Gender Issues

Sex-discrimination lawsuits are on the rise. Is your company at risk?

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For large corporations, the news has been grim: Last July, Boeing agreed to pay as much as $72.5 million to settle a class-action lawsuit by female employees. That same month, Morgan Stanley paid $54 million to settle a similar suit.

Sex-discrimination suits against small companies don't make headlines but they are just as common. In fact, nearly half of all sex-discrimination charges -- running the gamut from sexual harassment to gender-related firing -- filed with the Equal Employment Opportunity Commission last year were aimed at firms with 200 or fewer employees. And claims could surge in the years ahead as more women gain confidence from high-profile cases in the news, according to Cari Dominguez, chairperson of the EEOC. Many female baby boomers are entering their 50s and are "looking to leave a legacy," Dominguez says. "Women are taking on the role of whistleblower."

Smaller companies are particularly vulnerable because they tend to have less structured atmospheres and are less likely to have formal sex-discrimination policies in place, Dominguez adds. "A lack of infrastructure and awareness of the issues can lead a small business to run afoul of the law," she warns.

Many female baby boomers are entering their 50s and are looking to leave a legacy. They're taking on the role of whistleblower.

Donna Salyers, founder and president of Donna Salyers's Fabulous Furs, a faux-fur retailer based in Covington, Ky., learned that lesson three years ago. Back then, the retailer -- which has 35 full-time employees, an online store, a retail shop in Covington, and celebrity clients such as longtime Cosmopolitan editor Helen Gurley Brown -- was struggling to recover from the economic impact of the 9/11 terrorist attacks. Then Salyers received more shocking news: The EEOC was suing Fabulous Furs for sexual harassment on behalf of four temporary employees in the company's distribution center who claimed that their supervisor made offensive remarks to them. The women, who had been let go after the company's busy season, also claimed that they were fired in retaliation for their complaints. Salyers soon found herself consumed with the lawsuit, watching as her legal bills skyrocketed to $100,000. Finally, last fall, she decided to settle. Her company, which admitted no wrongdoing in the case, paid $45,000 in damages to the plaintiffs and agreed to implement a new sexual-harassment policy. "Small businesses like ours aren't equipped to handle these claims," says Guy van Rooyen, CEO of Fabulous Furs. "It's like a smack in the face."

Salyers, who founded Fabulous Furs in 1989, is determined that this never happen again. Before the lawsuit, her company's sex-discrimination policy consisted of little more than the standard guidelines in an employee handbook. After the suit was filed, however, she hired a full-time human resources director to develop and review her company's employee policies. As part of the settlement, she also created a complaint hot line for workers and began holding annual sex-discrimination seminars for managers. By being up-front about what is and is not permissible, Salyers hopes to limit her company's exposure to any future claims.

The EEOC's Dominguez wishes more privately owned companies would follow suit. Until recently, the commission's efforts have been focused on large corporations. But now, smaller companies are the top priority, says Dominguez, who has launched an aggressive outreach program to educate small and midsize businesses. "They're the brave new world for us," she says. "That's where the growth opportunities are for the country's economy, but I see liability potential, as well."

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