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On the final day of its 1998 term, the Supreme Court issued two landmark opinions that clarify the law on sexual harassment in the workplace. Both decisions were welcomed by management and by civil rights organizations. Both groups had anxiously awaited these roadmaps through the labyrinth of conflicting lower-court rulings on employer liability for sexual harassment by supervisors. Unquestionably, employer liability for sexually harassing acts by supervisors has been expanded. However, even more importantly, an employer's actions in generating, disseminating and enforcing an appropriate anti-harassment policy and procedure have been identified by the Supreme Court as critical elements of an employer's affirmative defense to a claim of sexual harassment. While both decisions focus on sexual harassment, the holdings will have broad application to anti-discrimination employment law as a whole.

Employers should view these decisions as a call to re-evaluate the authority of their supervisors, managers and team leaders, and to intensify preventive measures. For, the employer is strictly liable if an employment action by a supervisor has a tangible effect on an employee (usually resulting in an adverse economic consequence). Limiting and defining who has the requisite supervisory authority, and under what conditions it can be used, is now essential for putting an employer in a position to better ensure that such actions are non-discriminatory. For other actions that may arguably create a hostile work environment, but that do not have an adverse economic effect on the employee, the effectiveness of the employer's defense will be measured by its preventive measures and by the effectiveness of its corrective actions. These two decisions are a mandate for launching full scale preventive measures.

Included within this analysis is a seven step action plan for complying with the new Supreme Court standards.

In the first case, Burlington Industries, Inc. v. Ellerth, ____ U.S. ____, 1998 U.S. LEXIS 4217 (June 26, 1998), the Court ruled that an employee who resists a supervisor's sexual advances need not have suffered a tangible job detriment, such as termination or demotion, in order to pursue a lawsuit against the employer. In Ellerth, the plaintiff quit her job after her supervisor subjected her to offensive remarks and gestures, some of which could be construed as threats to deny her tangible job benefits if she did not submit to her supervisor's sexual demands. Although the plaintiff rebuffed her supervisor's advances, she suffered no tangible detriment and was, in fact, promoted. She later quit without complaining of the harassment to her employer, despite knowing that the company had a policy against sexual harassment. The Ellerth Court held that the employer is vicariously or automatically liable for a supervisor's harassment of a lower-level employee when a tangible employment action is evident. Such tangible action would include, for example: hiring, firing, failing to promote, or reassigning the employee to a significantly different job. The Court further ruled that an employer may also be vicariously liable to a victimized employee for a hostile work environment created by a supervisor with immediate (or successive, higher) authority over the employee - even if the employee suffered no tangible job consequences. The Court nevertheless clarified the limitations of employer liability by holding that an employer has an affirmative defense to such liability if it can demonstrate that (1) it exercised reasonable care to prevent and promptly correct any sexually harassing behavior, and (2) the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to otherwise avoid harm. Ellerth, 1998 U.S. LEXIS at *41-42.

The second case, Faragher v. City of Boca Raton, ___ U.S. ____, 1998 U.S. LEXIS 4216 (June 26, 1998), held that an employer may be liable for sexual harassment by a supervisor even if the employer lacked actual notice of the supervisor's misconduct. In Faragher, a lifeguard sued the city of Boca Raton, Florida, for failing to protect her from years of harassment by her supervisors in the form of lewd, offensive remarks and unwanted touching. Like the plaintiff in Ellerth, Ms. Faragher resigned without complaining of the harassment to her employer. The Court of Appeals for the Eleventh Circuit had held that the City was not vicariously liable. The Supreme Court reversed the Court of Appeals and remanded the decision for judgment in favor of the employee. According to the Court, Title VII of the Civil Rights Act of 1964 creates a cause of action against an employer where a sexually hostile environment is created by a supervisor with authority over an employee. In Faragher as in Ellerth, the Court emphasized that the employer may defend this by establishing the existence of a harassment policy and the employee's unreasonable failure to use it. Faragher, 1998 U.S. LEXIS at *48. The Court also held that, although "proof that an employer had promulgated an anti-harassment policy with complaint procedures is not necessary in every instance," such proof would constitute a significant factor in meeting the first element of the affirmative defense. Although not dispositive, the fact that the plaintiff failed to exercise available rights under the employer's procedures "normally [will] suffice to satisfy the employer's burden under the second element of the defense."

