When the harasser is the owner, the power dynamic that usually makes sexual harassment hard to confront becomes even more pronounced. Employees worry about retaliation, job loss, and reputational harm in tight-knit industries. Managers hesitate to escalate concerns because there is no one “above” the owner to investigate. Policy manuals often assume a chain of command that does not exist in practice. Yet California law anticipates this scenario and offers strong protections that go beyond the federal floor.
This article explains how California defines sexual harassment, how liability works when the harasser is the owner, what practical steps victims and witnesses can take, and how claims move through the civil rights and court systems. It folds in experience from real workplaces where the owner wields both cultural and economic control, and it highlights the trade-offs that come with different reporting choices.
The legal frame: the FEHA standard, not just federal law
California prohibits sexual harassment under the Fair Employment and Housing Act, often called FEHA. That law is broader than federal law in several ways. It applies to employers with one or more employees for harassment claims, it recognizes liability for harassment by supervisors and owners in a more direct way, and it covers independent contractors, applicants, and even unpaid interns and volunteers in certain contexts. The California Civil Rights Department, or CRD, enforces FEHA and provides the administrative path for a sexual harassment claim in California.
California’s definition of sexual harassment is not confined to overt physical acts. Harassment can be verbal, visual, or physical. Unwanted advances, explicit comments, repeated sexual jokes, sharing sexual images, leering, and pressure for dates can all qualify. Two common categories appear in the case law and guidance:
- Hostile work environment. This occurs when unwelcome conduct based on sex is severe or pervasive enough to create a work environment that a reasonable person would find hostile, intimidating, or offensive, and that the victim actually experiences as hostile. A single severe incident can sometimes be enough, particularly when there is physical assault or an explicit threat. Quid pro quo harassment. This occurs when submission to or rejection of sexual conduct is used as the basis for employment decisions, such as promotions, pay, scheduling, or continued employment. If the owner suggests “Spend the weekend with me and I’ll put you on the big account,” that is classic quid pro quo harassment.
California workplace sexual harassment laws also prohibit harassment based on gender, gender identity, gender expression, pregnancy, and sexual orientation. The idea is straightforward: the workplace belongs to everyone, and the law obligates employers to maintain a place free from sexual harassment and retaliation.
What changes when the harasser is the owner
In a small business, the owner might sign paychecks, decide promotions, and set the culture. In a larger company, the owner may be the ultimate decision-maker or a high-level executive with comparable authority. Under FEHA, the employer is strictly liable for harassment by a supervisor. If the owner or any individual with the authority to hire, fire, or direct work harasses an employee, the employer is on the hook. This is different from coworker harassment, where liability depends on whether the employer knew or should have known about the conduct and failed to take corrective action.
Strict liability matters for proof and for leverage. It means victims do not need to show that HR ignored complaints or that the company failed to act. They must still prove the harassment occurred and that it was unwelcome, but they do not have to prove employer negligence. When the owner is the harasser, the law recognizes the lack of internal recourse and shifts focus to the conduct itself and its impact.
There is also an additional layer when the harassment culminates in a tangible employment action, such as termination, demotion, or pay cut. In quid pro quo situations that involve an adverse employment decision, liability tightens further. If the owner conditioned benefits on sexual conduct or punished someone for refusing, the employer’s liability is virtually automatic once the facts are established.
Why reporting is difficult and what the law expects
I have worked with employees who did everything “right,” documenting events, reporting promptly, and asking HR for help, only to find HR worked for the owner and would not act. Others used a hotline only to learn it rolled to an assistant in the owner’s suite. California law does not penalize a victim for not using a broken process. That said, reporting remains valuable for a few reasons:
- It preserves contemporaneous evidence and demonstrates that the conduct was unwelcome. It gives the employer a chance to intervene, which can stop ongoing harm to you and others. It bolsters credibility before the CRD, the EEOC, or a court.
If your policy says to report to your immediate supervisor, that instruction makes little sense if the supervisor is the problem, and it makes even less sense when the owner is the problem. California employer responsibility for sexual harassment requires a policy that provides alternate reporting paths. A compliant policy names more than one person to receive complaints and allows for bypassing the chain of command. If the policy fails to provide that, or if those alternatives are illusory, you can still report to HR, any manager, the CRD, or the EEOC directly. You can also consult a California sexual harassment attorney before you report internally, especially if you fear retaliation.
