On June 26, 1998, the United State Supreme Court decided two landmark cases which expand the circumstances under which sexual harassment claims may be made against employers.
Below, we analyze those two decisions, and predict the likely consequences.
In Burlington Industries, Inc. v. Ellerth, 1998 WL 336326 (U.S., June 26, 1998), (No. 97-569), the Supreme Court considered whether to impose liability vicariously on an employer when its low-level manager allegedly had created a hostile work environment, even though the employer’s upper management was unaware of the manager’s conduct, and the alleged victim had suffered no adverse employment consequences.
Kimberly Ellerth had been a sales person for defendant Burlington for about 15 months. She claimed that her supervisor, Ted Slowik, a lower-level Burlington manager, engaged in a repeated series of boorish and offensive remarks and gestures, including threats to deny Ellerth tangible job benefits ("I could make your life very hard or very easy at Burlington").
Ellerth quit. She alleged that she had left the company because of Slowik’s conduct, which Ellerth characterized as "hostile work environment" sexual harassment. However, as Ellerth conceded, she had registered no significant complaints about Slowik’s conduct, and even chose not to lodge a formal complaint with the company, despite her awareness of Burlington’s anti-harassment policy. Moreover, not only had Ellerth had not suffered any adverse employment consequences from Slowik, but rather she had been promoted.
The trial court granted Burlington’s summary judgment motion. The court found that Slowik’s behavior had indeed created a hostile work environment, but granted the motion because, in the court’s view, upper management at Burlington neither knew nor should have known of Slowik’s misconduct. The Seventh Circuit then reversed the trial court, but left a confusing matrix of eight separate opinions, which forged no discernable consensus, let alone guidance for parties finding themselves in similar circumstances. See Jansen v. Packaging Corporation of America, 123 F.3d 490 (7th Cir. 1997) (en banc).
Thus, the Supreme Court took the case, focusing squarely on the issue of the employer’s vicarious liability for Slowik’s conduct. After considerable discussion, the Court ultimately determined that there indeed could be vicarious liability in this situation. The Court invoked general common law principles of agency, more specifically those embodied in the Restatement of Agency, §219(2), to craft an employment-related exception to the general rule that a master is not subject to liability for the torts of his/her servants acting outside the scope of their employment. The Court held that these principles of agency law compelled the imposition of vicarious liability on an employer for harm caused by its manager’s misuse of supervisory authority in creating a hostile work environment for the victimized employee.
However, obviously concerned about the facts of the Ellerth case — including the employee’s failure to pursue Burlington’s anti-harassment policy, coupled with the fact that no tangible adverse employment action had been taken — the Court went on to fashion an "affirmative defense to liability or damages, subject to proof by a preponderance of the evidence." This affirmative defense, held the Court, comprises two necessary elements:
1. That the employer exercised "reasonable" care to prevent and correct promptly any sexually harassing behavior, and
2. That the employee "unreasonably" failed to take advantage of any preventive or corrective measures offered by the company.
Following on the heels of Ellerth, the Court decided the case of Faragher v. City of Boca Raton, 1998 WL 336322 (U.S., June 26, 1998) (No. 97-282). Faragher concerned a female lifeguard for the City of Boca Raton, Florida, who had proven at trial that her male supervisors had sexually harassed her over a five-year period through repeated uninvited and offensive touching, lewd remarks and references to women in generally offensive terms.
The trial court had held that the City could indeed be liable for harassment by its supervisory employees because the harassment was pervasive enough to support an inference that the City had either actual knowledge, or constructive knowledge, of it.
However, the Eleventh Circuit reversed, holding that the supervisory employees were not acting within the scope of their employment when they engaged in the harassing conduct, that their agency relationship with the City did not facilitate the harassment, that constructive knowledge of it could not be imputed to the City because of its pervasiveness, and that the City could not be held liable for negligence in failing to prevent it.
Following the standards it had enunciated in Ellerth, the Supreme Court reversed the Eleventh Circuit Court. It said that Boca Raton was indeed liable, because it had not taken "reasonable" care, as evidenced at least by the following:
(1) The City had failed entirely to disseminate its anti-harassment policy among beach employees;
(2) City officials had made no attempt to monitor the conduct of the lifeguard supervisors; and
(3) The City’s anti-harassment policy included no assurance that harassing supervisors would be by-passed when sexual harassment complaints were registered against them.
As a result of Ellerth and Faragher, we believe:
There will now be more sexual harassment claims. These two decisions invite claims even where knowledge of the harassing behavior is confined to the lowest levels of an employer’s organization, and even though no adverse employment action is taken against the alleged victim. Several lower courts had previously ruled for the employer in similar cases, and undoubtedly many claims of that nature were never brought, or if so, were settled early and cheaply.
New sexual harassment claims will now take longer to resolve, and be more expensive. The issues of (a) whether an employer has undertaken "reasonable" efforts in combating harassment, and (b) whether the employee has "unreasonably" ignored such efforts, may often be questions of fact, about which the parties will almost always disagree. Therefore, resolving such issues will tend to require a trial — the very last, and often most expensive, phase of litigation.
Companies will need to devote more resources than ever before to preventing and correcting harassment. For example, now more than ever, employers must develop, execute and thoroughly disseminate meaningful, disciplined anti-harassment policies. This may require a significant amount of time, money and employee training.
Insurers are likely to be uneasy about these Supreme Court decisions. Premiums for Employment Practices Liability coverage may well increase, as will the attention insurers pay to the integrity and execution of an employers’ anti-harassment policies and practices. Coverage may well be denied where appropriate policies and procedures are not in place. In short, these recent decisions favor employees, and are not good for employers, despite the view to the contrary of some commentators. The decisions certainly clarify the law on sexual harassment, but that clarity will now place employers even more frequently on the defensive.
Shawn M. Collins is a Partner in the Collins Law Firm, P.C., Naperville. His practice is concentrated in Employment Law and Litigation. He received his Undergraduate Degree in 1980 from Notre Dame University and his Law Degree in 1986 from the University of Chicago.
Charles J. Corrigan is a Partner in the Collins Law Firm, P.C. He is the Chair of the DCBA’s Labor and Employment Law Committee. He received his Undergraduate Degree in 1983 from Georgetown University and his Law Degree in 1987 from John Marshall.