Taken together, the Ellerth and Faragher cases establish a set of more clearly defined rights and responsibilities for employers, managers and employees. Although these decisions expand employer liability for sexual harassment claims under Title VII, they also delineate affirmative defenses available to employers. Attention to developing and implementing a practical and proactive plan for preventing unlawful harassment remains the primary source of litigation prevention and liability avoidance for employers in this context.

Key Q & A's

Is the employer strictly liable for a supervisor's sexual harassment?
Yes, if it results in a "tangible employment action."

What is a "tangible employment action"?
The Ellerth Court stated: "[a] tangible employment action constitutes 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." In most cases, the injury from the supervisor's action must "inflict direct economic harm" to qualify as a "tangible employment action." These are the actions of a supervisor which bring "the official power of the enterprise to bear on subordinates." Explicit in the Court's decision is the statement that such acts are the type which may be subject to "review by a higher level of supervisors."

What are non-tangible economic actions of a supervisor?
These are the many actions of a supervisor that affect the work environment but do not rise to the level of impacting the economic conditions of employment. A supervisor may make sexually suggestive statements that intimidate an employee precisely because they are coming from a supervisor. If these statements do not have an injurious economic impact of the employee, they are likely to be classified as non-tangible economic actions of a supervisor. Many such actions will resemble offensive conduct of co-employees.

Is the employer liable for offensive non-tangible economic actions of a sexual nature taken by a supervisor?
Yes, provided that the actions are "severe and pervasive" and that no other defense applies. The Court did not further elaborate on what could be deemed severe and pervasive conduct; however, it may be possible that a single action that is so severe as to shock the conscience of a normal employee would qualify under the severe and pervasive standard. Importantly, the Court declared that the employer does have "vicarious liability to a victimized employee for an actionable hostile environment created by a supervisor with immediate (or successively higher) authority over the employee." This is subject to an affirmative defense if no tangible employment action follows.

In plain English, what is this defense?
The defense has two parts. First, the employer must show it has been reasonable in anticipating, preventing and correcting sexually harassing behavior. At a minimum, this will mean having an appropriate written sexual harassment policy and insuring that it was received by the affected employee. Evidence of sexual harassment prevention training of supervisors by the employer will be very helpful, if not essential. The employer would then need to show that when complaints are received they are quickly investigated, with appropriate corrective action being taken. Once this part of the defense has been established, the employer will then need to show that the employee failed to take advantage of the protections available in the workplace. This could be as simple as showing that no complaint was made or as complicated as demonstrating a lack of cooperation with the employer's investigation. The precise contours of this defense will be shaped by the lower courts on a case by case basis. Employers wishing to take full advantage of the defense can do so by following the seven part action plan which is included in this newsletter.

Is this defense only applicable to sexual harassment cases?
No. Although the defense is specifically provided for in the context of these two sexual harassment decisions, it can be logically extended to most forms of discrimination. If a plaintiff is claiming racial harassment, the same analysis and defense would likely apply. This could very likely extend to statutes beyond Title VII, such as the ADEA. The Supreme Court's reasoning was based on the authority of a supervisor in the workplace more than on any specific legislative mandate in Title VII.

Do existing policies need to be changed?
Probably not. The key is to revisit your policy and determine whether it is complete. The policy should not be limited solely to sexual harassment. It should also deal with other forms of unlawful harassment. The policy needs to meet federal and state requirements (which will vary). The policy must contemplate that if the harassing party is the immediate supervisor, the employee will have alternative places to file a complaint. A legal review of your existing policy would be advisable. (This could include a determination as to whether there is a sufficient emphasis on non-retaliation.)

Is supervisory training on sexual harassment sufficient?
No. Clearly, under the Supreme Court's decisions, there is an underscoring of the need for preventive action. The Court has assumed that an employer has considerable ability to control its supervisors, especially regarding tangible economic actions. With a reaffirmation that strict liability will apply for such events, the employer (in self defense) needs to educate its supervisors and build in a review process in order to avoid potentially improper economic actions. Regarding non-tangible employment actions, the employer's defense will depend in part on reasonable preventive measures. Clearly, training is an important preventive step. To the extent that the reasoning of these decisions applies to discrimination cases in general, then the rationale for broader training is obvious. In 1996, Littler published a generic eight hour curriculum for front line managers covering employment law. A copy of this curriculum and a reprint of a recent article on the "Emerging Law of Training" are available upon request from your nearest Littler office. (Or, simply call 1.888.LITTLER.)