Internal policies, training, and the real world
California mandates sexual harassment training for employers of a certain size: supervisors must receive at least two hours of training, and nonsupervisory employees at least one hour, typically every two years. The statutes you will hear about include AB 1825 and SB 1343, which expanded training coverage to smaller employers and nonsupervisory staff. The training should cover what is considered sexual harassment in California, how to report it, and anti-retaliation protections. It should also cover bystander intervention and the responsibilities of managers to escalate concerns.
Training is necessary but not sufficient. I have seen companies pass annual training with perfect attendance while the owner openly makes sexual remarks at team dinners. California workplace harassment laws require not just training but effective prevention. That includes a clear complaint process, prompt impartial investigations, and corrective action. If the owner undermines the policy, the company is still exposed. And while training compliance helps, it does not immunize the employer against a sexual harassment lawsuit in California when the facts show ongoing harassment.
Evidence that moves the needle
In owner-harasser cases, evidence often falls into a few categories. Contemporaneous texts or emails, calendar invites, direct messages, or social media communications can show unwanted advances at work. Witness testimony can be powerful, especially from colleagues who observed verbal sexual harassment or disrespectful conduct. Timing evidence matters, too: if an employee refuses advances and is abruptly reassigned to a poor shift or loses key accounts, that pattern supports quid pro quo or retaliation claims.
Keep a private, chronological record that includes date, time, location, what was said or done, and who was present. Save physical evidence, such as notes or gifts accompanied by suggestive messages. If there was a physical incident, medical records can corroborate impact. If you reported to HR or through a hotline, request confirmation in writing. In my experience, a log made in the moment carries more weight than a reconstructed summary months later. This is the type of sexual harassment evidence California investigators and courts find credible.
Do not secretly record conversations unless you have legal advice. California is a two-party consent state for audio recording. An illegal recording can create problems, though written communications sent to you are fair game to preserve.
Retaliation and constructive discharge
California sexual harassment retaliation law is robust. Retaliation includes termination, demotion, reduced hours, schedule changes designed to punish, exclusion from meetings, and sudden poor performance reviews that do not match historical feedback. Even subtle acts, such as removal from client communications or relocation to an isolated workspace, can qualify if they would dissuade a reasonable person from reporting.
When retaliation makes the job unbearable, employees may resign. The legal term is constructive discharge. If the working conditions were so intolerable that a reasonable person would feel forced to quit, and the employer created or allowed those conditions, the resignation is treated as a termination. Constructive discharge pairs with hostile work environment or quid pro quo allegations, and it can affect damages for front pay and back pay.
Independent contractors, interns, and third parties
California extends harassment protections to more than traditional W‑2 employees. Independent contractors can bring claims for sexual harassment in many circumstances. So can applicants and unpaid interns. If the owner harasses a contractor, the company can still be liable, and the contractor may have remedies under FEHA. Third party sexual harassment also comes up frequently in California. If the owner is not the harasser but a powerful client is, the employer must take reasonable steps to protect employees. The duty to prevent harassment is not limited to persons on payroll.
The complaint process: CRD, EEOC, or both
To preserve a sexual harassment claim in California under FEHA, you generally must file an administrative complaint with the California Civil Rights Department. That complaint can be cross-filed with the Equal Employment Opportunity Commission, which enforces federal Title VII. Filing with the CRD is not an optional step for FEHA claims; it is how you obtain a right-to-sue notice.
Filing deadline rules shifted in recent years. California extended the filing deadline to three years from the last act of harassment for administrative complaints under FEHA, although some nuances apply for delayed discovery or minors. Federal Title VII deadlines are shorter, often 300 days in California due to work-sharing with the EEOC. It is wise to confirm the applicable filing deadline early. Missing the administrative deadline can be fatal to a claim.
The sexual harassment complaint process in California typically looks like this:
- You submit an intake form to the CRD online or by mail describing the harassment, dates, and parties involved. You can request immediate right-to-sue or ask the agency to investigate. If you request investigation, the CRD evaluates jurisdiction and may facilitate voluntary mediation. Many cases resolve in CRD mediation, which is confidential and can be quicker than litigation. If the case does not resolve, the CRD may issue findings or a right-to-sue notice. With the notice, you can file a lawsuit in state court.
