November 1998 Issue



By Roy Whitehead, Jr., and Kenneth Griffin

On June 26, 1998, in two precedent-setting cases, the Supreme Court clarified the liability tests for employers where a supervisor is alleged to have sexually harassed an employee. The two cases provide a roadmap for employer liability and possible defenses in two relatively common instances. First, when an employee is victimized by a supervisor with immediate (or higher) authority over the employee. And secondly, when a supervisor creates a hostile work environment by making explicit threats to alter a subordinate's terms or conditions of employment based on sex, but, when rebuffed, does not fulfill the threat.

The First Case

After resigning as a lifeguard for the City of Boca Raton, Florida, Beth Faragher sued the city and her two immediate supervisors, alleging that they (both male) had created a "sexually hostile atmosphere" by repeatedly subjecting her and other female employees to "uninvited and offensive touching," by making lewd remarks, and by speaking of women in offensive terms. She claimed that this conduct constituted discrimination in the "terms, conditions, and privileges of employment" in violation of Title VII of the Civil Rights Act. Faragher never complained to higher city officials about her treatment. Another supervisor once told another female employee, "the city just doesn't care." There was no demonstration that higher-echelon city officials (the employer) had actual knowledge of the two supervisors' conduct. The city, however, had failed to disseminate its sexual harassment policy to beach employees and made no effort keep track of the conduct of the two beach supervisors. Additionally, the city's policy failed to provide for a procedure to bypass harassing supervisors in filing a complaint. The lower courts split on the issue of the city's liability.

The Supreme Court decided that an employer is subject to vicarious liability to a victimized employee for an actionable hostile sexual environment claim created by a supervisor with immediate (or higher) authority over the employee (Faragher v. City of Boca Raton, No. 97-282, June 26, 1998). When the supervisor's harassment culminates in a tangible employment action, such as discharge, demotion, termination, failure to promote, reassignment with different responsibilities, undesirable working conditions, or a significant reduction in benefits, the liability is absolute. This is so because tangible employment decisions are the means by which the supervisor brings the official power of the enterprise (employer) to bear on the employee. A tangible employment decision, such as a retaliatory discharge for rebuffing sexual advances, entails an official act of the enterprise. For these reasons, a tangible employment action taken by a supervisor becomes, for Title VII purposes, an act of the employer.

The next question is: What is the employer liability when the sexual harassment does not result in a tangible employment action? The answer is less obvious. The Court, however, did provide important guidance for employers on management steps that may be taken to avoid liability. The Court did so by establishing two affirmative defenses that may be raised when no retaliation or loss of tangible job benefits has occurred.

The Employer Defenses

In Faragher the court said that when no tangible job action is taken against the employee, the employer may raise two affirmative defenses to liability or the award of damages. The defenses consist of two necessary elements:

* That the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and

* That the complainant unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer to avoid harm.

Justice David Souter wrote that the need for a stated sexual harassment policy and grievance procedure suitable to the employment circumstances may be addressed in litigating the first element of the defense. A demonstration that the employee unreasonably failed to use the established complaint procedure will normally suffice to satisfy the second element. Applying the two affirmative defenses to the facts of Faragher, the court found as a matter of law that the city could not have exercised reasonable care because the city failed to provide its sexual harassment policy to beach employees, the city made no attempt to keep track of the two beach supervisors' conduct, and the city's policy failed to provide a procedure to bypass harassing supervisors.

The Second Case

Kimberly Ellerth quit her job as a salesperson with Burlington Industries after 15 months, alleging she had been subjected to sexual harassment by a mid-level supervisor, Ted Slowik. Slowik had authority to hire and promote employees, subject to higher approval, but not to set company policy. The plaintiff was subjected to repeated boorish and offensive sexual remarks and gestures and was threatened with a loss of job benefits. On one occasion when she failed to respond to explicit personal remarks Slowik made, he told her, "you know Kim, I could make your life very hard or very easy at Burlington." Ellerth rebuffed all of Slowik's advances, yet suffered no retaliation and was, in fact, promoted once. Moreover, she never informed anyone in authority of Slowik's conduct even though she was aware of Burlington's sexual harassment policy.

Justice Anthony Kennedy stated, again, that an employer is subject to vicarious liability to a victimized employee for an actionable, hostile environment created by a supervisor with immediate, or successively higher, authority over an employee (Burlington Industries v. Ellerth, No. 97-569, June 26, 1998). The liability is absolute when the employee has suffered the loss of a tangible job benefit, like a promotion, for rebuffing the sexual harassment. Again the Court said that when no tangible job action has been taken against the employee, the employer may raise the two affirmative defenses discussed previously. The Court remanded the case to the trial court for a determination of whether Ellerth has a claim for vicarious liability and whether the affirmative defenses apply.

Public Policy Goals of the Court

The decisions in Faragher and Burlington clearly illustrate several admirable public policy goals of the Supreme Court. Firstly, the Court is clearly advising employers that the actions of a supervisor which effect a loss of tangible job benefit for the harassed employee will trigger absolute employer liability because they are company acts. Secondly, the primary purpose of Title VII is "not to provide redress but to avoid harm," (Albemarle Paper Co. v. Moody, 422 U.S. 405). The Court is advancing this primary purpose by encouraging employers to publish, promulgate, and enforce sexual harassment grievance procedures. Finally, the Court is encouraging employees to take advantage of those employer-promulgated sexual harassment grievance procedures in order to avoid a hostile environment. The Court is working toward these goals by rewarding an affirmative defense to employers who comply with the holdings by establishing an effective sexual harassment policy and denying recourse to employees who unreasonably refuse to follow properly drafted employer sexual harassment grievance procedures. Thus, the next important question is what employer action is necessary to comply and avoid liability for supervisor harassment?

There are several preventive legal steps that the astute employer will take with regard to all employees, as follows:

* The employer should publish a strong, well-articulated sexual harassment policy;

* All employees should be informed of and provided a copy of the policy;

* The CEO should clearly and forcefully advise all employees that sexual harassment will not be tolerated;

* The complaint procedure should allow employees to report sexual harassment to someone other than the harassing supervisor;

* Supervisors should be informed, in writing, that the employer is absolutely liable for their sexual harassment involving the loss of an employee's tangible job benefits; and

* The employer should swiftly take appropriate remedial action by fairly investigating the claim, taking effective action, protecting the victim from retaliation, and restoring any lost tangible job benefits in a timely manner.

Many astute employers have already taken some or all of these preventive steps. *

Roy Whitehead, Jr., JD, LLM, is an associate professor of business law and Kenneth Griffin, DBA, a professor of information systems, both at the University of Central Arkansas.

James L. Craig, Jr., CPA
The CPA Journal

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