The Court held that an employer is subject to vicarious liability for hostile environment sexual harassment by a "supervisor with immediate (or successively higher) authority over the employee." When an employee has not been subject to any tangible adverse employment action, the employer is entitled to raise an affirmative defense to liability or damages. The defense is based on "two necessary elements: (a) that the employer excised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) 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 Court also endorsed the promulgation of Company policies against harassment and grievance procedures for employees who have been victimized by sexual harassment. However, the Court announced a strict liability standard where adverse action is taken against the complaining employee. The Court held that "[n]o affirmative defense is available, however, when the supervisor's harassment culminates in a tangible employment action, such as discharge, demotion, or undesirable reassignment."
The Court's rationale was based on public policy favoring remediation of sexual harassment in the workplace by "encouraging forethought by employers and saving action by objecting employees" The practical effect of these cases is a rebuttable presumption in favor of liability in sexual harassment cases involving supervisors where the employee has suffered no tangible economic injury. Where the employee has been subjected to some form of tangible injury to his or her employment status, the employer is strictly liable.