Allegations of sexual harassment and a purportedly illegal policy that discouraged employees from reporting such harassment will cost seven IHOP franchises $700,000 in a settlement with the Equal Employment Opportunity Commission (EEOC).

According to the lawsuit, the IHOP franchises in Nevada and New York implemented and enforced an unlawful sexual harassment policy that required employees who were sexually harassed by another worker to report the incident in writing within 72 hours to a national office or waive all rights to recovery.

In place since 2005, the policy prohibited submission of complaints to managers at locations where the employees worked and the harassment occurred, discouraging victims of sexual harassment from complaining and preventing local management from taking preventative or corrective measures, the EEOC said.

Further, the “onerous requirements” of the policy created an atmosphere where employees and managers “regularly and continuously engaged in sexual harassment,” the EEOC alleged in its Nevada federal court complaint. Harassment included unwanted touching, kissing and groping; propositions to engage in sexual intercourse; vulgar comments and name-calling; sending pictures of male genitalia and lewd text messages; and viewing pornography in the stores.

Those employees who reported and complained about the harassment faced retaliation in response, the agency said, with some having their hours reduced and others being terminated. The defendants repeatedly failed to take any form of corrective action, the EEOC added; in one instance, a general manager told a charging party to have intercourse with the cooks “to get better treatment.”

Pursuant to a consent decree approved by a Nevada federal court, the defendants will pay $700,000 to a class of female employees. The franchises also agreed to eliminate the 72-hour policy for reporting harassment, hire an outside monitor and provide extensive training on harassment and retaliation to all employees, including managers and supervisors.

The agreement prohibits future violations of Title VII’s prohibitions on discrimination, harassment and retaliation, and requires the defendants to establish and maintain a human resources department to carry out the terms of the decree.

To read the complaint in Equal Employment Opportunity Commission v. Lucinda Management, LLC, click here.

To read the consent decree, click here.

Why it matters: When announcing the settlement, the EEOC reminded employers that sexual harassment remains a persistent problem and that placing impediments on the ability of employees to complain—as the policy used by IHOP franchises allegedly did—only exacerbates the problem. “Employers should remember that they are responsible for creating an environment free of harassment,” director of the agency’s Las Vegas local office, Wendy Martin, said in a statement. “This includes empowering managers to address such conduct when they become aware of it.”