Supreme Court Clarifies Standards for Employer Liability for Sexual Harassment by Supervisors

On Friday, June 26, 1998, the U.S. Supreme Court issued two decisions which provide important guidance to employers in the area of sexual harassment. These two decisions, Faragher v. City of Boca Raton and Burlington Industries, Inc. v. Ellerth, clarify the standard for holding an employer liable for a supervisor’s acts in creating a sexually hostile work environment.

Prior to these decisions, federal courts were divided over the circumstances in which an employer could be held liable for sexually harassing conduct by its supervisors. In many of these earlier cases, employers argued, with mixed success, that they should not be responsible for such conduct where the employer was unaware of the offensive conduct or where the aggrieved employee failed to take advantage of the employer’s sexual harassment complaint procedure. In its decisions last week, the Supreme Court adopted the general rule that an employer is liable for an actionable hostile environment created by a supervisor with immediate (or successively higher) authority over the employee. However, the Court also ruled that an employer is entitled to raise a two-pronged affirmative defense. To succeed with this defense and avoid liability, the employer must show, first, that it exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and second, the employer must show that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. If the employer proves both elements of the defense by a preponderance of the evidence, the employer will escape liability. The one major exception to this general rule is that an employer may not avail itself of the affirmative defense if the harasser supervisor has taken some tangible employment action against the victim. For example, if the harasser did not merely create a hostile work environment but also caused any significant change in employment status, such as discharge, demotion, undesirable reassignment, or denial of a raise, the affirmative defense is not available, and the employer will automatically be liable for the supervisor’s conduct.

The real import of these cases lies in the Court’s clear approval of the affirmative defense. With respect to the first prong, the Court clearly noted that promulgation of an anti-harassment policy with a complaint procedure is one example of an employer’s exercise of reasonable care. With respect to the second prong, the Court noted that an employee’s unreasonable failure to use such a complaint procedure will normally suffice to satisfy the employer’s burden on that element. The Court specifically endorsed the notion that if an employer provides a proven, effective mechanism for reporting and resolving complaints of sexual harassment and a plaintiff unreasonably fails to avail herself of the employer’s preventive or remedial apparatus, the plaintiff should not recover damages that could have been avoided if she had done so.

Employers should be aware, however, that it may not be enough simply to adopt a sexual harassment policy. Indeed, in one of the two cases before the Supreme Court, the employer had adopted a sexual harassment policy but failed to ensure that the policy was widely disseminated throughout the organization. Because the policy had not even been distributed in the department in which the plaintiffs worked, the employer could not, as a matter of law, be found to have exercised reasonable care to prevent the supervisors’ harassing conduct. Similarly, the language requiring an employer to show that the plaintiff unreasonably failed to complain is cause for some concern. The Court did not discuss the circumstances under which, in the face of a proven, effective complaint procedure, a plaintiff’s failure to complain would be reasonable. We expect litigation on this point as plaintiffs offer explanations for their failure to invoke the employer’s harassment policy and thereby attempt to escape the major hurdle that is now imposed by an employer’s adoption of a proven, effective complaint procedure.

The significance of these two decisions is that, for the first time, employers may rest assured that taking reasonable measures to prevent and correct sexual harassment can, in many circumstances, insulate the employer from liability for the harassing actions of a renegade supervisor. In the wake of these decisions, employers should carefully evaluate all available methods for preventing and confronting sexual harassment in the workplace. At a minimum, employers should:

(1) Adopt an anti-harassment policy which defines harassment and which sets forth a reasonable complaint procedure. Employers should not rely on a generally worded “no discrimination” policy, but should adopt a policy which specifically refers to sexual harassment. The policy should not require that complaints be lodged with the employee’s immediate supervisor but must provide alternative avenues of complaint.

(2) Ensure that all employees know about the policy and have a copy of the policy available for their easy reference. Employers should make distribution of the policy to new hires a “standard operating procedure” and should periodically re-publish the policy to the entire workforce. In addition, employers should consider having all employees acknowledge in writing that they have received and reviewed the policy.

(3) Conduct training for supervisors on the subject of sexual harassment. In addition, while many employers have expressed concern that providing sexual harassment training to all employees not just supervisors might have the unintended effect of provoking claims that otherwise would not arise, we anticipate that an employer which has conducted such training will be in a much stronger position to take advantage of the defense recognized by the Supreme Court in its recent decisions.

Finally, while this new decision clarifies the law with respect to an employer’s liability in a limited class of cases, employers should bear in mind all of the various situations under which an employer may be liable for the sexual harassment of its employees, including the following:

• When the harasser is the owner of a business or is in such a high-level position within the company that his or her actions are imputed automatically to the company.
• When the harasser is a supervisor and the harassment results in tangible employment action, such as hiring, firing, promotion, compensation, and work assignment.
• When the harasser is a supervisor and the employer fails to exercise reasonable care to prevent and correct promptly any sexually harassing behavior, and cannot show that the plaintiff unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.
• When the harasser is a co-employee and the employer knew or should have known of the harassment, but failed to stop it.