The Moral Hazards of Workplace Harassment Law

Workplace harassment law is infected with moral hazards that shelter accused harassers from many of the risks associated with harassment. This Article is the first to explicate those moral hazards and theorize how to eradicate them. Foremost, it presents new empirical data showing that imposing statutory harasser liability across several jurisdictions has not materially deterred harassment. It then argues that workplace harassment law and its enforcement are to blame for such suboptimal deterrence because they acquiesce in employers shielding accused harassers from risks via indemnification, hold harmless, defense, and insurance arrangements. The Article goes on to expose a free rider problem that results from employer-funded settlements in a world where employers’ and accused harassers’ liability travel hand in hand. Subsequently, it contextualizes these moral hazards within law and economics literature and tort law’s optimal deterrence theory. Through those lenses, it resolves that law reform ought to prioritize the imposition of individualized, non-transferable risks on accused harassers. Finally, this Article considers how public ordering might assail these moral hazards and achieve that ideal. It compares and contrasts statutory and common-law harasser liability, explaining why statutory liability would achieve optimal deterrence. Subsequently, it explores articulations of public policy against insurance for intentional actions, applies that public policy to harasser risk shields, and makes the case for an ensuing interdiction of harasser risk shields by administrative agencies. Lastly, and assuming arguendo that harasser liability exists and harasser risk shields do not, it considers a proposal to reduce employers’ liability for hostile work environment claims, thereby decreasing opportunities for survivors to secure restitution, but reducing employer-funded settlements that inure to the benefit of accused harassers, mitigating against the free rider problem, and forcing harassers themselves to bear the brunt of the risks associated with harassment. In summary, this Article exposes the moral hazards of workplace harassment law, contextualizes them within social sciences scholarship, and explores how law reform efforts might eradicate them.