The Supreme Court Saddles Employers With Liability for the Sexual Harassment of Their Supervisors

In twin decisions issued June 26, 1998 -- Faragher v. City of Boca Raton and Burlington Indus., Inc. v. Ellerth -- the Supreme Court raised the bar for employers seeking to avoid liability for their supervisors' sexual harassment. Discarding the quid pro quo and hostile environment labels that have long determined whether an employer would have a defense to sexual harassment claims, the Court ruled that employers will be liable for their supervisors' harassment in all cases, with only a narrow exception carved out for those instances when the complaining employee suffered no "tangible employment action." Even in this narrow category of cases, however, an employer may find itself unable to establish the ill-defined elements of the only affirmative defense prescribed by the Court and saddled with liability for conduct that it neither knew about nor authorized.

The Legal Backdrop

To appreciate the import of the Court's decisions, one must first have a basic grounding in the liability standards that have been traditionally applied by the lower courts in sexual harassment cases. Over the last several years, court have found employers strictly liable for their supervisors' sexual harassment only where the employee who rebuffed the supervisor's advances suffered some tangible job detriment, i.e., a demotion, discharge, or suspension. These cases, which involve a tangible job detriment, are commonly known as quid pro quo cases.

Absent such a job detriment, courts typically have only found employers liable for their supervisors' harassment where the employer knew, or in the exercise of reasonable care should have known, about the harassment and failed to take remedial action. This rule, which applied in what is commonly referred to as hostile environment cases, was very advantageous to employers. Indeed, courts routinely granted summary judgment to the employer so long as it could demonstrate that it maintained a sexual harassment policy and that it took prompt measures to remedy any harassing conduct once it learned of it.

The Supreme Court's Decisions

• Burlington Industries, Inc. v. Ellerth

The decisions that reached the Supreme Court cannot be readily pigeonholed into either of these traditional categories. Burlington Industries had all of the trappings of a quid pro quo case -- a supervisor threatening, among other things, to make the plaintiff's life very hard if she didn't "loosen up" -- except that the plaintiff admittedly never suffered a tangible job detriment. In other words, the manager never carried out his threats. Indeed, the employer, who maintained a sexual harassment complaint procedure, first learned of Ellerth's complaints three weeks after she quit, when she forwarded a letter attributing her resignation to the manager's conduct. Ellerth later sued Burlington, claiming that that she had been sexually harassed and constructively discharged.

Treating Burlington's claim as a hostile environment claim, the district court granted Burlington's motion for summary judgment. While concluding that the supervisor's conduct was sufficiently severe to create a hostile environment, the court, citing Ellerth's failure to use the prescribed complaint procedure, nonetheless found that Burlington neither knew nor should have known about the conduct.

The Seventh Circuit Court of Appeals reversed the district court's judgment. While there was no consensus among the Court of Appeals judges as to the appropriate standard of employer liability, the majority of the judges agreed that Ellerth's claim should have been treated as a quid pro quo, rather than a hostile environment claim, notwithstanding the undisputed fact that Ellerth did not suffer a tangible job detriment.

• Faragher v. City of Boca Raton

Faragher did not involve threats to retaliate against an employee, but, rather, a supervisor's repeated demeaning sexual comments and gestures, as well as the physical "tackling" of the plaintiff, a lifeguard working for the City of Boca Raton. Faragher never reported this conduct to the City, but two months before her resignation, a former lifeguard accused two of Faragher's supervisors of sexually harassing her and the other lifeguards. Following its investigation of this complaint, the City reprimanded the two supervisors and offered them the option of suspension without pay or forfeiture of their annual leave. Faragher's lawsuit followed.

The District Court readily concluded that the supervisors' conduct constituted an abusive work environment that was sufficiently serious to alter the terms of Faragher's employment. On that basis, the court ruled that the city was liable for the hostile environment created by its supervisors. The Eleventh Circuit Court of Appeals reversed the district court, finding that (i) there was no adequate basis to conclude that the harassment was so pervasive that the City should have known of it; and (ii) that the supervisors acted outside the scope of their employment in harassing Faragher.

• The Court's Ruling

In a ruling that applied to both cases, the Supreme Court made it clear that liability for a supervisor's sexual harassment will depend in the first instance on whether the supervisor takes a tangible job action against the alleged victim. In cases where the supervisor takes such an action, the employer will be strictly liable for the supervisor's harassment. Alternatively, when no adverse employment action is taken, an employer may avoid liability for its supervisor's conduct by establishing "two necessary elements" of an affirmative defense: (i) "that the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and (ii) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise." Burlington Indus., 66 U.S.L.W. 4634, 4640 (June 26, 1998).

