Sexual Harassment in Lending Makes Business Harder for Women Entrepreneurs

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Starting a business is hard for anyone. Entrepreneurs looking for start-up capital often face uphill battles convincing investors that their product or service is worth the risk. But sexual harassment in lending makes it even harder for women entrepreneurs to get from making a pitch to opening a fully-funded business.

In this blog post, I will discuss the gender discrimination and sexual harassment in lending that women entrepreneurs face. I will address how hedge fund managers and investment bankers use promises of funding in quid pro quo sexual misconduct. And I will review what business owners can do when they are denied lending because of their gender or unwillingness to trade sex for funding.

Women Entrepreneurs Start Businesses Everywhere

The Department of Labor estimates that approximately 36% of all businesses are owned by women, and another 2.5 million are owned equally by male and female partners. Women-owned businesses account for over 8.4 million employees and $264 billion in payroll. Women entrepreneurs are opening businesses in every industry group, from child care to logging. Among minority communities, women-owned businesses make up an even larger share of the workforce. Women own over 59% of African American businesses and 44% of Hispanic businesses.

Women Face Gender Discrimination and Sexual Harassment in Lending

But women have not seen the same advancement in lending capital. A 2016 study by Biz2Credit, an online small-business funding marketplace shows that women are approved for loans 33% less often than their male counterparts. Minority business owners fare even worse.

Often, women seeking venture capital for their startup businesses are faced with gender discrimination and sexual harassment in lending applications and pitches. The venture capital industry is almost entirely male. According to a 2016 report, only 8% of investing partners at active venture and microventure firms are women. At the top 100 firms, that number drops to 7%. Another report reveals that 89% of venture capitalists are male, and 87% are white.

That gender gap has created a culture of sexual hostility. In 2017, the New York Times reported the stories of over two dozen women who faced sexual harassment in lending within the technology start-up industry. Their stories pointed high-profile venture capitalists like Chris Sacca of Lowercase Capital and Dave McClure of 500 Startups. The women reported that after making their pitch to male lending officers, they were touched without permission, hit on, and asked for sexual favors. This behavior was particularly challenging because the women entrepreneurs were not in a position to say no.

“There is such a massive imbalance of power that women in the industry often end up in distressing situations,” said Susan Wu, an entrepreneur and investor.

Saying No to Sexual Advances Puts Up Roadblocks to Women-Owned Businesses

When the capital you need to start your business comes with that kind of strings attached, saying no to sexual advances can create hurdles to meeting your funding needs. American Banker reports:

“Without access to small loans, women and minority business owners are at a competitive disadvantage. They must rely on personal savings, loans from friends, crowdsourcing and credit cards – when those options are available. Or, they have to seek capital from riskier lenders, increasing debt burdens and diverting funds from business operations.”

Saying no to one lender’s inappropriate sexual advances can also have wide-ranging effect throughout the industry. When one hedge fund or venture capital company declines funding, for any reason, it can make it harder to convince other investors your product is worth the risk.

Options for Women Entrepreneurs Facing Sexual Harassment in Lending

Women facing sexual harassment in lending may also have trouble exercising their right to be free from gender discrimination. Title VII, for example, bases its protections against sexual harassment on the employee/employer relationship. But entrepreneurs are their own bosses. The lenders demanding quid pro quo sexual favors work for another company.

The federal Equal Credit Opportunity Act, 15 USC section 1691, says it is unlawful for a creditor to discriminate against applicants based on sex. Depending on the nature of the loan, and if the investor would qualify as a “creditor”, a discrimination attorney may be able to use that law to confront sexual harassment in lending. However, this law is usually used in a consumer context, rather than between businesses.

California, for one, has enacted a state law that explicitly prohibits sexual harassment between anyone with a business, service, or professional relationship. In 2017, this law was amended to explicitly include investors, trust officers, financial planners, loan officers, and others who may have control over whether a woman entrepreneur receives funding. Since many venture capital companies are based in California, that law may give women entrepreneurs a new way of ending sexual harassment in lending.

