Excerpted from Arkansas Employment Law Letter, written by attorneys at the law firm Jack, Lyon & Jones, P.A.

Q: I recently hired a female employee who has been making sexual advances toward several of her male and female coworkers. She has made explicit offers of sex with multiple partners and talks about using sex toys, among other things. No one has complained about her suggestive behavior, and some people are even receptive to it, but I need to know the implications of our situation.

A: Office romances are fairly common these days because people spend so much time at the workplace. Handled well, workplace romance can lead to a meaningful relationship. Handled badly, it can lead to a lawsuit for harassment.

Many companies have tried to ban dating between employees, but most have abandoned that plan because of legal restrictions - and because they recognize that relationships between coworkers are inevitable. Many employers now try to use fraternization policies to restrict only activities that are harmful to their business.

To determine where to draw the line, you should ask yourself several questions:

• Is the behavior appreciated? If you're going to allow employees to "come on" to their coworkers, you have to make your company policy on harassment very clear. If an employee isn't receptive to an advance from another employee, it should end there. Playing around and verbal sparring can be the precursors to dating, but only if both people are comfortable with that type of behavior. If you have a harassment policy, make sure all your employees have a copy of it. If you don't, you need to create one immediately.
• Is the behavior appropriate? In most cases, mutually agreeable relationships between employees pose no danger to your company. There are circumstances under which they are inappropriate, however, and may be harmful to your company's interests. For instance, it's never a good idea for a manager to be romantically involved with a subordinate in his own organization. Company policy should clearly spell out that those types of situations are inappropriate and subject to corrective action.
• What are the potential problems? Some of the downsides to office romance are avoidable; others aren't. If two employees marry and have children, one of them may leave your company to raise them. There's nothing you can - or should - do about that except be prepared to hire a replacement. The downside with the biggest danger occurs when a relationship between employees ends. In many cases, they will behave like adults and move on with their lives. In other cases, the residual unpleasantness may require transferring one or both of them to new jobs. And one of them may file a harassment claim, even if your policy is very clear and you have enforced it consistently. In an extreme situation, the emotional stress may lead someone to lash out and commit an act of violence.
• What are the benefits? The upside to office romance is that you might have happier workers. When people are happy, they tend to be more productive and have fewer health problems. When partners work for the same employer, they have someone they can talk to about work who understands and can help them resolve any problems.
• What should you do? Develop a fraternization policy, publicize it, and then enforce it.

The specifics of your fraternization policy will depend on your company's culture and industry, local laws, and good managerial decisions about what you want to accomplish. If you encounter a problem, you may have to relocate one of the employees so they no longer work together. If you can't find another job within your company for either of them, let them decide who leaves. If they can't decide, be prepared to choose who stays, and document the business purpose behind your choice.

Once you have developed your policy, publish it to all your employees. Give a copy to new employees as part of their orientation. Make sure everyone in your organization knows your policy and the penalties for violating it.

Finally, once you publish your policy, you must enforce it. Be consistent in applying it so you're not accused of gender bias. Look at each situation on its own merits, and don't automatically assume that the more senior employee is more valuable to your company. A well written, widely publicized, strictly enforced fraternization policy won't prevent office romances from developing, but it will make life a lot easier for you - and less litigious - when romance does blossom.

Copyright © 2006 M. Lee Smith Publishers LLC. This article is an excerpt from ARKANSAS EMPLOYMENT LAW LETTER. Arkansas Employment Law Letter should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only. Anyone needing specific legal advice should consult an attorney. The State Bar of Arkansas does not certify specialists in labor law, and we do not claim certification in any listed area.