U.S. Supreme Court Clarifies Employer Liability for Sexual Harassment by Supervisors

In two opinions issued on June 26, 1998, Burlington Industries Inc v Ellerth and Faragher v City of Boca Raton, the U.S. Supreme Court clarified when an employer can be held liable for sexual harassment engaged in by a supervisor. In Ellerth, the court ruled that "quid pro quo" harassment for which an employer is automatically liable requires a showing that the employee suffered a "tangible employment action" for refusing the supervisor's sexual demands. The court defined a tangible employment action as "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." The court further observed that such action usually inflicts "direct economic harm," requires an official act of the employer, usually is documented in official company records, and often is subject to review by higher level supervisors. As a result, such tangible action becomes the act of the employer and the employer is strictly liable for such action.

When there is no tangible employment action, the harassment is labeled "hostile environment" harassment. An employer may or may not be liable for a hostile environment created by a supervisor. To avoid liability for hostile environment the employer must show both: 1) it exercised reasonable care to prevent and correct promptly any harassing behavior; and 2) the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid the harm otherwise. Regarding the two elements of this defense, the court explained that an employer need not demonstrate that it had a policy prohibiting harassment with a complaint procedure to establish the first element. Regarding the second element, the employer need not demonstrate that an employee failed to use an available complaint procedure, but such a demonstration normally will suffice to establish the second element.

The court directed the lower court to re-evaluate the Ellerth case in light of its opinion because the factual record was not sufficient. However, in Faragher the court ruled, as a matter of law, that the employer could not satisfy both elements of this defense. First, although the city had a sexual harassment policy, it was never disseminated to the employees in the department in which the complaining employees and accused supervisors worked. Second, the city did not keep track of the conduct of the accused supervisors. Third, the policy did not assure employees that they could bypass the accused supervisors when filing a complaint. The size of the employer and extent of it operations also were factors, "unlike the employer of a small workforce, who might expect that sufficient care to prevent tortious behavior could be exercised informally. . ."

The employees in Faragher also had argued that the city should be held strictly liable because other supervisory employees were aware of the harassment, but took no corrective action. The court did not rule on this issue because the factual record on the issue was not sufficiently developed.

The lessons of these cases are very clear. All employers should: 1) adopt and disseminate a policy prohibiting sexual harassment that includes a meaningful complaint procedure; 2) review tangible employment actions recommended by supervisors; and 3) keep an eye on supervisors to ensure they do not misuse their authority on any discriminatory basis.