In the latest HR headline from the start-up world, the offending executive doesn’t fit the typical mold, but the lesson remains the same: don’t ignore human resources.

Miki Agrawal, the self-proclaimed “SHE-eo” of THINX, and her “boundary pushing” workplace demeanor are the focus of a New York City Commission on Human Rights complaint by the former head of public relations, Chelsea Leibow. Leibow alleges that Agrawal created a hostile work environment through her constant discussion of sex, nudity around employees, and inappropriate touching of employees’ breasts.

THINX, the “period underwear” company that seeks to disrupt the menstrual products world, intentionally pushes boundaries with its marketing strategies. In her role, Leibow was responsible for PR emails, which were the subject of media attention highlighting the emails’ casual, “millennial-speak.” According to Leibow in an interview with New York Magazine, the company also pushed internal boundaries of professionalism.  Leibow alleges that, just a few months after she joined THINX Agrawal, “helped herself” to Leibow’s breasts and engaged in a variety of other sexualized conduct.  Leibow asserts that Agrawal drove a casual culture, and that many employees engaged in more casual (and often sexually-inappropriate) conversations out of fear of losing their jobs.

Leibow alleges that she made multiple internal complaints, including to the CFO and CCO, about Agrawal’s behavior, but those complaints were ignored. Rather than establish a formal HR function, Agrawal introduced “Culture Queens” to manage internal disputes. Neither of these individuals had HR experience, and the reporting line brought all complaints back to Agrawal – even those complaints about her. In fact, Leibow alleged that it was ingrained into the culture that the employees and the executive team “operated on different planes.”

In response to Leibow’s complaint and subsequent publicity, Agrawal published a blog acknowledging that THINX failed to appropriately establish a human resources function early enough in the formation of the company. Like many start-ups, when THINX had only 15 employees, Agrawal did not make hiring an HR professional a priority.  She acknowledges that the failure to address human resources was a “problem area,” but “to sit down and get an HR person and think about [health insurance, vacation days, benefits, and maternity leave] were left to the bottom of the pile of things to get done.” THINX has commissioned an employment law firm to investigate these claims, along with several other allegations being anonymously reported to various news outlets.

Following the complaint, Agrawal has stepped down as CEO, and THINX is hiring a new CEO and a HR manager. Our attorneys have seen a continuing pattern of successful start-up companies ignoring human resources functions in favor other responsibilities to launch the business.  But as this example teaches, start-ups and other small businesses should not leave HR-planning to the end. Although managing the HR function early on seems less important than getting the business off the ground, failing to establish basic workplace rules, including a harassment complaint procedure, can lead to major problems.

By: Christopher M. Farella, Jennifer L. Nutter, and Margaret C. Thering

Whitney Wolfe, former marketing vice president and co-founder of the company responsible for the popular mobile dating app, Tinder®, recently filed suit in California state court alleging sexual harassment and discrimination surrounding her experience and eventual departure from the company.  Tinder Inc.’s parent companies, IAC and Match.com, are also named as defendants.  While the complaint is only one side of the story, the exhibits attached to the complaint, which contain text messages between Wolfe, Chief Marketing Officer Justin Mateen (Wolfe’s supervisor and alleged harasser), and Chief Executive Officer Sean Rad suggest where there is smoke, there may actually be fire.  While Tinder Inc. is not the first burgeoning tech company to be involved in a salacious lawsuit, it does provide a cautionary tale on important legal issues for start-ups.

Wolfe alleges that she began experiencing discriminatory behavior as Tinder® became more popular and it only escalated after a failed romantic relationship with Mateen.  For example, despite being considered a co-founder of the company, she was left out of business articles appearing in more traditional business outlets because she was a “girl” and her male counterparts did not want people to think the company was “an accident.”  After Wolfe officially ended her relationship with Mateen, Mateen allegedly stripped Wolfe of her co-founder title, reportedly telling her that having a “24‐year-old girl” as a co-founder made the company “seem like a joke.”

As support for her claims of a harassing and hostile environment, Wolfe also alleges Mateen called her a “whore” in front of CEO Rad. Many of Mateen’s other expletive-filled text rants contain inappropriate comments.  Further, Mateen also appear to threaten Wolfe’s job in a text, writing, “[I]f I can not get along with you and it starts to effect [sic] my work too much not bc of me but the effect will be that ur gone.”  Wolfe claims to have asked Mateen to stop this behavior, claiming, “Please don’t do this during work hours” and she said she would ask the CEO to intervene to stop the harassment.

When she tried to complain to Rad, she alleges, the CEO stated that she was being “dramatic” and “annoying.”  Eventually, Wolfe claims, she was forced to leave, and although she wished to do so with just her vested equity and a severance package, her offer was rejected, leading to the filing of this suit.

Once the lawsuit went public, Tinder Inc. took action.  Mateen was suspended pending an ongoing internal investigation and there was a condemnation of the language in the publicized texts.  Nevertheless, the company stated that the allegations were unfounded.  (The company has not yet filed an Answer to the Complaint.)