Team leaders, managers and supervisors in our organization are empowered to act. This is essential for efficiency and our ability to compete. Is the Supreme Court directing us to change this?
No. However, the Court has placed responsibility for tangible employment actions with the employer (not just the supervisor). Your current systems can be left in place, but be aware of the liability even a team leader can create for your organization. If employment decisions can be made at this level, then training and review are essential. If a supervisor has the authority to fire, demote or transfer, then the organization has decided to place the exposure inherent in a lawsuit behind each of these decisions. This is the sobering economic consequence of the strict liability which could result from the misuse of that authority. Recognizing this, your organization may wish to move the decision point to a higher level and/or increase, through training, the quality of decision making at the front line level. This is the business decision which the Court has consciously handed to employers.

For pending lawsuits, do we need to do anything different?
Potentially, yes. If an existing lawsuit could be subject to the defense identified by the Court, then an evaluation needs to be made about whether it should be raised at this time. Furthermore, each case needs to be examined to determine whether federal law applies and whether the Court's analysis will affect the direction of state law.

How can we obtain more information on these decisions and their practical impact?
In the next several weeks, many opportunities will present themselves. Littler will be holding a national series of breakfast briefings in September. Each will provide a comprehensive Task Force Report on the implications of theses two decisions. Please contact your nearest Littler office or call 1.888.LITTLER for information.

Previously, sexual harassment was identified as either quid pro quo or hostile work environment. Do these terms still have meaning?
Yes. The Court used these terms, but it also modified the meaning of quid pro quo sexual harassment. The strict liability formerly associated with this term now is limited to circumstances where a "tangible economic action" has occurred. Formerly, if a supervisor stated "go to bed with me and you will do well in the company," this was labeled quid pro quo sexual harassment, even if nothing detrimental (or positive) actually occurred. Under the new standard, such a statement would be labeled a hostile environment claim, provided that no "tangible economic action" occurred. Likewise, the conduct covered by the term "hostile work environment" has expanded to include hostile supervisory actions (again, if they result in no tangible employment actions).

Is there a more useful terminology which we could apply?
Yes. It may be easier to now think of sexual harassment as either economic or environmental. The term "economic sexual harassment" would include actions by a supervisor (like quid pro quo) which result in a tangible economic detriment. The term "environmental sexual harassment" would include conduct by a supervisor or by others which creates a hostile work environment and is subject to the affirmative defense announced by the Court. These common sense terms should have a meaning to both supervisors and employees and may better define the forms of sexual harassment which occur. It is appropriate now to define sexual harassment more by the consequences experienced by the employee rather than the status of the perpetrator. Previously, the term "quid pro quo" almost always implied actions by a supervisor or a member of management, while a "hostile work environment" was usually created by others. To the extent that the old terms are perpetuated in your workplace, they have the potential to bring back the confusion engendered by prior decisions.

Executing The Supreme Court's New Directives:
1 Seven Points For Action

1. DEVELOP AN ANTI-HARASSMENT POLICY
   A thorough anti-harassment policy, including simple complaint procedures, is critical. An effective, easily understood policy is fundamental to establishing the employer's defense that it exercised reasonable care to prevent unlawful harassment. The Supreme Court in Faragher stated that an anti-harassment policy with complaint procedures would constitute "a significant factor" in meeting the first element of the employer's defense. A stand alone anti-sexual harassment policy is acceptable, provided a broader unlawful harassment policy also exists.

2. DISTRIBUTE THE POLICY
   Once an anti-harassment policy is generated, the employer should disseminate it to all employees. Managers and employees at all levels, of course, need to know that the policy exists and how to follow the specific procedures in the event of concerns or complaints about sexual harassment. Too many employers still maintain these policies only in management binders or on corporate office shelves. Current policies can be placed on an organization's intranet and can thus be available 24 hours a day. Encrypted computer signatures can validate that the policy has been received. However, for most employers a signed paper copy of the policy will still be the most efficient method of insuring that each employee has received it.

