Spring, 2000
CLAIMS LAW UPDATE
VICARIOUS
LIABILITY IN
SEXUAL HARASSMENT CLAIMS
[Ref: Law of Agency, Paras. 416, 427]
For over a century, employers could rest assured that they would be held liable for an employee’s wrongful act only if the employee committed the act while within the scope of employment. Under the law, it is fair to hold an employer vicariously responsible for an act which furthers his business interests, even if the act was tortious. Generally, an employer did not have to worry about having to pay damages stemming from an employee’s act outside the scope of employment. Until now. In June, 1998, the Supreme Court of the United States decided two sexual harassment cases which seem to have changed the ground rules for imposing liability on employers for the wrongful acts of their employees, at least in the context of “hostile environment” sexual harassment claims.
Under section 703(a) of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et
seq., an employer, defined to include any agent of the employer, is forbidden “to
fail or refuse to hire or to discharge any individual, or otherwise to discriminate
against any individual with respect to his compensation, terms, conditions, or privileges
of employment because of such individual’s ... sex.” Based upon this language,
courts have recognized certain actionable types of sexual harassment. The one at issue
here has been called “hostile work environment” sexual harassment. The Supreme
Court has previously described hostile work environment sexual harassment as that which is
“sufficiently severe or pervasive to alter the conditions of [the employee’s]
employment and create an abusive working environment.” Meritor Savings Bank, FSB v.
Vinson, 106 S.Ct. 2399 (1986).
A hostile work environment is typically created by a victim’s supervisor or superior.
In the past, courts generally did not hold an employer vicariously liable for a
supervisor’s creation of a sexually hostile work environment, because a
supervisor’s act of creating a sexually hostile work environment is not within the
scope of employment. These courts held that an employer does not benefit from a
supervisor’s creation of a sexually hostile work environment because employees are
less productive when they are being sexually harassed. Therefore, the very reason for
imputing the negligence of an employee to an employer – that the employer benefits
from the employee’s act – does not exist, and so there is no basis for imputing
the employee’s wrongful act to the employer.
Instead the courts applied a standard of liability based upon the negligence of the
employer. If an employer was negligent, then direct liability would be imposed. An
employer was considered negligent when he was on notice of a particular condition and
failed to remedy it. In a situation involving a sexually hostile work environment, an
employer was negligent when he was aware of the supervisor’s sexual harassment of
other employees and failed to remedy it. Under this standard, an employer was liable only
if he knew of the harassment but failed to take any action to stop it. An employer could
not be liable for harassment he did not know about under the negligence standard.
This had been the state of the law for some time. If an employer was negligent, he would
be directly liable for his own negligence. If an employee was negligent, and the act was
committed within the scope of employment, then the employer would be vicariously liable
because the employee’s act would be imputed to him. However, in the two cases before
it, the Supreme Court rejected both of these standards, and instead found that vicarious
liability could be applied without having to show that the wrongful act occurred while the
actor was within the scope of his employment.
In Burlington Industries, Inc. v. Ellerth, 118 S.Ct. 2257 (1998) and Faragher v. City
of Boca Raton, 118 S.Ct. 2275 (1998), Kimberly Ellerth and Beth Ann Faragher alleged that
their supervisors sexually harassed them on the job. Ellerth endured repeated offensive
remarks and gestures at the hands of her supervisor at Burlington Industries, Ted Slowik.
In particular, Slowik commented about Ellerth’s body, and, when she refused to
acknowledge his remark, he told her to “loosen up” and that he could make her
“life very hard or very easy at Burlington.” On another occasion, he told her
that if she wore shorter skirts it would make her job a lot easier. Even though Burlington
had a policy against sexual harassment, Ellerth did not report these incidents. She
subsequently quit because of Slowik’s behavior. Faragher, a lifeguard for the City of
Boca Raton, alleged that supervisors Bill Terry and David Silverman subjected her to
offensive touching, lewd comments, and threats such as “date me or clean the toilets
for a year.” Faragher discussed the incidents with another supervisor, Robert Gordon,
but she did not consider the discussions formal complaints and Gordon did not feel it was
his place to report the incidents to his superior or any other city official. Neither
Ellerth nor Faragher suffered any adverse employment consequences. Neither was de- moted,
fired, or given an undesirable work assignment.
The trial level courts in both cases found that the plaintiffs’ complaints
constituted actionable sexually hostile work environment situations. In both cases, the
courts held that the harassment was discriminatory based on sex, the harassment resulted
in the creation of an objectively hostile work environment, and the employers were not
aware of the harassment. The only issue in each case was the standard of liability to be
applied. The Ellerth lower court applied a negligence standard. It found that Burlington
did not know about the harassment, and thus was not negligent. No liability could be
assessed. The appellate court reversed, but the judges disagreed on the standard to be
applied. In Faragher, the opposite occurred. The lower court applied a vicarious liability
standard. It imputed the acts of the supervisors to the City of Boca Raton, and held it
vicariously liable for the supervisor’s acts. The appellate court reversed. It held
that the supervisors were not acting within the scope of their employment, so their acts
could not be imputed to the City of Boca Raton. No vicarious liability could be assessed.
