Supreme Court Finds Employers Liable for Sexual Harassment for Supervisors, but Creates Affirmative Defense

The United States Supreme Court in two landmark decisions has outlined the circumstances in which employers may be liable for sexual harassment by supervisors. Burlington Industries v. Ellerth, 524 U.S. 742 (1998); Faragher v. City of Boca Raton, 524 U.S. 775 (1998).

The Supreme Court concluded that employers cannot escape liability for supervisor misconduct simply because they did not know or could not have known about the misconduct. While a negligence standard still applies to sexual harassment by non-supervisory employees, the courts now hold employers to a higher standard for supervisory misconduct.

For misconduct by supervisors, an employer will be vicariously liable for the action of the supervisor where the sexual harassment did not culminate in a tangible employment action such as hiring, firing, demotion, etc. An employer, however, may avoid liability by satisfying a two-prong affirmative defense.

Under the first part of the affirmative defense, an employer must show that it took reasonable steps to prevent sexual harassment and prompt remedial measures to remedy the harassment once it learned of the misconduct.

The second part of the defense requires a showing that the employee did not take advantage of reasonably available opportunities to complain. This defense will most likely be successful in hostile environment cases where the employer has a comprehensive complaint procedure.

In contrast, where the sexual harassment culminates in a tangible employment action, this affirmative defense is not available and the employer will be liable for the supervisor's misconduct. Thus, for example, where a supervisor terminates an employee for failing to acquiesce to a demand for sexual favors (i.e., tangible job action), the employer will be liable even if it did not know about the supervisor's misconduct and the employee did not report it.

Highlights of the Court's Decisions

  • Employers are subject to vicarious liability for a sexually harassing hostile environment created by supervisors with immediate (or successively higher) authority over the complaining employee.
  • Employers always liable for sexual harassment by supervisors culminating in tangible adverse employment action.
  • A tangible adverse employment action is a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.
  • When no tangible employment action is taken against a complaining employee, defending employer has an affirmative defense to a hostile environment claim for liability or damages.

Affirmative defense is comprised of two elements:

  • Employer exercised reasonable care to prevent and correct behavior;
  • Employee unreasonably failed to take advantage of preventive or corrective opportunities or to avoid harm otherwise.

Summary of the Facts

Burlington Industries v. Ellerth

Kimberly Ellerth worked fifteen months as a sales person in the company's two-person office in Chicago. Ellerth contended she was subject to constant sexual harassment by her supervisor, Tom Slovik, who was in the Company's New York office. Slovik was a mid-level manager and was not her immediate supervisor. Rather, Ellerth reported to the only other individual in the Chicago office. That individual, in turn answered to Slovik in New York.

Ellerth alleged that Slovik invited her to a hotel lounge and made remarks that she should "loosen up" and warned "[y]ou know, Kim, I could make your life very hard or very easy at Burlington." Ellerth also complained that Slovik expressed reservations about her during a promotional interview because she was not "loose enough" and then reached over to her knee and rubbed it. Ellerth did receive the promotion.

When Slovik, however, called her to inform her of the promotion, he stated: "[Y]ou're gonna be out there with men who work in factories and they certainly like women with pretty butts [and] legs." On another occasion, Slovik allegedly said "I don't have time for you right now, Kim--unless you want to tell me what you're wearing" and asked "Are you wearing shorter skirts yet, Kim, because it would make your job a whole heck of a lot easier?"

Ellerth ultimately resigned. The reasons she gave to the Company for her resignation were unrelated to the alleged sexual harassment. After her resignation, however, Ellerth sent a letter to the company explaining that she quit because of Slovik's behavior towards her.

Faragher v. Boca Raton

Beth Ann Faragher was a part-time lifeguard with the City of Boca Raton from 1985 through 1990. She accused her two immediate supervisors Bill Terry and David Silverman of sexual harassment. During her employment, the City adopted a sexual harassment policy, but failed to distribute it to its employees. As a result, many employees were unaware that the City had a policy regarding sexual harassment.

In support of her sexual harassment claim, Faragher alleged that Terry repeatedly touched the bodies of female employees and frequently placed his arm around her with his hands on her buttocks. Faragher also claimed that Terry made crude and demeaning references to women. For example, during a job interview, Terry allegedly informed an applicant that female lifeguards had sex with their male counterparts and asked whether the applicant would be willing to do the same.

Faragher also claimed that her other supervisor, Silverman, behaved in similar ways. Regarding Silverman, Faragher claimed that on one occasion he tackled her and remarked that, but for a physical characteristic he found unattractive, he would have sex with her. Silverman also allegedly staged an act of oral sex and made frequent, vulgar references to women in sexual matters.

