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For the first time since the state supreme court told corporate New Jersey to root out sexual harassers or risk huge damages, a company is to be tried on a charge that it ensnared and fired an innocent employee without a fair and thorough investigation. A Middlesex County judge ruled Aug. 30 that a supervisor who had a consensual sexual relationship with a co-worker can pursue a claim that the company violated a public-policy mandate by discharging him for harassment he never committed. Judge Yolanda Ciccone’s ruling in Grasser v. United HealthCare, MID-L-12026-99, which creates a new cause of action, says that the law prohibiting discrimination requires companies to make fair and thorough investigations of sexual harassment. When they don’t, and suspected workers are fired for sexual shenanigans anyway, the company is liable for damages for wrongful discharge. The decision, in effect, adds victims of flawed investigations to the list of at-will employees who are protected from firing for public-policy reasons under a line of cases starting with Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58 (1980), which barred a whistleblower’s dismissal. Ciccone ruled that firing a worker solely for having a consensual sexual relationship also violates public policy. Courts have previously ruled that such relationships aren’t automatically sexual harassment. The decision, denying summary judgment to United HealthCare and setting up an Oct. 7 trial for plaintiff John Grasser Jr., is sure to make disturbing reading for lawyers who represent New Jersey employers. Many of them have learned the lessons of the landmark Lehmann v. Toys ‘R.Us Inc., 132 N.J. 587 (1993), and have advised their clients to institute elaborate policies against sexual harassment. Otherwise, the companies can be held vicariously liable for harassers’ behavior and face punitive damages. UHC counsel John Turner argued unsuccessfully to Ciccone that the interpretation she adopted would subject companies to unwarranted second-guessing by judges and juries vindicating a new corporate duty to alleged harassers — if the companies were committed to eradicating harassment. Turner, a partner with Chicago’s Seyfarth Shaw, sounded more like a plaintiffs’ lawyer when he argued at a pre-ruling hearing that “the mandate of public policy is the eradication of harassment and discrimination, not the protection of the accused.” But Ciccone apparently agreed with Grasser’s lawyer, Christopher Lenzo, about the importance of language in cases that champion harassment victims’ rights — language that says public policy requires fair and thorough investigations. That requirement should work for the benefit of falsely accused harassers, too, says Lenzo, a partner with Woodbridge, N.J.’s Wilentz, Goldman & Spitzer. Borrowing a phrase from the drug-testing milieu, Lenzo told Ciccone, “false positive findings of discrimination or sexual harassment do not serve the public interest.” NO COMPLAINT OF HARASSMENT The plaintiff, Grasser, was manager of a UHC technical support team at the end of 1998 when he had a one- or two-month consensual relationship with a secretary; whether she was Grasser’s subordinate or a co-worker is in dispute. Both sides agree, though, that the affair ended and they continued working together for about three weeks until her boyfriend found out and asked her to quit. In March 1999, the secretary resigned and during her exit interview told the human resources department about the relationship with Grasser and the boyfriend’s reaction. That prompted a sexual harassment investigation, and though the woman never accused Grasser of any improper behavior, the probe turned up evidence that Grasser had violated sexual harassment policy, company officials said in depositions. The investigation found, for example, that Grasser pressured the secretary to continue dating him after she wanted to end the relationship and that he made another female employee uncomfortable by making specific references to the sexual nature of his relationship with the secretary, the defense evidence showed. Grasser’s initial complaint against the company included a defamation claim of a type that has emerged as one of the few causes of action available to employees seeking damages for wrongful accusations of sexual harassment. No employee openly accused Grasser of such behavior and the company never publicized information to the extent that such a count could stick. So it was withdrawn, Lenzo says. Under the count asserting the right to a fair and thorough investigation, Lenzo plans to present evidence to a jury that UHCs finding against Grasser was a sham, that other managers engaged in behavior like Grasser’s, or worse, and that the investigatory findings