Takeaways From Wynn Resorts’ $20M Penalty Over Sexual Misconduct Claims

Posted February 28th, 2019.

As It Appeared On
National Law Journal

“There was a repeated failure to investigate and follow and enforce the policies concerning workplace harassment,” one observer says.

By Erin Mulvaney

The $20 million regulatory fine against Wynn Resorts tied to a sexual harassment scandal that ousted chairman and CEO Steve Wynn last year was the largest Nevada has imposed against a gambling licensee and marked a rare instance in the #MeToo era of a company being held accountable for not doing enough to investigate and stop workplace misconduct.

Companies across industries have been forced ever more to face consequences of alleged sexual misconduct claims against executives, as the #MeToo movement put a new spotlight on harassment in the workplace. The introspection has driven law firm investigations and preventative work, and in some cases big settlements involving claims against high-level executives.

But, so far at least, regulatory fines have been uncommon, employment attorneys said in interviews with The National Law Journal. The penalty this week issued by the Nevada Gaming Commission exposed the consequences a company can face by allegedly failing to timely investigate complaints of sexual harassment.

The penalty against Wynn Resorts showed that a company—beyond an executive—can be held accountable for how it responds to sexual harassment complaints, said Deborah Marcuse, the Title VII practice group co-chairwoman at plaintiffs firm Sanford Heisler Sharp. Ignoring complaints, or not doing enough to investigate them, can be a liability.

Wynn Resorts said in a statement that there’s been a “paradigm shift” at the company over the past year. The Wall Street Journal last year published investigative reports about Wynn, who resigned amid allegations of sexual harassment. He has denied any wrongdoing.
“The completion of the review by Nevada regulators is an important step forward, and we deeply appreciate the trust and confidence they have placed in the new leadership of Wynn Resorts to ‘grow and prosper,’” the company said.

Gregory Brower, a Brownstein Hyatt Farber Schreck partner who represented Wynn Resorts, was not reached for comment.

The Nevada Gaming Commission said in its settlement with Wynn Resorts that company leaders “fell short of their culture and commitment in perhaps one of the most important areas for an employer—focusing on its employees. Respondents have focused on a single man, rather than the company’s greatest asset, its 25,000 employees.”

Wynn Resorts initiated an “enhanced” workplace compliance and sexual harassment training program for all employees, and the company commissioned pay and promotion equity studies, the commission said. The company has taken measures to “reinvigorate and implement meaningful change across all levels of the organization.”

Marcuse called the Wynn Resorts case a “stark example” that features a more regular occurrence in which companies don’t adequately investigate misconduct claims.

“When you choose to ignore a cultural problem at your corporation, you’re making a bad business decision that could come back and bite you,” she said. “This is dramatically worse than a single case would be.”

Cheryl Sabnis, a litigation partner at King & Spalding in San Francisco, said the Wynn Resorts penalty showed the far-reaching consequences of allegations of sexual harassment.

“The issue was not just sexual assault happened, but there was a repeated failure to investigate and follow and enforce the policies concerning workplace harassment,” Sabnis said. “The key takeaway is a reminder that when allegations are made you have to investigate them, you can’t ignore them. If you do so, you do it at your own peril.” She added: “If you don’t live by those policies you are setting yourself up for failure.”

Sabnis said the Wynn Resorts penalty was specific to the Nevada commission but shows that companies will continue to face pressure to take seriously workplace culture and take steps to minimize and prevent misconduct.

“It’s one more avenue where a company has played fast and loose and ignored allegations and not properly handled those allegations in the past,” she said. “It’s not just litigation. It’s not just a social media onslaught. It’s not just bad press. It shouldn’t be looked at as a one-off. It should be looked at in a new area where regulators are holding the bar appropriately.”

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