Keeping up with US office politics

Richard Tyler talks to a leading US employment lawyer who warns that UK firms must toe the American legal line

If the philandering US president, Bill clinton, had been running a company rather than a country, he would have been thrown out long ago, according to Philip Berkowitz, employment litigation partner at US firm Epstein Becker & Green.

For had Paula Jones been on the payroll instead of in the Oval office, Clinton could have faced a watertight case of sexual harassment.

“But what happens in politics is not really transferable to the private sector,” says Berkowitz.

Indeed, Clinton the politician has come through allegations of sexual harassment and looks likely to survive the Lewinsky scandal. Clinton the head of a listed company would be facing disaster.

Stock markets are not as forgiving as the electorate. The company would face a fall in its share price due to the adverse publicity and, in the US, liability would be absolute, because a CEO is seen to act in the company's name.

The company would also face the prospect of a jury trial and up to $80m in punitive damages.

Berkowitz, who has followed the Clinton saga for US TV networks, says solicitors here need to be aware that UK-based subsidiaries of US firms also need effective sexual harassment policies. The cases in which a US employee has claimed sexual harassment in the UK have all been settled “quickly and quietly”.

But, he warns, it is only a matter of time before one of these cases blows right open.

“A company that wasn't prepared may be presented with someone who is willing to go the extra step and go back to the US and try a case,” he says. “Then you will have a jury questioning the employment practices of a British company practising in the UK.”

And in the US this area of law is developing quickly due to ground-breaking Supreme Court cases on sexual harassment which have made employers liable for their staff's inappropriate behaviour even if they are totally unaware of them.

Berkowitz says there is not one major US employer that is not reviewing its sexual harassment policies as a result of the rulings.

British subsidiaries of US companies should be doing the same because there are numerous examples of where US jury decisions in sexual harassment cases have had an impact on US subsidiaries in the UK.

The most notorious case has resulted in London-based partners at Baker & McKenzie facing a share of a $3.5m bill for the actions of a former

California-based senior partner, who allegedly sexually harassed a female member of staff.

But it is not just UK-based firms that need to be aware of the extraterritorial nature of US courts. Berkowitz says that problems occur for foreign companies which send staff to the US and do not give them adequate “sensitivity training” as to the different standards of what is acceptable in the workplace.

In a recent case involving Luxembourg bank CEDEL, the US Court of Appeals for the 2nd Circuit ruled that, for the purposes of federal anti-discrimination acts, a company's worldwide workforce should be included and not just the staff manning the US operations.

Before, foreign companies were liable only for such federal acts as the Disability or Age Discrimination Acts if they had more than 20 employees resident in the US.

There has not been the same level of employee awareness in the UK as in the US. But with the UK “opting in” to the EU's employment directives, this may change.

The EU directives will raise the profile of employment law and perhaps employees will start to reinterpret “good-humoured office banter” as a “hostile working environment”, says Berkowitz.

The US Equal Employment Opportunities Commission says harassment claims have more than doubled since 1991 to 16,000 a year. In comparison, the UK's Industrial Tribunal Office received 3,440 sexual harassment applications in 1997, up by just 283 from the previous annual census.

However, Paul Goulding, a barrister at 2 Hare Court and the chair of the Employment Lawyers Association, says that as US law in this area has developed ahead of the UK's, there have been times where he has drawn on the precedents set in the US in an English employment tribunal.

And, if the UK goes the way of the US and companies do not wake up to their obligations, there could be an explosion in cases and the level of awards.

Berkowitz reflects: “Clinton's troubles may be behind him, but the same can't be said for businesses operating in the US or here.”