The impact of workplace sexual harassment can go far beyond the employees who endure the harassment and the employers that perpetrate or tolerate it. New York City sexual harassment attorneys focus their efforts on helping the workers who are most directly affected, but others may also have legal rights and remedies. Several recent lawsuit settlements in New York City and elsewhere demonstrate shareholders’ ability to hold corporate officers and directors accountable for permitting cultures of sexual harassment. A shareholder derivative lawsuit filed in a New York City federal court resulted in a settlement earlier this year. More recently, a major tech company settled multiple shareholder lawsuits in a California court.
Individual employees in New York City can bring claims for sexual harassment by filing a charge with an agency like the New York City Division of Human Rights or the Equal Employment Opportunity Commission. They may then be able to file suit in state or federal court. Very few lawsuits go all the way to trial. In most cases, the plaintiff and defendant reach a settlement agreement. This type of agreement rarely, if ever, includes an admission of liability by the employer. It might include a clause prohibiting the plaintiff from speaking publicly about the case and the underlying allegations. The plaintiff has obtained some relief, in the form of compensation, but it might not always feel like “justice.” Shareholders can, at times, obtain legal outcomes that are not available to current or former employees.
Section 626 of the New York Business Corporations Law allows shareholders to file suit on behalf of the corporation in certain situations. A shareholder derivative lawsuit is only possible when a corporation has failed to pursue a valid legal claim. New York law requires a plaintiff to “set forth with particularity the[ir] efforts…to secure the initiation of such action by the board or the reasons for not making such effort.” If the plaintiff succeeds in obtaining a settlement or judgment, all proceeds go to the corporation after reimbursement of the plaintiff’s expenses.
Shareholder derivative lawsuits have arisen from several highly-publicized sexual harassment scandals at large corporations. The causes of action involve shareholders’ losses due to falls in stock prices because of bad publicity. While these cases are not geared towards protecting employees or making them whole, they can offer an incentive for corporations to address sexual harassment before it becomes a scandal.
A class action in the Southern District of New York alleged that a jewelry retailer “misled investors about a culture of sexual harassment at the company.” The lead plaintiff alleged violations of federal securities laws dealing with fraud and false statements. The defendants included multiple executives and directors of the corporation. The parties settled the lawsuit for $240 million in early 2020. The California shareholder lawsuit mentioned earlier involving the tech company settled in September. In 2017, executive and directors of a major media company settled a shareholder suit in the Delaware Chancery Court arising from a sexual harassment scandal at a cable news network.
If you have experienced sexual harassment or other acts that violate New York City employment law, the employment lawyers at Phillips & Associates are available to help you assert your rights. Please contact us online or at (212) 248-7431 today to schedule a free and confidential consultation with a member of our team.