EMPLOYER LIABILITY FOR SUPERVISORY SEXUAL (AND RACIAL) HARASSMENT AFTER FARAGHER AND ELLERTH
By
Jeff Scott Olson
INTRODUCTION
In Faragher v. City of Boca Raton, ___ S.Ct. ___ (1998),
and Burlington Industries, Inc. v. Ellerth, ___ S.C. ___
(1998), the United States Supreme Court undertook to resolve confusion
among the circuits concerning when employers will be vicariously
liable for sexual harassment perpetrated by superviso-ry personnel.
Though the formal holding of the Court creates little advantage
for victims who are harassed by supervisory personnel compared
to those who are harassed by co-workers of equal rank, certain
nuances of the Court's opinion open new possibilities for creative
advocacy.
I. THE COURT USED PUBLIC POLICY TO CRAFT A CAREFULLY WORDED HOLDING
AIMING TO RESOLVE THE TENSION BETWEEN THE RESTATEMENT OF AGENCY'S
BROAD AIDED-BY-AGENCY VICARIOUS LIABILITY STANDARD AND MERITOR'S
REQUIREMENT THAT THERE BE SOME LIMIT ON EMPLOYER LIABILITY FOR
SUPERVISORY HARASSMENT.
In Faragher,
a female lifeguard had been subjected to uninvited and offensive
touching, lewd remarks, and offensive talk about women by two
supervisors. A district court had found that Faragher had been
subjected to sexual harassment which was sufficiently serious
to alter the conditions of her employment, and awarded her nominal
damages of $1.00. The en banc Eleventh Circuit reversed the judgment
in Faragher's favor, holding that Faragher's supervisors had been
acting outside the scope of their employment when they harassed
Faragher because their wrongful actions had not been actuated
by a purpose to serve their employer's ends, the traditional test
of whether an agent's act lies within the scope of his or her
employment. The Eleventh Circuit also rejected Faragher's argument
that the city was liable because her supervisors had been aided
in accomplishing their sexual harassment by their agency relationship
with her employer, the City of Boca Raton. The court reasoned
that if an employer were liable because an agency relationship
led to close proximity and regular contact with the victim, employers
would be liable for all sexual harassment perpetrated by all of
their employees, and neither traditional agency principles nor
the Supreme Court's decision in Meritor Savings Bank v. Vinson,
477 U.S. 57 (1986), indicate that such a broad construction of
agency law should be applied in the context of employer liability
under Title VII.
In determining Faragher's case, Justice Souter's analysis began
with the observation that the seminal case of sexual harassment
decided by the Supreme Court, Meritor Savings Bank v. Vinson,
id., had held that employers are not automatically liable for
sexual harassment by their supervisors; i. e., there must be some
limits upon employer liability for supervisory sexual harassment
when it does not involve a tangible employment decision adverse
to the victim. Of course, Meritor also directed courts
to look to traditional agency principles for determining when
employers will be liable for supervisory sexual harassment. Justice
Souter engaged in some competent historical analysis designed
to show that the law governing vicarious liability for the acts
of an agent, which depends primarily upon whether the agent can
be said to have been acting within the scope of his or her employment
at the time of the tortious act in question, has been quite malleable
both over time, and from one area of the law to another, because
of the inadequacy of any single definition of the term "scope
of employment." Justice Souter's conclusion from this analysis
is that courts have molded their treatment of the term "scope
of employment" to engineer employer liability for torts which
are foreseeable consequence of the employer's business, whether
or not the perpetrator can be said to have been activated by a
purpose to serve his or her employer. Since, as Judge Posner's
opinion noted in the Seventh Circuit's en banc treatment of Ellerth
at 123 F.3d at 511, "everyone knows by now that sexual harassment
is a common problem in the American workplace," Justice Souter
said that given the way courts have traditionally handled the
scope of employment analysis, the very commonality of sexual harassment
"might justify the assignment of the burden of the untoward
behavior to the employer as one of the costs of doing business.
. . ." ___ S.Ct. ___.
