Opinion: Companies may have to make it very clear that cross-wall romance is unacceptable

In a case that left jaws dropping in human resources departments around the world, last December the Federal Court of Australia ruled that an employer was liable for injury sustained by an employee while having sex on a business trip. During the course of the evening’s “activity”, in the words of the court: “The respondent was injured whilst engaging in sexual intercourse when a glass light fitting above the bed was pulled from its mount and fell on her, causing injuries to her nose and mouth. She also suffered a psychological injury as a result …” The employer, which had booked the motel, was left to pay compensation.

Workplace affairs have long been a headache for employers. They can be disruptive to teamwork, cause bad feeling when they happen and result in further bad feeling when they break up. But now that employers have to tread ultra-carefully through the network of discrimination and sexual harassment laws, (not to mention liability for injury sustained on business trips), there’s a range of added hazard.

The risks run from allowing a “hostile working environment” to emerge, to more obvious forms of sexual harassment, to claims of discrimination if a forced reallocation of jobs in the aftermath of a failed affair is done by automatically moving the junior – or the female – partner.

Across the Atlantic, there has been a fashion for US employers to head off harassment claims by demanding that workplace lovebirds sign “contracts” stating that the relationship is consensual. In Europe, such an approach would be likely to fall foul of human rights privacy legislation. Equally, attempts to impose a blanket ban on office affairs would be unenforceable, and probably lead only to ridicule. The only sensible way to navigate the minefield is to clearly establish what the organisation considers to be unprofessional or unacceptable conduct (especially in the case of managers having affairs with subordinates), and to ensure that the human resources department is prepared to intervene rather than pretend it is none of its business. In financial services, or other heavily regulated businesses where there are Chinese walls, there’s also a compliance risk. Companies may have to make it very clear that cross-wall romance is unacceptable.

Workplace affairs are not the only risk that sex brings. Even leaving aside the many chief executives over the years who have been caught with their trousers down to the detriment of their own, and their organisation’s reputation, a company culture that sees nothing wrong in using prostitutes as a reward or bribe is playing with fire. This was notably the case in the great Volkswagen scandal of 2008, when an outraged population heard the courtroom details of slush funds used to pay for sex and shopping. According to The Guardian’s report at the time: “On one VW trip to Lisbon in 2003, a Brazilian prostitute was ‘ordered’ by a senior manager who requested a ‘young and lively dark-skinned girl’. He was so impressed by her performance that she was flown first-class to Paris and delivered to the George V Hotel, where the executive was attending a board meeting…”

The business world, the law and the media are taking an increasingly dim view of such behaviour. In April, Russia’s supreme court had a lengthy debate on the subject. “There was a heated discussion about whether or not providing the services of a prostitute for an official would be considered a bribe – several of the participants remarked that this was a very common practice. But in the end, a majority voted that free prostitutes would constitute a bribe.”

It would be better for all concerned if sex and business never mixed. But since there’s no chance of that happening, the risk manager needs to be aware of where the hazards lie.