The Supreme Court granted certiorari in both cases to resolve the conflict between these
holdings.
As stated in Ellerth, the issue in both cases was “whether an employer has
vicarious liability when a supervisor creates a hostile work environment by making
explicit threats to alter a subordinate’s terms or conditions of employment, based on
sex, but does not fulfill the threat.” As previously noted, a principal is
vicariously liable for an agent’s conduct when the agent acts in furtherance of the
principal’s business purposes (within the scope of employment). The law views the act
of the agent as the act of the principal and the principal is vicariously liable for the
agent’s acts. This is fair because the principal stands to benefit from the
agent’s activities.
The Supreme Court held that the scope of employment rule did not apply to the conduct at
issue in Ellerth and Faragher. It held that a supervisor furthers his employer’s
business purpose by creating a safe, productive work environment. It follows that creating
a work environment characterized by insult and fear would not be in furtherance of the
employer’s business interests, and therefore not within the scope of employment.
However, the Court held that even though the scope of employment rule did not apply,
vicarious liability could still be imposed under another, but seldom used, common law
principle of agency law. The court cited the Restatement (Second) of Agency, §219(2):
(2) A master is not subject to liability for the torts of his servants acting outside the scope of their employment, unless:
(a) the master intended the conduct or the consequences, or
(b) the master was negligent or reckless, or
(c) the conduct violated a non-delegable duty of the master, or
(d) the servant purported to act or to speak on behalf of the principal and there was reliance upon apparent authority, or he was aided in accomplishing the tort by the existence of the agency relation.
The Court held that the second portion of subsection (d) applied. In a work
environment, tortfeasors are “aided in accomplishing a tort by the existence of the
agency relation” because “proximity and regular contact may afford a captive
pool of potential victims.” But this is not the only test. If it were, the employer
would be vicariously liable not only for supervisor harassment, but also for co-worker
harassment, which is not actionable under Title VII. According to the Court in Ellerth,
what separates supervisor harassment from co-worker harassment is that “a
supervisor’s power and authority invests his or her harassing conduct with a
particular threatening character, and in this sense, a supervisor is aided by the agency
relation.” Further, “it is precisely because the supervisor is understood to be
clothed with the supervisor’s authority that he is able to impose unwelcome sexual
conduct on subordinates.” The court noted in Faragher that “when a fellow
employee harasses, the victim can walk away or tell the offender where to go, but it may
be difficult to offer such responses to a supervisor, whose power to supervise –
[which may be] to hire and fire, and to set work schedules and pay rates – does not
disappear ... when he chooses to harass through insults and offensive gestures rather than
directly with threats of firing or promises of promotion.”
The Court stated the new rule: A supervisor is aided by the agency relation in creating a
sexually hostile work environment, and, from now on, an employer is subject to vicarious
liability for that conduct without the need for the employee to prove that the employer
was negligent, and without the need to prove that the supervisor was within the scope of
his employment.
Under the new rule, a complaining employee must show that a supervisor created a
sexually hostile work environment which is sufficiently pervasive. However, the
employee’s proof of the supervisor’s acts will not automatically result in
vicarious liability for those acts. In order to allow for vicarious liability, but not
automatic or strict liability, the Court fashioned an affirmative defense in Ellerth and
Faragher. Once a complaining employee has met her burden of demonstrating a sexually
hostile work environment created by a supervisor, an employer is allowed to show that it
“exercised reasonable care to prevent and correct promptly any sexually harassing
behavior, and that the plaintiff employee unreasonably failed to take advantage of any
preventive or corrective opportunities provided by the employer or to avoid harm
otherwise.”
The defense has two elements. First, an employer must show that it exercised reasonable
care to prevent sexual harassment and that it moved to promptly correct it when it
occurred. This may or may not be shown by the existence of an antiharassment policy with a
complaint procedure. The Court was unclear on that point. Second, the employer must show
that the complaining employee unreasonably failed to take advantage of the employer’s
safeguards or to have otherwise taken steps to avoid the harm. This may or may not be
shown by proving that a complaining employee failed to use the employer’s complaint
procedure. Again, the court was unclear on that point. If an employer proves these
elements, then it will not be vicariously liable for its supervisor’s creation of a
hostile work environment.
In Faragher, the Court found that the City of Boca Raton had failed to make employees
aware of its antiharassment policy and no attempt was made to keep track of supervisors
like Terry and Silverman. The Court held as a matter of law that the City would not be
able to show that it acted reasonably to prevent harassment. The City was given no
opportunity to assert the affirmative defense. In Ellerth, the case was remanded so that
Burlington Industries would have an opportunity to assert and prove the affirmative
defense.