The allegations present several legal touchpoints that all companies, but especially tech start-ups, should follow:

  • Have Clear and Effective Policies in Place.  There are no factual allegations in Wolfe’s lawsuit suggesting that Tinder Inc. had policies in place to prevent this type of discrimination and harassment in the workplace.  While Tinder Inc. may have had such policies, it is also important that such policies be well-publicized.  All employers should have and publicize such policies as a way to set the proper tone in the office and to serve as a first line of defense to situations such as this.  California, where Plaintiff was employed, requires employers to prevent sexual harassment. California employers are required by law to display a government posting entitled “California Law Prohibits Workplace Discrimination and Harassment” and to give all employees information sheets on sexual harassment.  One bedrock policy is an anti-harassment/discrimination policy with clear pathways for employees to come forward with complaints. Employees should be given multiple choices of persons to whom to complain so that they are not forced to complain about sexual harassment to the harasser.
  • Train Employees About Your Policies That Prohibit Sexual Harassment.  Employees should be trained about the employer’s policies prohibiting sexual harassment, and employees should be trained about how they can report harassment and what to do if the person to whom they report harassment ignores their complaints. This training should occur on a regular basis, not just when one begins employment. California law requires all employers with 50 or more employees to provide such training to supervisors every two years.
  • Romantic Relationships Should Be Managed.  Wolfe contends that when the relationship began to turn downward, Mateen stepped up his harassing behavior.  The text messages attached to the complaint arguably show that Mateen was using his position to subject Wolfe to continued harassment.  Indeed, in the text mentioned above, Mateen could be said to threaten Wolfe’s employment.  Given his position in the company, this threat could be seen as carrying real weight.  Besides insulting Wolfe, Mateen seems to have insulted others with whom she associated.  After one particularly intense exchange, Wolfe writes, “I need to be more clear.  We are not together.  You have no right to my personal life.  I answered your question, yet you continue to ask the same thing 100 times over.  Then you threaten me.   Unacceptable.”   Relationships at work are sometimes unavoidable, but ones between supervisors and subordinates are fraught with potential difficulties thus demanding immediate attention.  Companies may want to consider mandating that romantic relationships have to be disclosed to management to assist in preventing the all-too-familiar scene Wolfe describes in her complaint. Some companies implement policies that prohibit or discourage workplace romances, but the problem with such policies is that if an employer would not enforce the policy against its two best employees who entered into an office romance (which few employers would), then it is possible that the policy could lead to discrimination complaints. Upon learning of an intra-company romantic relationship, companies need to take action to avoid what has played out here.  Among the steps to take are to appoint a different supervisor to the subordinate.  This way, the romantically involved supervisor does not have the power to affect the subordinate’s working conditions negatively should the relationship sour.
  •  Take Employee Complaints Seriously.  Wolfe alleges that when she complained to Sean Rad, Tinder Inc.’s CEO, and then post-separation, to IAC’s CEO, neither of them took her complaints seriously.  In fact, Rad allegedly responded by calling her “dramatic” and “annoying.”  When an employee is reaching out to others in management to complain about the behavior of another executive, steps should be taken immediately to investigate the complaints. Blaming or belittling the person who makes the complaint only serves to increase feelings of alienation, persecution, and retaliation; and it also almost guarantees a lawsuit.  Investigations can go far in both restoring confidence in the affected employee and addressing a situation before it gets well out of hand. Legal defenses to lawsuits of this nature, in some jurisdictions, can be asserted where prompt steps were taken to remediate the harm allegedly being caused.  If nothing is done, this defense is unavailable. In contrast to federal law, California law requires employers to take reasonable steps to prevent harassment, and it requires employers to investigate complaints of harassment. Additionally, unlike federal law, California law does not provide an affirmative defense for employers who take reasonable steps to prevent harassment and were unaware that the employee was being harassed. California law does allow employers who show this, however, to reduce their damages.
  •  The “Permanent Record”.  A long time ago, school children were threatened to behave or else a report would go into their “permanent record” which would seemingly follow you the rest of your life.  That threat was probably hollow then, but has never been more real than it is today.  Texting and email have become the preferred methods of communication, especially in the business setting.  While texts and emails may be helpful as reminders to negotiations or agreements, companies need to be vigilant with employees about the content of these communications.  As is seen from the texts attached to Wolfe’s complaint, a “permanent record” of a conversation is created each time a text or email is sent.  These “permanent records” will become the inevitable focal point for discovery and trial.  Effective policies and training need to be implemented to minimize the risks associated with the unfiltered use of today’s communication tools.
  • Don’t Let Ego Control.   Wolfe alleges that at some point, she felt beaten down and offered to resign.  She tried to work out a resolution where she would retain her equity and also receive severance.  In a text, Rad agreed to the equity, but called the request for severance a “ridiculous ask” since she was quitting.  From a business perspective, what is more ridiculous – paying a departing co-founder a sum of money that can be made contingent upon waiving any legal claims against the company and keeping the matter confidential, or allowing things to fester, become a public lawsuit, and expose the company to embarrassment and loss of market confidence?  In a world where allegations, whether true, false or somewhere in between, can live permanently in the searchable public archives, public airings (and the subsequent debates and dialogues that proliferate online) of potentially embarrassing personal exchanges can spook investors and damage an emerging (or even established) brand.  Better to swallow pride and get past an unfortunate situation in private.

Tinder Inc. will have its chance to rebut these allegations and explain certain decisions it made with respect to Wolfe.  Nevertheless, the facts as alleged should send a message to companies that this situation could occur within their walls and steps should be taken today to minimize the risks.