Justice Souter rejected this conclusion both because of Meritor's
holding that there must be some limits on employer liability for
supervisory sexual harassment, undisturbed by Congress in spite
of substantial intervening amendments to Title VII, and because
of the uniformity of lower court opinion that employers are liable
for co-worker harassment only under negligence theory, never under
a theory of vicarious liability.
Of course, the Restatement of Agency also provides for vicarious
liability where an agent acts outside the scope of his employment,
under certain circumstances (enumerated in § 219(2)(d) of
the Restatement). Most relevant of these exceptions is where
an agent is aided in accomplishing his wrongdoing by the existence
of the agency relationship. Justice Souter recognizes that there
are good reasons for holding that supervisors are always aided
by their status when they undertake to sexually harass a subordi-nate.
This analysis would lead to employer liability for all acts of
supervisory sexual harassment, in Justice Souter's view, were
it not for Meritor's caution that employers are not automatically
liable for all harassment by supervisors.
Thus, Justice Souter reasons that the Court should recognize
a general rule of employer liability for supervisory sexual harassment,
but must erect certain limitations to that rule because of the
limiting language of Meritor. He finds the limitations which
he chooses in public policy, specifically, Title VII's policy
that employers should take steps, including the promulgation of
complaint procedures, to attempt to prevent sexual harassment
from occurring or continuing, and the policy of our entire tort
system that if victims can avoid harm, the law charges them with
an obligation to do so.
Based on these policy considerations, Justice Souter states
the following holding, which is set forth in Justice Kennedy's
opinion in Ellerth in exactly the same words:
An employer is subject to vicarious liability to a victimized
employee for an actionable hostile environment created by a supervisor
with immediate (or successively higher) authority over the employee.
When no tangible employment action is taken, a defending employer
may raise an affirmative defense to liability or damages, subject
to proof by a preponderance of the evidence, see Fed. Rule Civ.
Proc. 8(c). The defense comprises two necessary elements: (a)
that the employer exercised reasonable care to prevent and correct
promptly any sexually harassing behavior, and (b) that the plaintiff
employee unreasonably failed to take advantage of any preventive
or corrective opportunities provided by the employer or to avoid
harm otherwise. While proof that an employer had promulgated
an antiharassment policy with a complaint procedure is not necessary
in every instance as a matter of law, the need for a stated policy
suitable to the employment circumstances may appropriately be
ad-dressed in any case when litigating the first element of the
defense. And while proof that an employee failed to fulfill the
corresponding obligation of reasonable care to avoid harm is not
limited to showing an unreasonable failure to use any complaint
procedure provided by the employer, a demonstration of such failure
will normally suffice to satisfy the employer's burden under the
second element of the defense. No affirmative defense is available,
however, when the supervisor's harassment culminates in a tangible
employment action, such as discharge, demotion, or undesirable
reassignment.
Applying its new rule
to Faragher's facts, the Court had little difficulty in holding
that as a matter of law Faragher was entitled to judgment and
there was no need to remand for fact finding to apply the new
test to the circumstances at bar. The Court held that the City
of Boca Raton would be utterly unable to satisfy the first element
of its affirmative defense obligation for three reasons: (1) "the
city had entirely failed to disseminate its policy against sexual
harassment among the beach employees"; (2) "its officials
made no attempt to keep track of the conduct of supervisors"
like Faragher's bosses; and (3) "the city's policy did not
include any assurance that the harassing supervisors could be
bypassed in registering complaints." ___ S.Ct. at ___.
Justice Kennedy's opinion in Burlington Industries v. Ellerth
stated the same rule and applied it to a factual situation in
which the parties had been arguing about whether stated but unfulfilled
threats of job consequences could amount to the sort of quid pro
quo harassment that would automatically lead to vicarious liabili-ty.
While the Seventh Circuit opinion below had refused to recognize
a difference between cases in which threats of formal employment
actions are used against an employee but not carried out in cases
in which they are carried out, the Supreme Court does recognize
this difference in Ellerth. Scenarios in which threats are made
but not carried out must be analyzed under the rule quoted above,
with the two-element affirmative defense noted there being afforded
to the employer. Cases in which threats are carried out lead
to vicariously liability with no affirmative defense available.