The justices were not in agreement on the holdings in the two cases. Two justices in
both Ellerth and Faragher were vehemently opposed to the majority’s holding, and
Justice Clarence Thomas wrote a dissenting opinion in each case. He articulated several
reasons why this type of vicarious liability standard should not be applied in sexually
hostile work environment cases.
First, the dissent felt that the proper standard is a negligence standard, not a vicarious
liability standard. A hostile work environment is “antithetical” to the business
purposes of an employer, and thus could not be said to be within the scope of a
supervisor’s employment or in furtherance of an employer’s business purposes.
Further, an employer cannot prevent harassment without extraordinary measures, such as a
constant surveillance of its supervisors. The most an employer can do, according to the
dissent, is to act reasonably under the circumstances. Employers can let it be known that
harassment will not be tolerated, and take reasonable measures to enforce that policy.
Thus, the dissenting justices felt that an employer should be liable for a sexually
hostile environment only if the employer knows or should know about it and fails to remedy
it – the negligence standard.
Second, the dissent felt that §219(2)(d) was inap- plicable to this type of case and did
not support a finding of vicarious liability. Under that section, they felt that liability
could be imputed when the plaintiff believes that the agent acted in the ordinary course
of business or within the scope of his apparent authority. The comment to subsection
219(2)(d) illustrates the dissent’s argu- ment. Comment e to §219 of the Restatement
states that:
“[a] principal is liable for an agent’s fraud if the agent’s position facilitates the consummation of the fraud, in that from the point of view of the third person the transaction seems regular on its face and the agent appears to be acting in the ordinary course of business confided to him.”
The dissenting justices felt that section 219(2)(d) has nothing to do with a
servant’s authority or whether it was threatening, as the majority had held. Rather,
they believe that liability under this subsection is imposed only when a third party
reasonably believes that the agent acted in the ordinary course of his agency. No sexually
harassed employee would reasonably believe that the harassment was the official business
of the employer or that the supervisor was acting on the employer’s behalf. The
justices felt that the only subsection of §219 which could possibly apply was subsection
(b), under which an employer will be liable for the torts of the employee if the employer
was negligent or reckless in permitting them to occur. Applying this standard to
Burlington Industries, the employer would not be found negligent.
Third, the justices felt that the affirmative defense was vague and did not follow
Meritor’s holding that an employer is not automatically or strictly liable for a
supervisor’s sexual harassment. The affirmative defense does not explain to employers
how they can avoid vicarious liability. For example, the majority in Faragher held that as
a matter of law, the City of Boca Raton did not act reasonably in preventing harassment
because it did not disseminate information about its antiharassment policy and because
there was no mechanism in place for checking its supervisors’ activities. The
dissenting judges felt that under the standard set by the majority, that an employer must
act reasonably in preventing harassment, the City should have an opportunity to show
either that there was a reasonably available course through which Faragher could have
complained to the City officials who super- vised Terry and Silverman, or that the City
would not have learned of the harassment even if it had disseminated information about its
antiharassment policy. Since the City of Boca Raton was not permitted to make this
showing, and rather was held as a matter of law to have acted unreasonably, the
affirmative defense is unworkable and gives little guidance to employers as to how they
are to avoid the result that their supervisors’ acts will be automatically imputed to
them.
Since Ellerth and Faragher, lower courts from around the country have been struggling with the practical application of the Supreme Court’s guidelines for imposing vicarious liability on an employer for the wrongful employment acts of its supervisor. Outcomes have varied greatly. For example, in Grozdanich v. Leisure Hills Health Center, 5 F.Supp.2d 953 (D. Minn. 1998), the employee was subjected to three incidents of groping within the span of one day on the job. The court found that by failing to report the harassment until after the second incident, she failed to take advantage of the employer’s preventive and corrective opportunities, allowing the employer to assert an affirmative defense. In Corcoran v. Shoney’s Colonial, Inc., 24 F. Supp.2d 601 (W. Dist. Va. 1998), however, the court found that an employee who waited seven months before she reported improper sexual remarks made to her by a supervisor did not delay unreasonably in availing herself of the employer’s preventive opportunities. In that case, the employee waited because there was a lengthy period (seven months) between the first incident and the second, more serious incident involving unwanted touching. The court explained its decision as follows:
Though unwanted sexual remarks have no place in the work environment, it is far from uncommon for those subjected to such remarks to ignore them when they are first made. In Ms. Corcoran’s case, the facts indicate that isolated remarks were made and that for a long period nothing further occurred. The court cannot say that it was unreasonable for Ms. Corcoran to remain silent during this period. When, however, the sexual harassment became virtually impossible to ignore, Ms. Corcoran took immediate action. Considering the totality of the circumstances, Ms. Corcoran’s actions do not make it possible for the defendants to successfully establish the second prong of the affirmative defense. Because the facts before the court render the affirmative defense inapplicable, Shoney’s and Triple H Properties remain vicariously liable for the creation of a hostile work environment.
Obviously, results will depend on the facts of each case and the inclinations of the particular state or federal court.
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