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California Tackles Investor Relationships And Sexual Harassment

California is without a doubt the tech capital of the United States, and tech startups usually rely on investors to get off the ground. Unfortunately, there is a history of sexual harassment against women in the tech industry, sometimes involving cases in which investors were accused of harassing women in order to receive financial backing. Because California law does not specifically address the investor/entrepreneur relationship, State Senator Hannah-Beth Jackson introduced SB 224 to clarify the issue.

Business Relationships Under California Sexual Harassment Law

California Civil Code 51.9 lays the groundwork for determining which types of business relationships are covered under sexual harassment law. The law states that if there is a professional, service or business relationship between two parties, the parties have a cause of action if they feel they have been harassed. The bill then mentions several applicable relationships, such as those between the person who feels they have been harassed and physicians, real estate agents, building contractors, attorneys, and several other professionals. The listed professions are those in which one party has some type of power over the other because of the relationship.

There is a grey area in the California Civil Code regarding exactly which relationships are covered, as people such as investors are not specifically listed. The current wording of the Code does state that the affected relationships are "including, but not limited to, any of the following persons," and it is this wording that has led some to claim that the investor relationship should be included. The purpose of SB 224 is to remove any equivocation about whether or not people can sue their potential investors for sexual harassment.

What the Bill Does

SB 224 is quite simple really. In the section that lists other professionals that may be subject to a sexual harassment suit, the word "investor" has been added. Passage of the bill would make it explicit that an investor who sexually harasses someone seeking capital can be sued for sexual harassment based on that relationship. For example, if an investor were to tell someone that money is available in exchange for sexual favors, that investor could be sued for sexual harassment.

Next Steps

Senator Jackson does not plan to take further action with SB 224 until January, 2018, in order to gather more information, hear from the public and tech industry insiders, and decide if additional language is required in the bill. If the bill is passed and becomes law, it will make it easier for entrepreneurs to get their cases against investors into the courts, and send a clear message to investors that should help level the playing field.

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