II. EMPLOYERS SHOULD NOW ALSO BE LIABLE FOR SUPERVISORY HARASSMENT
WHERE (A) THE VICTIM ACQUIESCES, OR WHERE (B) A TANGIBLE EMPLOYMENT
ACTION FACILITATES THE HARASSMENT.
Ellerth answers two
important questions about employer liability for supervisory harassment
by implication only. The first of these concerns the proper analysis
to be employed where the target of supervisory threats acquiesces
and engages in sexual activity or otherwise does what the supervisor
wants in order to avoid the threatened consequences. Ellerth
strongly implies that because such a chain of events leads to
a concrete alteration in the conditions of employment of the victim,
i.e., she has an additional duty added to her job descrip-tion,
there should be no affirmative defense available. Just as well
as the consummated threat in response to nonacquiescence, acquiescence
demonstrates an extreme example of the aided-in-agency rule:
"When a supervisor makes a tangible employment decision,
there is assurance the injury could not have been inflicted absent
the agency relation." ___ S.Ct. at ___. Certainly, it is
equally true that a supervisor could not obtain sexual perks by
threaten-ing a tangible employment decision "absent the agency
relation."
The second question to which the answer is only implied in Ellerth
concerns the analysis to be employed where the supervi-sor's implementation
of a tangible employment action is not a retaliatory response
to nonacquiescence or simply the hostile consummation of a campaign
of sexual harassment, but rather a mechanism designed to make
sexual harassment easier to perpetrate. In Harrison V. Eddy Potash
, Inc., 112 F. 3d 1437 (10th Cir. 1997), the Tenth Circuit had
found employer liability where the supervisor used his authority
to direct workers in their tasks in order to send his chosen victim
to remote areas of the worksite where he could harass her without
fear of detec-tion. Ellerth implies that this holding remains
good law, because, in its chain of reasoning, it is the presence
of a tangible employment action that is crucial, not its timing.
Tangible employment actions are the means by which the supervisor
brings the official power of the enterprise to bear on subordinates.
For these reasons, a tangible employment action taken by the
supervisor becomes for Title VII purposes the act of the employer.
Whatever the exact contours of the aided in agency relation standard,
its requirements will always be met when a supervisor takes a
tangible employment action against a subordinate. ___ S.Ct. at
___. Certainly, when a supervisor uses the coercive authority
of his position to set up an opportunity to act against his chosen
victim with impunity, such as by ordering her to a remote area
of the workplace as in Harrison, or, perhaps, ordering her to
accompany him on a weekend convention trip out of town, this is
every bit as much "a tangible employment action against a
subordi-nate," as ordering a subordinate to clean toilets
with a toothbrush as a sanction for nonacquiescence. In both
cases the supervisor uses the formal authority delegated to him
by the employer to order the employee into less favorable conditions
of employment, in one case where she will be sexually harassed
and in another case where she will be subjected to less desirable
work.
III. EXISTING THEORIES OF EMPLOYER LIABILITY ARE STRENGTHENED
BY THE SUPREME COURT'S NEW OPINIONS: (1) PROXY LIABILITY; (2)
NEGLIGENCE LIABILITY; AND (3) ABSOLUTE LIABILITY FOR TANGIBLE
EMPLOYMENT ACTIONS.
In Faragher,
the Supreme Court recognized the general rule that in cases where
sexual harassment is perpetrated by very high level officials,
employer liability may arise from simply determining these officials
to be the organization's proxy. ___ S.C. at ___. Harris v.
Forklift Systems, 510 U.S. 17, 19 (1993), is cited as an
example of this genre, because in that case the abusive atmosphere
was created by the president of the corporate employer. Other
cases are cited for the proposition that an individual sufficiently
high in the management hierarchy, such as a proprietor, partner
or corporate officer can, essentially bind the employer by his
acts of sexual harassment.
