Cameo Industries desired a workplace free from all forms of sexual harassment. Accordingly, Cameo developed guidelines for its workers that specifically forbade sexual harassment. The guidelines gave examples of conduct that would not be tolerated, provided penalties, designated a company official as the proper person to whom complaints should be brought, investigated complaints thoroughly, and maintained an educational policy designed to remind employees of the policy.

Maureen made a complaint of sexual harassment charging her supervisor had demanded sexual favors. An investigation was made and the charge was substantiated. The supervisor was warned not to continue this conduct, but it happened again. The supervisor was again issued a warning. Finally, Maureen brought a court action against the supervisor and Cameo. Cameo defended on the ground that it had done all in its power to rectify the situation. Decide.