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California Supreme Court Affirms Strict Liability for Supervisor Sexual Harassment But Applies "Avoidable Consequences" Doctrine to Limit Damages

In a highly anticipated decision for employment lawyers and their clients, on November 24, 2003, the California Supreme Court ruled in State Department of Health Services v. McGinnis that California's Fair Employment and Housing Act (FEHA) imposes strict liability on employers for all acts of sexual harassment by a supervisor. This was no surprise given previous interpretations of FEHA by California courts. However, the Court also gave some hope to employers having to defend such cases. The Court ruled that employers can limit damages for sexual harassment by supervisors by showing that the plaintiff could have avoided the consequences of the harassment by taking action, such as reporting the harassment sooner. If a plaintiff could have avoided certain damages with "reasonable effort" and "without undue risk, expense, or humiliation," the avoidable consequences doctrine prevents the plaintiff from recovering those damages.

As the Court explained, it expects that employers will be "the first line of defense against sexual harassment in the workplace." As such, the Court imposed certain conditions on the use of the avoidable consequences doctrine. By doing so, the Court seeks to encourage employers to "establish effective workplace remedies against sexual harassment" and thereby fulfill one of the purposes of FEHA. Indeed, the Court ruled that employers can only avail themselves of the defense if all three conditions are met. First, the employer must take "reasonable steps to prevent and correct workplace sexual harassment." Second, the employee must unreasonably fail "to use the preventive and corrective measures that the employer provided." Third, reasonable use by the plaintiff of the "employer's procedures would have prevented at least some of the harm that the employee suffered."

The Court went on to state that "the employer ordinarily should be prepared to show that it has adopted appropriate antiharassment policies and has communicated essential information about the policies and the implementing procedures to its employees." Courts will also look to see if the employer prohibited retaliation for reporting harassment, whether the employer's procedures protect employee confidentiality as much as practicable and whether the employer firmly and consistently enforced the policy. The Court provided a laundry list of potential factual issues that would need to be resolved to determine whether the defense could be applied. For instance, an employee's failure to immediately report sexual harassment by a supervisor through internal procedures may depend on whether the employer's sexual harassment policy and procedures are adequate, appropriately communicated and enforced. The Court further noted that "an employee's natural feelings of embarrassment, humiliation, and shame may provide a sufficient excuse for delay in reporting acts of sexual harassment by a supervisor."

To avoid potential damages in sexual harassment cases, employers need to ensure that they have an appropriate antiharassment policy and implementing procedures, that they are communicated and enforced, that employees are encouraged to report violations of the policy without fear of retaliation and with as much confidentiality as possible, that such reports are thoroughly investigated and that the policies are vigorously and consistently enforced. Further, if the employer finds sexual harassment following an investigation, it must act on its findings. "To establish the defense [of avoidable consequences], the employer must also show that the employee's failure to report the harassment was unreasonable under the circumstances and that, more likely than not, using the employer-provided internal remedies would have prevented at least some of the employee's claimed damages from occurring." Employers in California and elsewhere need to be conscientious and vigilant to avoid damages in sexual harassment cases like McGinnis's.

The California Corner is a regular feature of our Arizona Practical Guide designed to update California employers on new developments in California employment law. If you have any California employment issues you would like to discuss, please contact any of our California attorneys based in Arizona: Cathy Dehlin (602) 230-5547/; Robert Jones (602) 229-5496/; or Charlie Herf (602) 230-5581/

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