How New York Employment Laws Deal With Alleged Sexual Harassment Among Entrepreneurs, Venture Capitalists

The past few months have seen proverbial dams burst with regard to sexual harassment allegations in places like Washington, D.C. and Hollywood. People—perhaps mostly, but not exclusively, women—who have long felt that coming forward would endanger their careers, or even their safety, finally feel that they can tell their stories. Months before the first allegations against Hollywood producers and Washington politicians began to dominate the news cycle, female entrepreneurs and tech workers in Silicon Valley, New York City, and elsewhere around the country were exposing cultures of sexual harassment in the startup world. The nature of the startup scene, however, presents certain legal challenges. Employment statutes prohibiting New York City sex discrimination and sexual harassment allow employees to file suit against their employers, but the relationship between startup founders and investors is not always that of employee and employer. In the absence of direct legal relief through anti-discrimination laws, entrepreneurs and investors are trying other methods to combat sexual harassment.

Laws like Title VII of the Civil Rights Act of 1964 and the New York State Human Rights Law (NYSHRL) prohibit employment discrimination based on a person’s sex. Sexual harassment, which includes a range of unwelcome, sexually oriented behaviors, from bad jokes to outright assault, constitutes unlawful sex discrimination when it is severe enough to create a hostile work environment impeding an individual’s ability to do their job, or when an employer makes sexual activity a condition of employment.

In order to successfully assert a claim for sexual harassment under Title VII, the NYSHRL, or another statute, a plaintiff must demonstrate an employment relationship. This is not present in many encounters between entrepreneurs and investors. A common, and often defining, feature of a “startup” company is an inability to meet operating costs through business revenue. Many startups spend years developing a product or service before even expecting such revenue. Instead, they rely on funding from investors. Venture capitalists (VCs) provide funding to startup businesses in exchange for stock in the company, and they often place one or more people on the company’s board of directors. If a VC sexually harasses an entrepreneur prior to this part of the funding process, the entrepreneur may have no recourse under existing anti-discrimination laws.

One possible solution is to amend existing anti-discrimination laws. The California Legislature will consider a bill in early 2018 intended to address sexual harassment of startup owners by investors. California’s anti-discrimination statute already identifies groups of people who may be held liable for sexual harassment in addition to managers, supervisors, executives, and directors. The bill would add investors to the list.

Other possible ways of addressing this issue involve internal controls within startup companies or among VCs and other investors. The Washington Post reported this summer on a tech entrepreneur who includes provisions in her company’s corporate documents that allow the removal of directors “if there is a ‘reasonable probability’ that sexual harassment occurred.” Another method involves using crowdsourcing methods to compile a list of investors accused of sexual harassment—which the company does not want to call a “blacklist.”

The sexual harassment lawyers at Phillips & Associates advocate for New York City workers in claims of sexual harassment and other unlawful workplace practices. You can contact us online or at (212) 248-7431 today to schedule a free and confidential consultation with a member of our team.

More Blog Posts:

Sexual Harassment at Company Holiday Parties in New York, New York Employment Attorney Blog, December 5, 2017

Bullying and Sexual Harassment in New York City Workplaces, New York Employment Attorney Blog, November 28, 2017

How Employment Laws in New York and Around the Country Deal with Sexual Assault as a Form of Sexual Harassment, New York Employment Attorney Blog, November 27, 2017


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