Requesting an immediate right-to-sue allows you to proceed directly to court, but it skips the agency’s free mediation. The decision depends on urgency, the strength of the facts, and whether early employmentlawaid.org discovery through the agency could help. Counsel can guide the strategy, especially when the owner remains in control of company records.
Investigations when the boss is the accused
Employers must conduct a prompt, thorough, and impartial sexual harassment investigation. When the accused is the owner, an internal HR review rarely passes the impartiality test. California guidance encourages use of an external, qualified investigator. The investigator should be trained, experienced in workplace investigations, and free from conflicts. The company should preserve evidence immediately, suspend any reporting relationship between the owner and the complainant, and implement interim measures without penalizing the complainant.
As a practical matter, I look for whether the company offered a paid leave for the employee during the investigation, whether it restricted the owner’s access to the employee, and whether it warned against retaliation. If the company does none of these, it suggests the process is not designed to protect the complainant. It also creates additional claims.
Damages and remedies
Sexual harassment damages in California include several categories. Victims can recover economic damages such as back pay and front pay for lost wages and benefits. They can recover noneconomic damages for emotional distress. Punitive damages may be available when the harasser acted with malice, oppression, or fraud, and when an officer, director, or managing agent of the employer engaged in or ratified the conduct. When the owner is the harasser, punitive exposure often comes squarely into play because the owner is the epitome of a managing agent.
Courts can also order injunctive relief, such as policy changes, training, or restrictions on the owner’s interactions with employees. Attorney’s fees and costs are available to prevailing plaintiffs under FEHA, which substantially affects settlement dynamics. California sexual harassment settlements vary widely. I have seen settlements for modest five figures in low-damage cases up to seven figures where there was severe harassment, evidence of retaliation, and career harm. Settlement value depends on credibility, documentation, corroboration, and the employer’s financial condition, among other factors.
Arbitration and confidentiality
Many California employees sign arbitration agreements at hire. Sexual harassment arbitration in California remains common despite legislative efforts to restrict mandatory arbitration. Some agreements are unenforceable, particularly if they are procedurally or substantively unconscionable. Others are enforceable, but even in arbitration, FEHA rights and remedies largely carry over. The forum changes, not the underlying law.
Confidentiality restrictions have shifted. California law limits nondisclosure provisions that prevent disclosure of facts underlying claims of sexual assault, sexual harassment, or retaliation. Settlement agreements can protect the amount paid but generally cannot gag an employee from sharing factual information about harassment. That change altered negotiation dynamics, especially where the owner desires secrecy.
Wrongful termination and related claims
Sexual harassment claims often travel with retaliation and wrongful termination. If you report harassment and are fired, you can bring a wrongful termination claim in violation of public policy, anchored in FEHA and other statutes. Depending on the facts, Labor Code claims may also apply, such as whistleblower protections for reporting unlawful conduct or refusing to participate in it. These claims can expand damages and add fee-shifting provisions that raise risk for the employer.
Constructive dismissal claims arise when the environment becomes intolerable and the employee resigns. The standard is not subjective misery; it is whether a reasonable person in the same position would have felt forced to quit. Documented harassment by the owner, coupled with ignored complaints and retaliation, often satisfies that standard.
Practical steps if the owner is harassing you
When you cannot simply report up the chain because the chain ends with the harasser, you need a plan that protects your livelihood and your legal options. The following short checklist reflects approaches that have worked for employees in California.
- Preserve evidence immediately and privately: save texts, emails, calendars, and your notes. Back them up off the work system. Use an alternate reporting path if safe: HR, another executive, a board member, or the third-party hotline. Request written acknowledgment. Limit one-on-one exposure: bring a colleague to meetings or request communications in writing. Propose neutral locations. Consult a sexual harassment lawyer in California early: a brief consultation can clarify strategy, deadlines, and whether to file with the CRD now or later. Watch for retaliation: track schedule changes, assignments, write-ups, and pay impacts from the date of reporting.
Special issues for managers and bystanders
Managers in California are mandatory conduits. If you learn about sexual harassment, you must elevate the report, even if the complainant is hesitant. Failure to act can create personal and employer risk. If the owner is the alleged harasser, managers should push for an external investigator and document the request. If retaliation follows against the manager for reporting, the manager may have a separate claim.
