Employment Law Lessons from Recent Celebrity Cases

High-profile employment claims are making headlines due to celebrity involvement. But these claims yield important reminders for all employers. Employers should take note of the importance of addressing hostile workplace environments, taking proactive steps to create a safe and respectful workplace for all employees, and having well-drafted employment policies.

Romantic/Sexual Relationships in the Workplace

Recent claims in the news include allegations of improper or coerced workplace relationships. These relationships, particularly when they involve power imbalances, can lead to significant legal liability. This may be especially true in the entertainment and media industries, where claims against newsmakers can get front-page attention.

Depending on the circumstances and the size of company, employers should consider policies prohibiting or restricting romantic or sexual relationships between managers and the employees they supervise. Some employers require workplace couples to proactively report relationships to HR. That way, if possible, reassignments can be made so that the supervisor is no longer supervising their romantic partner. Some employers also require couples to sign agreements that the relationship is voluntary, consensual and not coerced. If the relationship ends poorly, employers could also face added liability for retaliation. This could include demotions or other adverse actions taken against an individual who chooses to exit a workplace relationship.

Sexual Harassment/Hostile Workplace Environment

Under Title VII of the Civil Rights Act, sexual harassment is considered a form of sex discrimination. There are two primary types of sexual harassment:

• Quid pro quo harassment: This occurs when submission to or rejection of sexual conduct is used as the basis for employment decisions. For example, if a supervisor demands sexual favors in exchange for a promotion or threatens an employee with demotion if they refuse such advances, it constitutes quid pro quo harassment.
• Hostile work environment: This occurs when unwelcome sexual conduct is so severe or pervasive that it creates an intimidating, hostile or offensive work environment, or it unreasonably interferes with someone’s work performance. The conduct must be such that a reasonable person would find the work environment hostile or abusive. The victim must also perceive it as such.

Key elements of the Title VII standard for sexual harassment include:

• Unwelcome conduct: The behavior must be unwelcome. This means the employee did not solicit or incite the behavior and regarded it as undesirable or offensive.
• Severe or pervasive: The conduct must be either severe (e.g., physical assault) or pervasive (e.g., frequent inappropriate comments or touching) enough to create a hostile work environment.
• Objective and subjective impact: The environment must be one that a reasonable person would find hostile or abusive (objective standard), and the victim must also perceive it as such (subjective standard).

Employers can be held strictly liable for sexual harassment by supervisors. They can also be held liable for harassment by co-workers or non-employees if the employers knew or should have known about the harassment and failed to take prompt and appropriate corrective action.

On the flip side, in some cases, employers can avoid liability for claims of supervisor sexual harassment under what is called the Ellerth/Faragher defense, named after two landmark U.S. Supreme Court cases.

To successfully assert this defense, an employer must prove the following two elements:

• Reasonable care to prevent and correct harassment: This defense applies when the employer exercised reasonable care to prevent and promptly correct harassing behavior. This typically involves having anti-harassment policies in place, providing training to employees, and establishing complaint procedures that encourage employees to report harassment. Employers should conduct investigations and remedial actions promptly. Both supervisors and employees should receive training on their responsibilities in reporting and addressing harassment in the workplace.
• Employee's failure to utilize preventive or corrective measures: The defense also applies when the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer. This means that the employee did not use the employer's established procedures to report the harassment or seek a resolution.

If an employer demonstrates both elements of the Ellerth/Faragher defense, it may avoid liability for a harassment claim against a supervisor that did not culminate in a tangible employment action. However, if a tangible employment action did occur, the defense is not available, and the employer may be held liable for the supervisor's conduct.

Under the case law of most jurisdictions, an employee claiming they were too scared to report harassment is not enough to defeat the Ellerth/Faragher defense. Most well-drafted policies will stress that it is an essential duty of employment to report harassment.

Leaders and managers play a critical role in setting the tone for workplace culture. They should model appropriate behavior for maintaining a respectful environment.

Fair Labor Standards Act

The topic of proper compensation has also been raised by recent high-profile suits. Employees have argued they didn’t receive proper employee classification or compensation for hours worked as required by the federal Fair Labor Standards Act (FLSA).

Under the FLSA, employers must pay at least the hourly minimum wage for all non-exempt employees. Non-exempt employees must receive overtime pay for hours worked over 40 in a workweek at a rate not less than one and one-half times their regular rate of pay. Certain exemptions apply, such as for executive, administrative and professional employees who meet specific duty and salary criteria. The FLSA also requires employers to keep accurate records of hours worked and wages paid to employees.

Employers can face liability for unpaid wages. Common violations include requiring employees to work off the clock, not paying overtime, or misclassifying hourly employees as exempt to avoid having to pay overtime. In addition to full liability for unpaid wages, the FLSA also imposes liquidated damages, which doubles the amount in wages owed. The FLSA provides for collective actions when a whole class of employees are subject to the same wage violation. Here, the multiplied damages can potentially ruin a business. Failure to maintain proper records is itself a basis for liability.

Unpaid internships can also be a source of liability for any for-profit business. These are common in the entertainment industry, but risks remain even for those not in the celebrity spotlight. While common in the past, the U.S. Department of Labor now takes the position that not paying interns at least the hourly minimum wage will violate the FLSA, except under the following circumstances:

• The internship must be “similar to training” that would be given in an “educational environment.”
• The internship and training must be “for the benefit of the intern.”
• The intern must not “displace regular employees,” but must instead work “under close supervision of existing staff.”
• The employer must derive “no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.”
• The intern is “not necessarily entitled to a job at the conclusion of the internship.”
• There is a clear understanding between the employer and the intern that the intern is “not entitled to wages for the time spent in the internship.”

The FLSA does distinguish between intentional and unintentional wage and hour violations. If the violations were intentional, it could affect the statute of limitations for such claims. The FLSA can be confusing, and one way to avoid liability is to conduct a regular audit for FLSA compliance. This involves a thorough review of the following:

• Employee classifications
• Payroll practices
• Timekeeping systems
• Overtime calculations
• Youth employment practices/internships
• Recordkeeping practices

Employers should use findings from the audit to identify and address potential violations, update policies, and train managers on proper practices.

By conducting regular FLSA compliance audits, employers can reduce the risk of legal challenges, penalties and back pay liabilities. It's often beneficial to involve legal counsel with experience in wage and hour laws to assist with the audit process.

The possibility of employment-related lawsuits is always a risk for employers, even those who are not subject to intense public scrutiny. By learning from the allegations involving celebrities, employers can better understand the importance of addressing sexual harassment and hostile workplace environments and take proactive steps to create a safe and respectful workplace for all employees.

Contact Mark Fijman or any member of the Phelps labor and employment or media, sports and entertainment teams with questions or for advice and guidance.