It is not only illegal, it was very, very stupid.
Viewing their actions in the most charitable light possible, what they did & the explanation they gave were probably based on a misunderstanding of Harassment law. It is true that an employer can be punished for failing to take reasonable care to prevent and correct harassment, including formal policies that encourage reporting. However, this does not extend to the right to punish a victim who fails to report “early enough”.
In fact, when you make a claim of harassment (on the basis of sex, race, age, etc), the law currently leans towards the idea that employees must report harassment promptly, at the first incident almost, in order to retain their claim that a Hostile Work Environment existed. (see Matvia v. Baldhead Island (4th Cir. 2001)). It varies by circuit, but many require a victim to report the first sign of harassment, before it becomes a pattern.
What this employer seem to not realize, is that the victim-employee failing to report the harassment promptly is an employer’s defense NOT a source of liability. In fact, the victim’s unreasonable failure to complain is a complete defense to liability for the employer!
Moreover, a Retaliation claim is completely independent of the merit of the underlying harassment complaint (as long as it’s not actually frivolous). Here, the employer went so far as to specify that her punishment flowed directly from her complaint.
Thus, this dingbat employer has transformed a Harassment claim which was arguably fundamentally weak (because the reporting was not prompt at an early stage of the behavior) into a Retaliation claim which appears quite strong.
DO NOT GIVE BACK THAT MEMO UNDER ANY CIRCUMSTANCES.
This is not legal advice. I am not your lawyer. I am not A lawyer. I am speaking in general, theoretical terms. Speak to a lawyer with expertise in Employment law as soon as possible to understand how the law in your locality + the particular facts affect your rights under the law