Since Clarence Thomas' confirmation hearing and the Paula Jones lawsuit, sexual harassment has been a frequently reported-and more frequently litigated-issue. Certainly most people are familiar with at least the basic facts and circumstances of a sexual harassment lawsuit. A federal appellate court, however, recently decided a case that could have serious implications for all employers throughout the country. In this case, decided in December by the Tenth Circuit Court of Appeals, a three-judge panel found the employer, a Pizza Hut franchisee, liable for sexual harassment of an employee not by other employees or her supervisor, but by customers.
The facts of the case are relatively straightforward. The employee, Rena Lockard, was a waitress at an Oklahoma Pizza Hut restaurant. The situation from which the lawsuit arose concerned two disorderly male customers. Apparently these men had frequented the restaurant and had previously made sexually offensive comments to Ms. Lockard. Ms. Lockard told her shift manager that she did not like waiting on these two patrons. One night, the two men entered the restaurant and apparently the entire wait staff, including male waiters, argued over who would seat and serve them. Ms. Lockard's manager instructed her to wait on them. The customers then proceeded to make sexually offensive comments to her and pulled her hair. She informed her manager of this incident, but he responded, "You wait on them. You were hired to be a waitress. You waitress." At this point, she returned to the table, where one man pulled her to him by her hair and fondled her breasts. She immediately told her manager that she was quitting and returned home.
The franchisee had adopted Pizza Hut's comprehensive sexual harassment policy which included a three-step grievance procedure wherein employees were to discuss their problem with management with successively higher supervisory authority-first the manager, second the area manager, and third the market manager. Pizza Hut's policy described sexual harassment as sexually harassing behavior "whether committed by supervisory or non supervisory personnel, co-workers or customers." The company also advised its managers against "ignoring allegations or rumors that sexual harassment is occurring," and with regard to customers, specifically instructed managers to "ask the customer to refrain from the conduct and if the customer persists, asking the customer to leave the restaurant."
Based on this policy, Ms. Lockard filed a sexual harassment complaint with the Equal Employment Opportunity Commission. Apparently Ms. Lockard had had a history of sexual abuse, and the incident with the customers seriously impacted her emotional condition. In fact, her psychologist testified at trial that she exhibited classic symptoms of post-traumatic stress disorder and major depression as a result of the incident. The jury returned a verdict in her favor for $200,000, plus almost $40,000 in costs and attorneys' fees. The franchisee appealed.
To be actionable as sexual harassment, the conduct complained of must be sufficiently severe or pervasive to alter the conditions of the employee's employment and create an abusive work environment. Specifically, courts analyze the frequency of the conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with the employee's work performance.
In its decision, the Tenth Circuit noted that the behavior engaged in by the two male customers went beyond mere offensive comments and also included physically threatening and humiliating behavior. The court also found that the conduct unreasonably interfered with Ms. Lockard's ability to perform her duties as a waitress. Finally, the court rejected the franchisee's argument that the conduct was simply a one-time incident and therefore not pervasive enough to create an abusive environment. Rather, the court noted that frequency is only one factor to analyze, and concluded that the harassing conduct of the customers was severe enough to support a sexual harassment claim.
What made this case notable was the fact that customers, not employees, perpetrated the harassment. In finding the Pizza Hut franchisee liable, the court noted several facts. First, EEOC regulations provide that employers may be responsible for sexual harassment by non-employees when the employer, its agents or supervisory employees knew or should have known of the conduct and failed to take immediate and appropriate corrective action. Likewise, the court noted three other cases wherein courts held that employers could be liable for customer harassment.
In its analysis, the Tenth Circuit noted that the focus of a sexual harassment lawsuit is whether the workplace is permeated with discriminatory intimidation, ridicule and insult. Since the employer ultimately controls the conditions of the work environment, it is irrelevant who is responsible for the offensive conduct. Furthermore, employers are liable for co-worker sexual harassment based only on negligence; that is, if they fail to remedy or prevent a hostile or offensive work environment about which the employer knew, or in the exercise of reasonable care should have known. In this case, prior to the final sexual assault, Ms. Lockard told her manager at least three times that she did not want to serve these two customers. The court found this was sufficient notice that the customers were likely to sexually harass Ms. Lockard. This triggered her employer's obligation to respond adequately and promptly.
Instead of following the guidelines set forth under the Pizza Hut policy, however, her manager ordered her to continue waiting on the customers despite their display of physically aggressive sexual behavior. In other words, Ms. Lockard's manager placed her in an abusive and potentially dangerous situation even though he had both the means and authority to avoid doing so by either directing a male waiter to attend to them, waiting on them himself, or asking them to leave the restaurant. Because he had notice of the customers' harassing conduct and failed to remedy or prevent the hostile work environment, the franchisee became liable for the manager's failure.
There are several lessons to learn from Ms. Lockard's case. First, even though Pizza Hut had a very progressive sexual harassment policy that specifically included customer conduct, it is possible that the court would have found the franchisee responsible based solely on the EEOC guidelines and the other customer harassment cases. Therefore, employers should not lull themselves into a false sense of security because their harassment policies apply only to employee behavior.
Second, this case highlights the importance of repeated sexual harassment training for all employees, but especially supervisory employees. The repeated failure of Ms. Lockard's manager to react properly to this situation directly cost his employer $240,000, in addition to its own attorneys' fees. Companies should not underestimate the benefits of sexual harassment training and periodic review. In fact, some employers have even amended supervisors' performance appraisals to include a statement that they are aware of and committed to the company's sexual harassment policy.
Also, supervisors must not be afraid to ask potentially abusive customers (or other third party visitors such as vendors, service suppliers, etc.) to behave, or even to leave the employer's establishment. While no company likes to lecture or turn away its customers, employers should encourage its managers and supervisors to guard against offensive conduct and not fear retaliation from the employer from the decision. Two hundred forty thousand dollars is a high price to pay for repeat patronage.
The most important lesson to be gained from Ms. Lockard's case is that it is not enough simply to have a sexual harassment policy. Even the soundest, most flexible policy is only as strong as the supervisors charged with its application. Therefore, managers and other supervisory personnel must be highly sensitive to interpersonal interactions in the workplace, even between customers and employees. And even if the manager thinks that the conduct complained of seems minor, or is concerned about loss of customers, it is important to take prompt remedial action in addressing the problem and to fully document the occurrence in accordance with any existing sexual harassment policies. Also, it might be wise to reissue the sexual harassment policy after any incident to ensure that all employees are aware of the company's strong stance against sexual harassment. Rigorous adherence to these practices should help most employers protect themselves from liability for sexual harassment.