BY late afternoon on December 19, Nathaniel Norgen, a senior lawyer at Merrill Lynch, the investment bank, was rather the worse for wear.

A boozy Christmas lunch, held at a City wine bar, wore on into an alcohol-fuelled afternoon, and the session had taken its toll.

According to witnesses, Norgen staggered into a table, triggering a series of events that led to a lengthy tribunal case in which he and Merrill Lynch were accused of sexual harassment and victimisation.

The table fell over, throwing a bottle of red wine over the front of Elizabeth Weston, 29, another lawyer at the bank. This apparently prompted Norgen to make observations about Weston’s chest and her sex life.

Norgen, who denied sexual harassment but admitted telling Weston she had “a great cleavage”, allegedly turned to others to ask whether he should be referring to Weston’s “waps” or “baps”. The dictionary of slang defines “baps” as breasts. Weston claims Norgen then discussed “barbecuing”, a euphemism for sex.

After months of legal wrangling, the affair was brought to a close last week when Weston was paid £1m by Merrill Lynch in an out-of-court settlement.

It was the latest in a series of cases that are rocking some of the world’s biggest companies.

Last week, a tribunal reopened the case of Andrea Madrassay, formerly of Nomura, who claims she was a victim of persistent discrimination at the Japanese bank.

On Monday, Morgan Stanley admitted it had paid $54m (£29m) to settle a case brought by the US Equal Employment Opportunities Commission on behalf of some female staff.

Meanwhile, the case of Stephanie Villalba, who is seeking a record £7.5m from Merrill Lynch, continues in London.

The cases paint a shameful picture of City culture. But it is happening elsewhere, too. Last year more than 11,000 claims of sexual harassment were logged at tribunals across the country.

Mike Huss of Peninsula, the employment-law firm, said: “Laws banning sexual discrimination in the workplace were introduced in 1975, yet I am stunned by the number of companies that still fail to address the issues properly and are then taken to tribunal.”

Experts say that with the correct policies and procedures in place, companies should find it easy to defend themselves against crippling claims.

Huss said: “Legally, if a company can prove it has the recommended systems in place and did everything to prevent harassment or sexual discrimination, it will not be held liable. Few managers know this.”

The first step is to have an equal-opportunities policy that clearly states the company’s commitment not to tolerate discrimination on the basis of sex, race, religion and age. An anti-harasssment policy should be attached to this.

Information on drawing up these documents is available from lawyers and some trade organisations. For example, the Federation of Small Businesses has a ready-made harassment policy on its website that can be downloaded for free.

Managers should make each member of staff aware of such policies when they join a company. The details should be in their contracts.

“But having a policy is not enough,” said Murray Fairclough of Abbey Legal Protection. “Managers have to make sure staff understand the policy. It should be discussed in a meeting. Then twice a year a training day should be held so that staff understand exactly what bullying and harassment is, and that it won’t be tolerated.”

Managers must also have a grievance procedure so that staff know how to make a complaint. For example, it should identify the person to talk to and set a time limit on the company’s response.

Experts say written, open and well-understood procedures for hiring, firing, promotion and pay are crucial to avoid or defend tribunal claims.

“When hiring or promoting, managers ought to have a clear job specification and a checklist of the required qualities,” said Fairclough. “Point-scoring interviews should be conducted and the best performer awarded the job. If everything is written down and clear, managers can easily defend their decisions.”

In October new laws will be introduced which will, among other things, entitle workers to know what their colleagues are being paid. It will also become law for every contract to include equal-opportunities rules.

Such rules may seem tedious, but as recent cases are proving, failing to get to grips with them can be costly.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts