New York employment discrimination laws (as well as those around the country) tend to focus on the actions of individual managers, supervisors, or others; or on individual discriminatory policies or practices by employers. This approach is useful and necessary for obtaining justice for individual employees who have endured sexual harassment. It is proving, however, to be insufficient for addressing broader systemic problems that enable and contribute to sexual harassment and employment discrimination in the first place. Liability for damages in a sexual harassment lawsuit might not provide incentive for widespread reforms in companies with vast resources. Earlier this year, the State of New York tried a different approach. Instead of acting in its capacity as an enforcer of employment discrimination laws, it acted in its capacity as a corporate shareholder, alleging that a former CEO accused of sexual misconduct breached his fiduciary duties. New York City’s public pension funds later joined the lawsuit alongside the state funds. DiNapoli et al v. Wynn et al, No. A-18-770013-B, verif. am. complaint (Nev. Dist. Ct., Clark Cty., Mar. 23, 2018).
Under employment statutes like Title VII of the Civil Rights Act of 1964 and the New York City Human Rights Law (NYCHRL), unlawful discrimination on the basis of sex includes sexual harassment in two broad categories. Quid pro quo sexual harassment consists of demands for sexual activity in some form as a condition of obtaining or maintaining employment. Hostile work environment involves unwelcome sexual conduct, ranging from sexual jokes or remarks to outright sexual contact or assault, that is so pervasive that it interferes with an employee’s ability to do their job. These laws allow employees to file complaints, followed by lawsuits, seeking a variety of damages.
Lawsuits for employment discrimination can lead to changes within a company, such as when a public agency like the Equal Employment Opportunity Commission requires new company policies, subject to monitoring and review, as part of a settlement. Unlike this type of lawsuit, which imposes change from the outside, shareholder derivative suits are brought by corporate insiders as a means of enforcing a corporation’s rights or protecting its interests. See N.Y. Bus. Corp. L. § 626. A lawsuit brought under Title VII or the NYCHRL typically casts the employer on the side of the alleged harasser, seeking to hold the company liable for the actions of its agent. A shareholder derivative suit arguably allows a company to distance itself from the alleged acts of individuals. It is no substitute for a lawsuit that allows an aggrieved employee to recover damages directly, but it could be a useful method of demonstrating that corporations will not tolerate sexual harassment among their executives.