Two months before Faragher resigned, a former lifeguard complained to the City about Terry and Silverman. Following an investigation, the City reprimanded Terry and Silverman and required them to choose between a suspension without pay and forfeiture of annual leave. Faragher never complained herself of sexual harassment.

The Supreme Court's Analysis

Employers Are Vicariously Liable For The Acts of Supervisors

In both cases, the Supreme Court began its analysis by reviewing Section 219(1) of the Restatement of Agency which sets out a central principle of agency law and states in relevant part: "A master is subject to liability through the torts of his servants committed while acting in the scope of their employment."

Based on this language, the Court noted that general agency principles provide for vicarious liability for intentional torts committed by an employee when the employee is aided in accomplishing a tort by the existence of its agency relationship with his or her employer.

Based on these agency rules, the Court distinguished between circumstances involving a tangible employment decision, such as hiring and firing, and non-tangible employment actions such as hostile work environments. The Court explained that in a situation involving tangible employment actions, a supervisor is aided in committing the sexual harassment because the supervisor has the authority to carry out a threat of tangible job detriment.

Conversely, in the hostile work environment situation where there is no adverse employment action taken against the complaining employee, the Court reasoned that in such situation, a supervisor's sexual harassment would be more like the misconduct committed by an employee's co-worker than conduct reflective of a supervisor's employment authority.

For these reasons, the Court concluded that, in making liability determinations, courts should apply different standards to employers depending upon whether the sexual harassment culminated in a tangible employment action. In making that determination, the Court recognized that previously most courts applied different standards of liability to employers for sexual harassment depending upon whether they characterized the alleged harassment as "quid pro quo" or "hostile environment."

The Court concluded that this distinction was of limited utility because the relevant inquiry is whether the sexual harassment ultimately resulted in a tangible employment action.

Employers Are Vicariously Liable For Sexual Harassment by Supervisors That Culminates In A Tangible Employment Action

For Title VII purposes, the Court ruled that a tangible employment action taken by a supervisor against an employee becomes the act of the employer. The Court stated succinctly that the express language of the statute mandates employer liability where a supervisor takes a tangible employment action against a subordinate.

The Court defined a tangible employment action as that type of action that constitutes a significant change in employment status. The Court provided the following actions as examples of a material adverse change in employment: a termination of employment, a demotion evidenced by a decrease in wage or salary, a less distinguished title, a material loss of benefits, and/or a significant diminution of material responsibilities or other indices that might be unique to a particular situation.

The Court also specifically addressed under what circumstances a demotion or job reassignment would constitute a tangible employment action. Regarding these two actions, the Supreme Court explained that a demotion without change in pay, benefits, duties or prestige or a job reassignment to a less convenient job are not material adverse changes in an employee's job that would constitute a tangible employment action.

Employers Are Liable For A Hostile Environment Created By Supervisors, But May Escape Liability Through The New Affirmative Defense

Relying upon the Court's prior decision in Meritor Savings Bank v. Vinson, 477 U.S. 57 (1986), the Court recognized that there should be limitations on employer liability for supervisor misconduct. It also recognized that Title VII was designed to encourage the creation of anti-harassment policies and effective grievance mechanisms so that employers could deter such workplace misconduct.

The Court concluded that limiting employer liability would serve Title VII's deterrence goals by encouraging employees to report harassing conduct before it becomes severe and/or pervasive.

Based on this rationale, the Court created an affirmative defense to its new rule of vicarious liability when no tangible employment action is taken. To escape liability on the affirmative defense, an employer must prove by a preponderance of the evidence two points.

First, the employer must show that it exercised reasonable care to prevent and correct promptly any sexually harassing behavior. Second, the employer must show that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer to avoid harm to him or her otherwise.

Regarding this affirmative defense, the Court noted that proof that an employer had promulgated an anti-harassment policy with a complaint procedure is not required in every instance. Thus, an employer might be able to show that a written policy might not be necessary due to specific employment circumstances.

Regarding the second element of the defense that an employee failed to fulfill the obligation of reasonable care to avoid harm, the Court noted that an employer's showing that an employee failed to use the complaint procedure will normally suffice to satisfy the employer's burden.

The defense is not available, however, when the supervisor's harassment culminates in tangible employment actions such as discharge, demotion or undesirable reassignment.