Bystanders often feel powerless when the owner misbehaves at work events or offsite dinners. Yet neutral witnesses tip cases. A simple contemporaneous message to yourself describing what you saw, along with willingness to confirm it later, can change outcomes. Employers should include bystander guidance in their California sexual harassment training requirements, teaching staff how to interrupt, document, and report safely.
When the culture is the problem
Sometimes the owner’s conduct is not an aberration but the culture. Jokes at meetings, gossip that punishes those who speak up, and discipline selectively applied to complainers signal a systemic issue. FEHA sexual harassment cases thrive on patterns. Proving pattern and practice does not require a class action. Declarations from multiple employees and prior complaints, even if unresolved, can show that the company knew or should have known that the owner engaged in harassment. In these cases, injunctive relief becomes almost as important as money. Removing the owner from operational control, establishing an independent hotline, and requiring neutral oversight can be part of settlement terms.
Timelines and strategy
The California sexual harassment case timeline varies, but a rough path looks like this. Initial consultation and evidence gathering take a few weeks. Filing with the CRD and participating in mediation can take a few months. If mediation fails and you proceed to court, discovery can run 6 to 12 months or longer. Trial calendars stretch, especially in larger counties, so two years from filing to trial is common. Arbitration can be faster but still runs many months. Along the way, you will make decisions about confidentiality, references for future employment, and whether to request a neutral designation for separation.
There are tactical decisions at each turn. Sometimes it is smart to send a pre-complaint demand with a proposal for independent investigation and temporary separation from the owner. Other times, particularly where the owner has retaliated already, it is better to file with the CRD immediately to stop the clock and seek mediation. If the company moves to compel arbitration, you will weigh the advantages of a private forum against the leverage of a public court record. None of these choices is one-size-fits-all.
Policy requirements employers cannot ignore
California sexual harassment policy requirements include a written policy that prohibits harassment, provides a clear complaint process with multiple avenues, assures a fair and timely investigation, ensures confidentiality to the extent possible, and explains anti-retaliation protections. Employers must distribute the policy, translate it as needed, post the required workplace notices, and provide training. For multi-location employers, a single policy is not enough; the policy must actually function at each site. When the owner is the alleged harasser, the policy should name an external reporting option or a board-level contact who has real authority to act.
In my experience, investors and boards that fail to set up an independent channel for complaints about owners are not just courting legal risk, they are undermining the business. Talented employees will not stay where safety depends on the whims of one person.
How settlements and remedies play out when the owner is involved
Negotiating with a company where the owner is the accused can be complicated. The owner’s personal stake can cut both ways. Some owners dig in, denying everything and fighting on principle. Others want quiet resolution to protect relationships and brand value. Settlement terms often include non-disparagement provisions, training, policy overhaul, and sometimes changes to the owner’s role, such as moving to a board-only position with no day-to-day supervision. Money matters, but so does preventing recurrence.
California’s limits on confidentiality in harassment settlements mean the factual outlines of what happened cannot be gagged. Parties can still agree not to disclose the settlement amount. Savvy counsel draft terms that allow the complainant to speak to close family, tax advisors, and therapists, and to testify if legally required.
Final thoughts for employees and employers
For employees: you are not powerless just because the harasser is the owner. California law anticipates this imbalance and imposes strict liability for supervisor harassment, including by owners. There are practical ways to preserve evidence, report safely, and pursue remedies without sacrificing your dignity or career. Timelines are generous under California law compared to federal law, but they are not limitless, so do not delay in seeking advice.
For employers and boards: do not assume loyalty to the owner outranks legal obligations. Build an external reporting channel, contract with reputable investigators, enforce anti-retaliation rules, and separate the accused from the complainant during investigations. Training is the floor, not the ceiling. The cost of ignoring credible complaints when the owner is involved is measured not just in damages but in lost talent, churn, and brand erosion.
California workplace sexual harassment laws are designed to address exactly the situation that feels most daunting, where the person at the top abuses their power. The law provides structure, remedies, and a path forward. The sooner organizations and individuals use that structure, the sooner the workplace returns to what it should be: a place to work, not to endure.