Finding funding for your new startup shouldn’t have to include enduring unwanted sexual advances or contact. At Eisenberg & Baum, LLP, our sexual harassment attorneys know that unreasonable demands don’t only happen within the company organizational chart. We can help you review your case, and your legal options, to find a solution to the gender discrimination you experience. If you are a woman entrepreneur facing sexual harassment in lending, contact us today to schedule a free consultation.

Sexual Harassment of Independent Contractors in the Workplace

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The definition of a worker is changing. As contract jobs become more common and the “gig economy” grows, more New Yorkers are finding themselves working, but not technically employees. Does this new status mean they lose out on the workplace protections of the state’s Human Rights Law? Or are there rules about the sexual harassment of independent contractors in the workplace?

In this blog, I will review changes to the New York State Human Rights Law, which came into effect earlier this year. I will explain how the law protects against sexual harassment of independent contractors, vendors, and consultants in the workplace, and what they can do if they face discrimination by a contract employer.

Does Who You Work For Affect Your Sexual Harassment Claim?

Historically, civil rights laws have protected the employee against gender discrimination by his or her employer. When an employee reports sexual harassment to an employer, that employer is required to investigate and respond to the report.

But what if you work for yourself? According to the Department of Labor 1 in 10 workers in the United States is an independent contractor. That’s 15.5 million people who don’t technically have an employer. As the number of independent contractors and other contract employees continues to increase, it raises a question about whether these “gig” workers are trading freedom for protection.

New York State Human Rights Law Expands to Cover Sexual Harassment of Independent Contractors in the Workplace

While federal law still words its sexual harassment protections in terms of employees, the New York State Human Rights Law has been expanded to cover independent contractors and other non-employees in the workplace. Since April 12, 2018, contractors, subcontractors, vendors, consultants, and anyone else providing services in a business are covered by the law. That means companies are required to respond to sexual harassment of independent contractors on their job sites, even if the people involved aren’t on the company organizational chart.

Non-employees come in all shapes and forms. The New York State Human Rights Law is broad enough to cover:

  • The short-term contract employee who is being hit on by her supervisor
  • The remote worker receiving sexually explicit messages from a teammate.
  • The temp worker being offered a full-time position in exchange for sexual favors
  • The maintenance worker exposed to dirty jokes while on the premises
  • The full-time employee who is sexually harassed by a janitorial contractor

What to Do When You Face Sexual Harassment on the Job Site

When you’re not a formal employee of the place where you do your work, it can be hard to know where to turn when sexual harassment becomes a problem. Your official employer and the business that operates your worksite are both required to take reasonable steps to provide a harassment-free worksite.

For sexual harassment of independent contractors, gig workers, consultants, or others outside the traditional employment model, that means can sometimes be more options to have your concerns heard and addressed. Temps can turn to their staffing company; maintenance workers to their direct employer. Anyone who faces sexual harassment in the workplace can file a complaint with the company managing that workplace.

Responding to Sexual Harassment By an Independent Contractor

The state law also protects against sexual harassment by an independent contractor or other occasional worker. Your employer can’t use the fact that the harasser works for another company as an excuse. They are required to take reasonable steps to end the harassment, even if that means negotiating with the temp company, cleaning service, or consulting firm about the actions of their workers.

Retaliation Can Mean Lost Jobs for Gig Workers

Gig work is also less stable than traditional employment. When facing sexual harassment, you may be concerned reporting it could cause you to miss out on the next job. Retaliation for lodging a sexual harassment complaint is illegal. But in the gig economy it can sometimes be harder to prove the reason you didn’t get that next job was because of your sexual harassment complaint. If you are concerned that reporting sexual harassment of independent contractors could have a negative consequence, you may also hire a private employment discrimination attorney to negotiate on your behalf or file a complaint with the Division of Human Rights.

At Eisenberg & Baum, LLP, our experienced gender discrimination and sexual harassment attorneys have seen all kinds of employment arrangements. We know how to make the New York State Human Rights Law work for independent contractors, gig workers, and traveling professionals. Contact us to schedule a consultation at our office in New York City, or over the phone.