Sexual harassment is illegal and is also bad for business.
You should develop a written policy concerning sexual harassment, which clearly states that it is not only against the law, but against company policy, and will not be tolerated. You should create an effective complaint or grievance procedure for employees who have been victims of sexual harassment. The procedure should make it easy and comfortable for an employee to file a complaint, especially if the harasser is a direct supervisor. The procedure should also be such that a solution to the problem can be arrived at quickly and effectively. You need to take complaints seriously, and respond to them as quickly as possible.