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Directors are liable for discrimination: sexual harassment case points out trouble.

Directors Are Liable for Discrimination

A sexual harassment case points out trouble.

What should the chief executive of an association do if a staff member complains of sexual harassment by a director? Both CEO and board should take prompt remedial action. This can range from reprimanding the director to removing him or her from the board. If the director attempts to retaliate against the chief executive by having the CEO dismissed, the executive would have a cause of personal action against any director who voted for such a move.

This is what happened in a recent case, Mayo v. QuesTech, Inc. Although Mayo involved a for-profit corporation, the facts and laws are every bit as applicable to a nonprofit corporation.

The Mayo Case

After becoming president and CEO of QuesTech, William M. Mayo took action to correct improper behavior by directors. He investigated reports he received from one of the directors that some male directors were using abusive, sexually derogatory language with female employees of the company; that they were having illicit sexual relationships with female employees of the company; and that they were diverting corporate funds to compensate the women during or after the relationships.

Upon confirming the reports, Mayo demanded that the directors involved halt their improper activities and recommended to the board that one director (who was also executive vice president of finance and administration, secretary, and treasurer of the company) be terminated because of his treatment of female employees. The board accepted the recommendation and terminated the director from his position with the company, although he stayed on the board.

"Mayo's reform efforts made him singularly unpopular with many of QuesTech's officers and directors," as the court put it, and the board convened a special meeting to consider his removal. It terminated Mayo without giving him any reason. Mayo thereupon sued the company and the directors individually on various state and federal law claims. The relevant claim for our purposes here is the federal antidiscrimination law spelled out in Title VII of the Civil Rights Act of 1964.

Ironically, one of the directors Mayo sued was the very one who had reported the other directors' misconduct to him in the first place. The directors attempted to have themselves dismissed from the suit, but they were unsuccessful.

What the CEO Can Do

The Mayo case illustrates the risk an association executive takes in attempting to confront sexual harassment by board members: The reward for keeping the association out of trouble can be dismissal.

What, if anything, can an association executive do to protect himself or herself in the type of situation presented in Mayo?

* Have an employment contract. The best protection an executive can have is an employment contract that guarantees the executive cannot be fired except for cause and also guarantees him or her a generous severance benefit in the event dismissal occurs anyway, without cause. * Appoint a special committee. The chief executive confronted with allegations of improper conduct by board members might take the problem to the president or executive committee and suggest that a special committee be appointed to investigate and take appropriate remedial action. * Let the lawyers handle the problem. Upon receiving the initial complaint from a director, Mayo might have advised the director to take the matter up with corporate legal counsel. Alternatively or additionally, upon learning of the problem, Mayo might have gone to legal counsel himself and let the lawyers handle it from there. * Counsel the employees. Another possibility is to advise employees to take their complaints to the board. A potential down side to this course, however, is that advising the employee to go to the board may set a bad precedent of condoning or encouraging direct contact between the board and staff.

The Mayo case shows that directors can be held liable personally for their discriminatory conduct. Moreover, under well-established principles of antidiscrimination law, the actions of directors are the actions of the association. Thus, any sexual discrimination committed by the directors would be attributable to the association.

It is important, therefore, that directors be very correct in their relationships with association staff and that they cooperate with anyone on the staff (or other director on the board) who brings problems to their attention--especially if the problem is as delicate as sexual harassment of staff by members of the board.

George D. Webster is general counsel to ASAE and a partner in Webster, Chamberlain & Bean, a Washington, D.C., law firm.
COPYRIGHT 1991 American Society of Association Executives
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Title Annotation:Legal; sexual harassment case points out trouble
Author:Webster, George D.
Publication:Association Management
Article Type:column
Date:Jan 1, 1991
Words:743
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