have a bigger impact on the labor market must bear. These considerations appear to have been absent from the debate regarding the expansion of liability to small employers.

State Rep. Erin Zwiener, D-Kyle, who sponsored the bill, framed the issue as one of due process. The Legislature wanted by their calculations approximately 300,000 additional women to have redress for sexual harassment.

In response to these changes, small employers should consider adopting sexual harassment policies to ensure they are consistent with the new Texas laws. Equally important, small employers should consider training supervisors and managers on their new level of responsibility for these claims. Supervisors and managers need to know that they may now be held individually liable for sexual harassment claims. In addition, supervisors and managers should be trained on their role in fulfilling the employer’s obligation to take “immediate and appropriate corrective action.”

Finally, given the changes to the Texas laws and the uncertainties created by them, employers, particularly small-business owners, should consult with a qualified attorney to assist them in drafting and implementing sexual harassment policies and procedures. Likewise, they should obtain assistance in how to properly investigate and resolve such complaints because, for the many who have never done this before, it can be complicated with the consequences of failing to follow proper protocols having significant ramifications regarding the employer’s liability.