In dissent, Justice Thomas, joined by Justice Scalia, criticized the Court for "providing shockingly little guidance about how employers can actually avoid vicarious liability" and "leaving the dirty work to the lower courts." Id. at 4642. Consistent with this criticism, the dissent stated: "[t]he Court's holding does guarantee one result: There will be more and more litigation to clarify applicable legal rules in an area in which both practitioners and the courts have long been begging for guidance." Id.

What's Left Of Employer Defenses?

The Supreme Court's decisions both muddy the waters and raise the stakes for employers in hostile environment sexual harassment cases. The Court did not, of course, describe how an employer could satisfy the two elements of its newly created affirmative defense. The first element -- that the employer exercised reasonable care to prevent and promptly correct harassment -- is strikingly similar to the showing that employers have been required to make for some time in hostile environment cases.

The same cannot be said for the second required element -- that the victim "failed to take advantage of corrective opportunities provided by the employer or to avoid harm otherwise." Indeed, the Court gives no hint as to how an employer could establish this second element in a case where an employee actually reports the harassing conduct through the employer's complaint procedure. According to the dissent, the employer could not establish the affirmative defense in that instance, and would be liable for its supervisor's harassment, notwithstanding the fact it had maintained a complaint procedure and took prompt action to correct the alleged harassment. Id. at 4642.

The Court similarly failed to address whether the affirmative defense it created would be available when the alleged harasser is a high-level employee in the employer's hierarchy. Courts have typically found employers automatically liable in such cases, even in the absence of a tangible job detriment.

While the impact of the Court's decisions is impossible to measure at this juncture, there are at least a few certainties: the decisions will invigorate the plaintiffs' bar, generate confusion in the lower courts, enhance the settlement value of claims of supervisory sexual harassment, and render the likelihood of achieving summary judgment in sexual harassment cases much more remote. Indeed, given the cryptic elements of the affirmative defense prescribed by the Court, employers' opportunities for achieving summary judgment may be limited to the issue of the pervasiveness of the harassment -- an issue that the Supreme Court did not address in detail and one with which the lower courts and litigants are intimately familiar.

Proactive Steps Employers Can And Should Take To Avoid Liability

There is, of course, no simple recipe for employers to avoid liability for the sexual harassment of their supervisors. That being said, there are some critical threshold steps that employers can and should take to minimize their liability for the harassment of their supervisors:

• Establish a sexual harassment policy that defines and prohibits sexual harassment in the workplace. At a minimum, the policy should state that violations of its terms will result in discipline up to and including discharge, provide multiple avenues for employees to lodge complaints of sexual harassment, and guarantee that employees will not be retaliated against for invoking its terms.
  
• Educate and admonish your supervisors at all levels about the company's prohibition against sexual harassment and the serious consequences that will ensue should a supervisor engage in such conduct. Many employers erroneously believe that they will have a solid defense to a sexual harassment claim so long as they have posted a policy or trained their supervisors at some point over the last ten years. You should train your supervisors on a regular, on-going basis and should document the fact that you have conducted training.
  
• Educate your non-supervisory employees about your sexual harassment policy and the procedures you have (or will) put in place to ensure that they have multiple avenues available to them to report harassment without fear of reprisal. As with your supervisory staff, you should train and re-train your employees concerning the company's prohibition against sexual harassment in the workplace and the available avenues to report the harassment. You should communicate clearly to employees that they are not required to report harassment to their immediate supervisor, should they be uncomfortable doing so. Again, as with supervisors, you should document each employee's participation in sexual harassment training.
  
• Enforce your sexual harassment policy. Should you determine after investigation that an employee has violated the Company's policy, you should take immediate steps to eradicate the harassment and discipline the supervisor and/or employees involved. While the Court's decisions do not address the steps an employer should take to eradicate harassment, the first prong of the affirmative defense established by the Court hinges on the reasonableness of the employer's efforts to prevent and correct harassment. This focus on the employer's efforts to prevent and correct harassment underscores the importance of taking all measures available to ensure that reported or discovered harassment does not recur.

This sampling of the measures that employers can and should take to minimize their liability for sexual harassment is by no means exhaustive. Rather, they simply provide a starting point for employers seeking to take proactive measures to minimize their potential liabilities. Whether these or the many other available measures will prove effective to shield employers from liability in the wake of the Supreme Court's decisions will be hashed out in the lower courts over the next several years.