"Sexual harassment or hostile and abusive work environment, press one.... Obscene gestures, press three.... The person keeps bothering me, press five."

It had to happen someday. A West Coast human resources company has devised a service that helps small businesses handle one of the most controversial workplace issues of the day -- sexual harassment -- through an interactive phone-message system. For $695 a year, T.R. Anton Inc.'s Harassment Hotline lets small businesses that can't afford a human resources department give aggrieved employees someone to talk to -- first a recording, then a person.

T.R. Anton's service certainly taps the zeitgeist. Few things frighten entrepreneurs more than the specter of protracted litigation. The mere accusation of sexual harassment can do major damage to a company's finances and image if not properly addressed -- to say nothing of an actual multimillion-dollar judgment. But in June, two decisions by the U.S. Supreme Court gave companies some protection if they have a specific sexual harassment policy in place.

That's where the Harassment Hotline comes in. Its purpose is to field and document the first calls in a neutral, professional fashion, which helps establish in court that the company is acting responsibly.

The price is certainly right. But given the high emotions surrounding sexual harassment, what are the chances that a recorded message at the end of an impersonal phone-mail trail will soothe a humiliated employee or prove an entrepreneur's good intentions?

Not very good, says Jane Applegate, a small-business consultant and syndicated columnist. She calls it a "cold" tool blatantly designed to protect management. "It falls under the category CYA -- cover your ass," she says. Adds Janice Goodman, a Manhattan lawyer specializing in sexual harassment: "It's traumatic to be harassed and then finally raise a complaint." People are uncomfortable with the idea that such an intimate problem might be recorded by a faceless outsider.

What's more, some businesses may think they've dispatched a complex legal problem with a simplistic solution and will let their guard down about sexual harassment -- only to find themselves on the hook anyway.

RETALIATION FEARS. George Howes, president of T.R. Anton in Laguna Niguel, Calif., says his critics are missing the point. He contends his two-year-old service is the perfect vehicle for employees who have been sexually harassed, precisely because they don't really want to talk to anyone -- let alone someone within the company -- for fear of retaliation.

The hotline works like this. When employees have a problem, they call a toll-free number that prompts them through a menu of options, much like they make a train reservation or check a bank balance.

The computer records the choices. At the end of the call, the employee is asked to identify him or herself and gets a confirmation number and a promise of a follow-up call within eight hours from an Anton human resources manager. The employee's company also receives a call within 12 hours. So far, 100 companies with a total of 20,000 employees have signed up for the service, Howes says. In two years, the service has pursued full investigations into 22 complaints of harassment and one of discrimination.

Despite the impersonal touch, T.R. Anton apparently does take calls seriously. Business Week Online got calls back within several hours to see why this reporter -- who was checking out the system -- hung up several times.

One Harassment Hotline customer says the service is doing everything it's supposed to. John Hungerford, vice-president for operations at Cobblestone Golf Group, which owns and operates 43 U.S. golf clubs, is Harassment Hotline's largest customer. Although it has 3,500 employees, the San Diego company has no internal human resources department. And Cobblestone figured employees would prefer to report such a discomfiting thing to a hotline than to their managers. In the year since Cobblestone started using the service, Hungerford says, six sexual harassment calls have been logged, and the company has terminated some offending employees. None of the cases went to court.

SKYROCKETING LAWSUITS. That's no mean feat, given the issue's high political profile -- starting with Anita Hill's accusations against Supreme Court Justice Clarence Thomas in 1993. The number of sexual harassment suits skyrocketed 130% from 1991 to 1997, with nearly 16,000 charges filed last year with the U.S. Equal Employment Opportunity Commission.

Given the litigious climate, some small businesses have been buying insurance against harassment suits. Major insurers like Hartford Financial Service Group and smaller companies such as Emek Group, an insurance company in New York, see a ready market for employee-practices liability insurance.

Sharon Emek, president of Emek, says her sales of such policies have grown 30% in the last year alone. A small business can expect to pay about $3,000 a year for $1 million of coverage. Hartford offers some less-expensive alternatives that add the same amount of coverage to an existing business owner's policy for as little as $750. That's not cheap, to be sure. But with a proactive policy, perhaps your employees will be less likely to dial 1-800-LAWSUIT.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com

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