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Sexual Harassment Investigation Can Be Proof of Wrongful Discharge


The Employment and Labor Law Alert

October 1, 2002

When an employee makes a claim of sexual harassment, prudent employers typically conduct an investigation, and, if warranted, take remedial action. This response has been lauded as a defense in the event of future litigation by a complainant. Now, however, employers should be cognizant that investigations and employers’ responses to them may be used also by alleged harassers in suits alleging violations of public policy.

In Grasser v. United Healthcare Corp., the Law Division denied summary judgment to a defendant employer, sending to a jury the issue of whether the former employee plaintiff had been discharged in violation of public policy after a sexual harassment investigation. Plaintiff had been a long-time employee of United Healthcare Corp. and its predecessors. In 1997 he began working as a Manager, and a year later assumed supervisory responsibility over a female employee who had been transferred to his team. Beginning in December, 1998, Plaintiff and the female employee became intimately involved. The relationship ended, however, and the female employee resigned her employment in March of 1999. After the resignation, United Healthcare conducted an investigation of the relationship. As a result, Plaintiff was terminated. Plaintiff’s litigation alleges, in part, that he was terminated in violation of public policy on account of United Healthcare’s failure to conduct a fair and thorough investigation. Specifically, Plaintiff asserts that United Healthcare’s conclusion regarding the nature of the relationship and his conduct was inaccurate, and that, as the relationship was completely consensual, he had not violated any company policy regarding harassment.

Although no New Jersey court had previously recognized that a public policy claim could exist as a result of an allegation of an employer’s failure to conduct a fair and thorough investigation, the Law Division found such a claim could be viable. Specifically, the court noted that public policy mandates a fair and thorough investigation of complaints of harassment, and that public policy is violated by firing an employee for alleged sexual harassment based on a consensual relationship. The court therefore determined that if a jury found that plaintiff had been discharged because his employer should have, after conducting a sexual harassment investigation, concluded that there had been no harassment but rather that a consensual relationship had existed, a public policy wrongful discharge claim had been established.

The source of this “public policy” is unclear. Neither the New Jersey Law Against Discrimination nor its federal law counterparts require an employer to investigate claims of harassment. To be sure, an employer who conducts investigation is usually in a better position to defend a lawsuit by the alleged victim of the harassment, but ,until this case, an alleged harasser who is an employee at will was no different than any other employee at will who can be terminated for any reason or no reason. The court’s decision casts a shadow over employers’ rights to interpret their own policies and make business decisions accordingly. Additionally, the decision places a new burden on employers with regard to the investigation of harassment complaints – the process and outcome have suddenly become available as a double-edged sword against employers, and, as such, will in the future be the subject of intense scrutiny. Employers should carefully monitor investigations and actions taken in response to same, and, if in doubt as to the propriety of the process or outcome, should not hesitate to contact legal counsel.

The ultimate outcome of Grasser, and its progeny (if any), should be carefully monitored for further guidance in this area.”