were a pretext for firing Grasser because of his age. He also wants to elicit evidence that nothing in the company handbook prohibited consensual relationships, that Grasser never saw a memorandum warning mangers against such affairs with subordinates and that the secretary wasn’t a subordinate anyway. Grasser, who worked for UHC or its predecessors for 30 years, was fired at age 49, a year before he was entitled enhanced retirement benefits, and Lenzo says the damages could be about $1 million. Also surviving summary judgment is an age-discrimination claim that says the sexual harassment finding was a pretext for wrongful discharge. NO PRESCRIBED LEGAL DUTY In a brief and during oral argument, Turner argued that nothing in New Jersey’s Law Against Discrimination or case law mandate a good-faith investigation of harassment claims. In fact, the cases say the goal of the LAD is the eradication of the cancer of discrimination and that’s where the true public policy resides, he argued. “Obviously, when an employer fails to prevent harassment, Courts must protect the victim,” Turner said in his brief. “Absent some contractual obligation, however, courts must leave an employer free to deal with employees it determines violated anti-harassment policies as it see fit.” “Courts must give employers like UHC latitude in creating and enforcing anti-harassment policies which attempt to prevent or prohibit conduct which might lead to or could be perceived as unlawful sexual harassment,” he wrote. And, as he concluded in his oral argument, “there is no right for the accused harasser.” Lenzo argued that sexual harassment will not go away if employees believe they have no defense against a flimsy suspicion followed by a desultory, liability-shedding investigation and then dismissal. “What deterrent effect is there for them not to engage in actual sexual harassment or actual discrimination?” he asked. DAMNED IF THEY DO OR DON’T Lenzo conceded in an interview that the decision might create some unease among plaintiffs’ employment lawyers, whose niche has blossomed with the growth of sexual harassment claims against defendants with deep pockets and an eagerness to avoid being publicly named as sexual harassers. On the other hand, plaintiffs’ lawyers rarely take umbrage at a new cause of action, particularly another one against corporations accused of violating rights. “Wow,” was the first reaction Richard Schall of Moorestown, N.J.’s, Schall & Barasch had when told of Ciccone’s ruling. Schall, president of the New Jersey chapter of the National Employment Lawyers Association, says he has long been concerned about abuses associated with corporate investigations that lead to terminations in sexual harassment cases. “Employers sometimes overreact and figure they’re supposed to take radical action and fire everyone in sight,” he says. “At times it can be arbitrary and unfair.” “I can see why employers are going to be upset by this ruling,” he says. “They are going to feel damned if they do and damned if they don’t.” As for whether his organization’s members might disagree with the ruling, he says, “generally at NELA we’re concerned about employee rights and those rights extend to all employees.” A NELA member, Glen Savits of West Orange’s Green Lucas Savits & Marose, says he is concerned about rulings that could undermine corporate responsibility for sexual harassment. If corporations say they are between a rock and a hard place, they could throw up their hands and complain, “we can’t do anything without being sued,” he says. “It’s a way employers can take the whole theory of sexual harassment and say, ‘see it doesn’t work, it hurts innocent people,’” Savits says. His partner, Walter Lucas, is among NELA members who say they would not represent an alleged sexual harasser in a wrongful discharge claim. He says the decision bothers him because “it could embolden real sexual harassers to feel they somehow might find a way to insulate themselves from their actions.” His reading of Pierce, the LAD and sexual harassment cases is the same as Turner’s on the public-policy issue. Ciccone’s ruling “is at the edge of an envelope,” but trial judges make new law all the time, he says. Turner did not return a call last week, and local counsel, John Murphy III, a partner in Cherry Hill, N.J.’s, Stradley, Ronon, Stevens & Young, declines to comment. So it could not be determined whether the defense would seek an interlocutory review. Lenzo, who doubts there will be such an appeal, expects the case to go to trial on whether the company’s investigation wasn’t fair or thorough and led to a discriminatory firing. Lenzo says that after the Aug. 30 ruling ordering a trial, Turner turned to him and said, “Now we go to war.”

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