Do you really need a formalized reporting/complaint procedure for employee complaints? YES.
But I am a small company: YOU STILL NEED ONE
But I have good managers that would never do anything wrong: YOU STILL NEED ONE
But my employees know where to go if they have an issue: YOU STILL NEED ONE
But I don't want to have to go through the hassle of setting one up: IT'S TOTALLY WORTH THE EFFORT
Here's why: In many claims of hostile work environment harassment by an employee's supervisor or superiors, employers can take advantage of what's known as an "affirmative defense" known as the Faragher-Ellerth defense. The Faragher-Ellerth defense is usually used to defend against claims of hostile work environment sexual harassment, but there are other situations where it could also be used.
The idea of this defense is that employers that go out of their way to prevent workplace harassment should be afforded some leeway in certain circumstances. But, the defense is not available if a supervisor's harassment results in a tangible employment action against the harassed individual.
This affirmative defense can shield an employer from liability for acts of its supervisors under these conditions:
No tangible adverse employment action was taken against the plaintiff (for example, no failure to hire, termination, failure to promote, demotion, undesirable reassignment, significant change in benefits, or negative compensation decision);
Once it was informed of the alleged bad actions, the employer exercised reasonable care to prevent and correct the harassing behavior; and
The employee failed to take advantage of any preventative or corrective opportunities provided by the employer or to otherwise avoid harm (for example, by not taking advantage of reporting procedures outlined in an anti-harassment policy).
It's not as simple as having an anti-harassment policy and reporting procedure, however. The policy has to be effective. That means that employers should make sure employees are aware of the policy and procedure, train employees on the policy and procedure, and routinely follow the policy and procedure.
There are a lot of cases where a court held that an employer was unable to take advantage of the Faragher-Ellerth defense. For example, employers weren't given the benefit of the defense where:
The policy only provided one reporting channel.
The employer didn't train on the policy.
The employer couldn't prove that the employee received the policy.
The employer didn't promptly investigate the complaint per the policy.
Best Practices:
Make sure your anti-harassment policy and reporting procedure is well publicized.
Train your supervisors on the policy and sexual harassment.
Have multiple complaint channels for reporting harassing conduct, including a possible Ethics #Hotline.
Don't require an alleged victim to report harassment to the alleged harasser him/herself.
Make sure you have evidence that employees received the policy (such as a signature acknowledgment).
Don't make the outset of employment the only time employees receive the policy. Put it in your handbook, post it, and periodically redistribute it (annually is good).
Promptly investigate any claims of harassment.
Take prompt and appropriate corrective action after your investigation is complete, if improper conduct is found to have occurred.
Establishing an effective anti-harassment policy and reporting procedure won't necessarily insulate you from liability - but it's a good first step and time well spent.