Russell Jacobus, the CFO of a six-person investment banking firm, had a friendly relationship with secretary Rosie Vera-Aviles that included sexual banter. At her request, Jacobus showed her written erotic stories, and they passed one back and forth with handwritten notes attached.
You can see a lawsuit coming, but stay tuned for the plot twist.
Jacobus didn't supervise Vera-Aviles but did commonly review her work. One day, she became upset after he relayed a co-worker's complaint about her performance to the company's VP. In retaliation, Vera-Aviles showed the VP some of Jacobus' sexually explicit notes and complained that he was harassing her. Jacobus resigned that day. Vera-Aviles quit her job within a week and filed suit against the company and Jacobus. The company settled its suit, but Jacobus spent more than $82,000 in legal fees before a jury found him not guilty.
The firm refused to reimburse him, so he filed suit for indemnification under a Californiathat requires an employer to pay a worker for all expenses and losses incurred "in direct consequences of the discharge of his duties." He won, and the firm had to pay his legal bill. (Jacobus v. Krambo Corp. No. A087995, Calif. Ct. of Appeals, 2000)
Advice: This employer got caught in the crossfire of a situation it didn't even know about, but you can protect yourself against a far more likely scenario: an environment where sexual banter and innuendo is tolerated and even encouraged.
Stamp out any whiff of a hostile sexual environment. Don't take seemingly innocent and consensual dialogue between employees regarding sexual subjects lightly. If somebody can convince a jury that you condoned it, you'll pay.