For small employers, this is the downside of Faragher;
the upside is that the opinion recognizes that they may be able
to enforce their expecta-tions against sexual harassment informally,
without promulgating written policies and complaint procedures.
___ S.Ct. at ___.
Faragher recognizes, and Ellerth actually strengthens, the traditional
negligence theory of employer liability applied to co-worker harassment
cases. Justice Kennedy's opinion in Ellerth states succinctly,
"An employer is negligent with respect to sexual harassment
if it knew or should have known about the conduct and failed to
stop it." ____ S.Ct. ___. This is a better formulation
of the negligence rule than most previous statements, which simply
required the employer to act promptly and appropriately, but did
not require a showing of success in order to avoid a negligence
finding. This formulation also eliminates any doubt that constructive
knowledge as well as actual knowledge triggers an employer's obligation
to act.
Finally, both Faragher and Ellerth recognize an employer's liability
for tangible employment actions which occur in connection with
a campaign of hostile environment sexual harassment or otherwise.
Another phrase for a "tangible employment action" is
a "materially adverse change" which, according Crady
v. Liberty National Bank and Trust Co. of Indiana, 993 F.2d 132,
136 (7th Cir. 1993), can include "a termination of employment,
a demotion evidenced by a decrease in wage or salary, a less distinguished
title, a material loss of benefits, significantly diminished material
responsibilities, or other indices that might be unique to a particular
situation."
IV. A LOOK AT THE TWO PART, SLIDING SCALE AFFIRMA-TIVE DEFENSE
CREATED BY FARAGHER AND ELLERTH.
The affirmative defense
quoted above contains two necessary elements, both of which are
the employer's burden and both of which must be proven to establish
the defense. It can be a complete defense to liability. As noted
in Faragher, it can also be a partial defense to damages, where
the employer proves that, for example, a campaign of harassment
started without any contribu-tion from the victim's negligence,
but continued longer than it had to because the victim negligently
failed to report or otherwise address it. Under such circumstances,
the victim's negligence would create a cutoff date after which
she would accrue no damages for further harassment.
What now is the difference between a co-worker negligence case
and a supervisory vicarious liability case? On the surface, not
much. In a co-worker harassment case, where employer liability
is premised on employer negligence, there has always been an issue
as to whether the employer learned of the harassment as rapidly
as it should have and whether, when it knew or should have known
of the harassment, it did in fact take prompt and appropriate
remedial action. Failure to learn early enough or failure to
act early or firmly enough was negligence. This issue is transplanted
in identical terms into the supervisory harassment scenario by
the Supreme Court's new opinions. Only the burden of proof has
shifted.
Similarly, employee negligence has also always been at issue
in co-worker harassment cases where employer liability has been
premised on employer negligence. This is because the employer's
obligation to exercise ordinary care only kicks in at that point
at which it knows or ought to know of the harassment. If its
only available conduit of information is the employee herself,
her conduct in failing to report the harassment may let the employer
off the hook for a considerable portion or even all of her injuries.
The employer's obligation to act arises late in the day or never
because of the employee's negligent failure to report. This issue
remains the same in the supervisory harassment scenario created
by the new opinions, with only the burden of proof shifting to
the employer.
Although these observations make it look as if employers have
gained ground with these rulings, subtle nuances of the opinion
provide ammunition for plaintiffs' lawyers. First, the actual
track record of an employer's sexual harassment policy, and the
nature and extent of its communication to employees become crucial
under the new formulation. This is so because whether an employee
is negligent in failing to utilize an employer's sexual harassment
mechanisms may depend, at least in part, on whether the employer
has as the Court suggests it may, "a proven, effective mechanism
for reporting and resolving complaints of sexual harassment, available
to the employee without undue risk or expense." Faragher,
___ S.Ct. ___. Since employees won't be negligent for failing
to utilize a proven and effective mechanism which entails little
risk or expense unless they know that it is proven, know that
it is effective, and know that they won't suffer for employing
it, many current sexual harassment policies will be weighed in
the balance and found wanting when the analysis reaches the employee-negligence
phase. This is true because many employers don't tell anyone,
even a complaining victim, what the result of a sexual harassment
investigation has been or what if any corrective actions have
been taken as a result.
