Is Sexual Harassment Driving Up Compliance and Training Costs

In the U.S. new state-by-state anti-harassment legislation has passed and more sexual harassment training is required in 2020. The impact on the multifamily property management industry serves as an example of how increased compliance and training costs are coming, writes Dru Armstrong CEO of Grace Hill.

As with every part of society in the #MeToo era, multifamily property managers are confronting new risks associated with behavior that has been tolerated for too long in too many places, and the deservedly increased scrutiny focused on sexual harassment.  

Since 2017, the U.S. Department of Justice has filed or settled 14 casesOpens a new window of sexual harassment

in housing, resulting in $1.6 million paid out to victims. 

But it’s not just federal rules and lawsuits that property management companies need to worry about. States are passing their own laws around sexual harassment in the workplace, creating a far more complex and challenging regulatory environment for executives. 

Connecticut, New York, and Illinois, for example, have recently passed significant new anti-harassment legislation. And more sexual harassment training is required now in California, Connecticut, Delaware, Maine, New York, and New York City. It will be required on a more expansive basis in Illinois starting in 2020. 

The impact on the multifamily property management industry can be seen in increased compliance and training costs.  At large companies (more than 5,000 units), compliance costs increased by more than 30 percent, according to Grace Hill’s most recent benchmarking report. 

Yet the rising cost of compliance is perhaps most keenly felt at mid-size, about 1,000 to 5,000 units, and small companies, where a lawsuit can drain already limited resources. In 2017, mid-size companies spent an average of $6,000 on compliance, compared to $3,000 at large companies and $1,000 at small companies. 

Executives have rightly responded with increased investment in training. 

Grace Hill’s research shows a significant increase in training budgets at both large and mid-size companies, which expect a 60 percent and 30 percent growth in training costs respectively. Mid-size companies have budgeted $20,000 for training, on average, while large companies plan to spend $50,000. 

Sexual harassment still represents a fairly small slice of the compliance costs for property managers. Grace Hill’s 2018 benchmarking report showed it represented about 5 percent of compliance issues, compared to 70 percent related to federal fair housing. 

In addition to this, new sexual harassment laws create a rapidly changing legal landscape that multifamily property managers cannot afford to ignore. It’s an issue that has become a public policy priority in many states, while tenants and employees are increasingly aware of their rights and empowered to call out abuses when they occur. 

In Connecticut, for example, new legislation has expanded protections for employees reporting alleged discrimination, expanded potential damages, and increased time to file a discrimination complaint. 

New York’s new law no longer requires that harassment be “severe or pervasive” to be illegal, a departure from federal law that increases an employer’s potential liability. It also requires employers to translate anti-harassment policies in a number of different languages. 

Other states and localities are sure to follow suit, with laws that vary on details and often go beyond federal rules that property managers have become familiar with. 

Property managers are also reporting an increase in “drive-by” litigation on minor issues, as well as residents researching to see what improvements or remedies they may be entitled to, according to a Grace Hill industry survey conducted. 

Omnipresent technology like smartphones and security cameras only reinforce the need for executives to make sure that all employees are carrying out their duties in ways that are consistent with state and federal laws. 

The increased investment in training among multifamily property management firms is a positive sign they are taking these new challenges seriously. However, digging deeper into the data shows continued reliance on training systems that will struggle to keep up with a more fluid regulatory reality. 

While almost 80 percent of companies report using a learning management systemOpens a new window , less than half use their learning management systems to create custom content. And almost half of the respondents complained of a small training team struggling to manage large training programs. 

One of the top priorities for executives in the coming year will be not only increasing their investment in training but utilizing technology to create training programs that can keep up with changes to what their employees need to know, without drastically increasing staff resources dedicated to the task.

Learn More: Using AI to Improve Sexual Harassment Training and ReportingOpens a new window

This means adopting easy-to-use, streamlined and quickly implemented training programs that can be updated as federal and state policymakers change the rules and requirements for employers. 

Knowing that a single sexual harassment complaint can cost companies thousands of dollars, or far more if they are found to be liable, executives have clearly done the math and realized that investment in training upfront makes financial sense. 

Ultimately managing property management compliance risk is really about building a culture of respect. Where property managers succeed is where they are able to blend compliance training with training on diversity and inclusion, and training to support their culture and values, and companies that recognize those that live their company values.

The property management world needs to make sure the programs we are building facilitate the right culture and are agile enough for the #MeToo era, and its far-reaching and perhaps necessary impact on housing.

Learn More: Knowing the Different Types of Sexual Harassment Is an Important Step in PreventionOpens a new window