The Court Reiterates That Hostile Environment Sexual Harassment Must Be Severe And Pervasive

The Supreme Court also revisited its earlier decision in Harris v. Forklift Systems, Inc., 510 U.S. 17 (1993), and reiterated that hostile environment sexual harassment was actionable only where it was so "severe or pervasive" as to "alter the conditions of the [victim's] employment and create an abusive working environment." 477 U.S. at 67 (quoting Henson v. Dundee, 682 F.2d 897, 904 (11th Cir. 1982)).

For example, in Faragher, the Court reemphasized that harassment must be both objectively and subjectively offensive. Not only must the conduct be the type of conduct that a reasonable person would find hostile or abusive, but the victim must also perceive that the conduct was offensive.

The Court also reiterated that lower courts should continue to consider the hostile work environment factors enunciated in Harris, such as the frequency of the discriminatory conduct, its severity, whether it is physically threatening or humiliating or a mere offensive utterance, and whether it unreasonably interferes with an employee's work performance.

The Court ensured that the Harris standards for establishing actionable sexual harassment are sufficiently demanding to prevent Title VII from becoming a "general civility code." Regarding this concern, the Court specifically stated that "properly applied, [lower Courts] will filter out complaints attacking the ordinary tribulations of the work place such as sporadic use of abusive language, gender related jokes and occasional teasing." Faragher at 6. See also, e.g., Carrero v. New York City Housing Authority, 890 F.2d 569, 577-578 (2d Cir. 1989); Moylan v. Maries County, 792 F.2d 746, 749-750 (8th Cir. 1986); see also Lindemann & Grossman, Employment Discrimination Law, 805-807, n.290 (noting cases granting summary judgment for employers because the alleged harassment was not sufficiently severe or pervasive).

Implications For Employers

Like the Supreme Court's other recent employment decisions, the Faragher and Ellerth opinions bring both good and bad news for employers.

The good news for employers is that the Supreme Court's decisions make clear that in many situations employers will not be liable for hostile environment claims where no tangible employment action was taken.

While the Court shifted the burden of proof to employers when a plaintiff has established actionable sexual harassment, employers generally should be able to succeed on the new affirmative defense by showing that they disseminated an effective sexual harassment policy and complaint procedure.

Under the Faragher and Ellerth decisions, where an employer has issued a comprehensive policy and has undertaken reasonable and prompt action to remedy a hostile environment situation, there appear to be very few situations where an employer cannot escape liability for sexual harassment misconduct - even by supervisors.

The bad news for employers is that an employer will be liable if a supervisor takes a tangible adverse employment action against an employee. In the tangible employment action situation, the Supreme Court also has made it clear that an employer will be liable for that supervisor's act even if it had no knowledge of the misconduct.

A typical situation would be where a supervisor demanded sexual favors of a subordinate that the subordinate rejected, and the supervisor responds by punishing the employee through a demotion, job reassignment or termination. An employee in this example still can establish employer liability even if he or she never complained to the company.

An employer, however, caught in this situation can and should mitigate its liability by taking prompt corrective action as soon as it has notice of the alleged sexual harassment. For example, the first time an employer learns of alleged misconduct might be through an EEOC charge or a lawsuit.

No matter what stage an employer learns of the alleged misconduct, it immediately should conduct an investigation and take corrective action as if the individual had filed a complaint under the employer's EEO policy. If an employer learns belatedly of a tangible job action against an employee due to sexual harassment, it should move promptly to reverse the harm done to that employee by restoring the employee to the same position that he or she was in prior to the adverse action.

While doing so may not eliminate liability under the Supreme Court's decisions, it no doubt should diminish substantially any potential claim. In a tangible job action situation, the bottom line is that an employer no longer can build its defense on an employee's failure to promptly follow a complaint procedure.

For this reason, employers need to respond to belated complaints by employees who suffer tangible job actions, even if the complaint was first made in litigation.

Regarding the sufficiency of an employer's sexual harassment policy and complaint procedures, employers should review their policies and ensure that they are distributed to all employees. Harassment policies should contain an express provision that allows employees to bypass their supervisors in the event the supervisor is the individual who has engaged in the misconduct. In light of the Supreme Court's earlier decision in Oncale v. Sundowner Offshore Services, Inc., 523 U.S. 75 (1998), employers also should revise their policies so that they protect both sexes.

Likewise, harassment policies should not be limited to just sexual harassment, but also should include a prohibition against discrimination on the basis of all protected categories. Complaint procedures also should specify that complaints are to be directed to the Human Resource Department or a high level official, and not to any employee's immediate supervisor.