For the victim, this means that filing a sexual harassment complaint
through channels is like dropping it into a black hole. The victim
never learns whether her concerns about sexual harassment have
been determined to be valid by the company, or whether the perpetrator's
denials have been believed and she is now branded as a false complainer.
The harassment may, indeed, stop after a time, but in an atmosphere
of corporate secrecy the victim cannot know whether this is because
the company has acted on her complaint and sanctioned the perpetrator,
or whether the perpetrator has simply lost interest, found a new
target, or been deterred by her personal firmness.
Similarly, if the employee, at some point after filing a harassment
complaint has an unhappy experience with management herself, can
she know whether it is the consequence of her complaint, either
because such complaints are not really welcomed by the company
or because her particular complaint is believed to have been unfounded.
If such a victim who has used the complaint system and received
no concrete report from the company confides in other victims
who are considering using it, they won't be encouraged by what
they hear. Is it unreasonable of them to attempt to deal with
the situation themselves for as long as they can without risking
the exposure of a formal complaint? A great argument can be made
that it is quite reasonable for them to withhold their complaints
where they don't know whether the company's system is proven,
where they don't know whether the company's system is effective,
and where they don't know whether the company's system is risk-free
for the victim. No rational trier of fact would expect employees
to simply take the company's word on these matters.
Victims will be justified in being even more cautious about
taking their employer's word for the efficacy of an harassment
policy where it is included in a typical employee handbook. This
is because, in response to court decisions recognizing employee's
contract claims arising out of alleged employer violations of
employee handbook provisions, the typical employee handbook now
contains a disclaimer of contractual effect. Such a disclaimer
is, after all, essentially a statement that the employer is not
bound to follow its policies and may ignore or deviate from them
without consequence of any kind. A solid argument can be made
that it is non-negligent for an employee to decide against staking
her career on a policy stated in "maybe-we will-and-maybe-we-won't"
terms.
Also, since it is so obvious and so widely known that victims
of sexual harassment themselves have a variety of reasons to hesitate
before reporting it, an employer policy probably ought to require
reporting by those who are not victimized by sexual harassment
but merely witness it. A sexual harassment policy that does not
require witness reporting may fail the test of reasonable-ness.
Finally, the very way in which an employer's sexual harassment
policy is communicated to workers may enter into the calculus
of reasonableness. Is it simply one page of a 100-page policy
manual which is given to every employee on their first day along
with reams of insurance information, security information, and,
incidentally, the instructions the employees need to perform their
own jobs adequately so as not to be fired? Or, is it important
enough to the employer that it is distributed separately, perhaps
at a short training session on sexual harassment policy for new
employees, perhaps with some audiovisual aids or videotape vignettes?
Does the employer share any of the policy's history with new
employees to demonstrate that it is "proven and effective"?
All of these issues are now fair game at the affirmative defense
stage.
CONCLUSION
How, now, is a lawyer to advise a client who comes in to confide
that her supervisor has threatened to fire her unless she fellates
him? If she refuses and is fired she can recover. If she acquiesces,
she can probably recover. If she refuses, complains to the company,
and is not fired, she is up against the new affirmative defense
and probably cannot recover.
As Justice Souter noted in Faragher, an employee who is being
sexually harassed by a co-worker is, her legal position to one
side, substantially better off than an employee who is being sexually
harassed by a supervisor. She can walk away or tell the co-worker
where to go. She could expect to be disciplined for showing this
sort of disrespect to a supervisor. As a result of the Supreme
Court's new opinions in Faragher and Ellerth, employees are marginally
better off, as a legal matter, to be harassed by supervisors than
they are to be harassed by co-workers, because their cases will
be marginally easier to prove against their employers. While
the legal advantage to being sexually harassed by a supervisor
is slight, however, the practical disadvantage is substantial
and, therefore, on balance, most informed employees should continue
to prefer to be harassed by co-workers. It also remains true
that it is probably better to have a good left-jab, right-cross
combination than a good court case.
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