3. CONDUCT TRAINING
   The unequivocal message from the Supreme Court is that employers must act affirmatively to prevent sexual harassment. When they do they may raise such acts as an affirmative defense in a lawsuit. For this reason, all employers should revisit their overall sexual harassment prevention plans and adopt more effective, enlightened, practical and consistent training programs. One of the most effective and proactive ways to prevent sexual harassment lawsuits is to teach employees about the specific conduct prohibited, and to inform them that they will be held personally and individually accountable for such behavior. It is important now, more than ever, that supervisors receive training that outlines the conduct that may constitute sex harassment and that they receive a strong message that their employer will not tolerate acts of harassment. The best means of preventing unlawful harassment and laying a strong foundation for the affirmative defenses outlined in Ellerth and Faragher, however, is to ensure that all employees attend comprehensive, periodic "awareness training."

   Such training should incorporate both practical information and legal interpretation as to why and how harassment complaints arise, definitions of prohibited conduct in plain terms and a delineation of complaint procedures that leaves no doubt as to the appropriate means for victims to obtain assistance and relief. Managers, supervisors and human resources representatives should additionally receive appropriate training on how to effectively implement an employer's response mechanisms, from communication of the initial complaint or concern (no matter how informal) to investigating and executing corrective action. Practical and interactive management-level training on handling typical challenges, such as uncooperative victims, the impact of consensual relationships and a lack of corroborating evidence in "he said-she said" situations is vital. Training on the issue of individual liability under state law can also be a very important tool to establish an initial interest among employers and supervisors in avoiding prohibited conduct.

   Ideally, training programs should be reevaluated to insure that they cover more than just sexual harassment prevention. Other unlawful conduct in the workplace is equally unacceptable and also creates potential liability.

4. AUDIT EMPLOYMENT DECISIONS
   Every employer should heed the Supreme Court's focus on "tangible employment actions" by ensuring that all such actions are subject to internal "checks and balances" before implementation. This review may be performed by human resources personnel or other experienced managers to ensure that no illegal actions are involved. This is a good way to limit the employer's vicarious liability in situations where a tangible employment action is at issue.

5. PROMPTLY INVESTIGATE
   Prompt investigation of harassment claims is critical. An employer's indecisive action, or failure to exercise unambiguous leadership in this context, will serve neither to correct unlawful behavior nor to establish the affirmative defense that it exercised reasonable care and promptly corrected any inappropriate behavior. An effective investigation includes planning and coordination with human resources. Experience teaches that where the employer takes the concerns raised seriously enough to launch a well-planned investigation and communicates the general plan and related policies (including no retaliation) to the victim before the investigation begins, the victim is reassured and risks of further claims and eventual liability are reduced. Finally, thorough, accurate and factual documentation is a key factor in accomplishing the best possible outcome. Because such investigations require outstanding listening and communication skills, as well as scrutiny and interpretation of complex human interactions, only well-trained employees or third parties should be charged with this responsibility. Incomplete, inaccurate or biased investigations can actually serve to deepen both the problem and the employer's liability.

6. TAKE PROMPT AND EFFECTIVE REMEDIAL ACTION
   After concluding that inappropriate harassment has likely occurred, an employer must take prompt remedial action reasonably designed to stop the harassment. The Ellerth and Faragher decisions emphasize the duty of the employer to promptly correct any unlawful behavior. While the victim is not entitled to decide the appropriate response, his or her wishes may be taken into consideration. To avoid claims of retaliation, the victim should not be required to transfer or to change jobs to resolve the situation. The threat of retaliation suits is great in this context and must be aggressively addressed by reiteration of the employer's "zero tolerance" policy at appropriate intervals throughout the process.

7. FOLLOW UP ON REMEDIAL MEASURES
   The employer should always check back with the victim after remedial action has been taken to make sure that it was effective in resolving the harassment. Periodic monitoring and follow-up questions should be documented, as well. The victim's feedback should be documented, as well. At this stage, it is also a good idea to reaffirm the employer's anti-harassment policy with all employees involved in the investigation, including the accused, the accuser and any witnesses. Copies of the policy should be distributed to such persons as a matter of course. Under appropriate circumstances, immediate training focused on any weak areas of the employer's prevention or response plan is recommended.

CONCLUSIONS

The Ellerth and Faragher decisions impose vicarious liability on employers where supervisors request sexual favors in exchange for tangible employment action. In cases where supervisory behavior is severe and pervasive enough to constitute a hostile work environment but does not culminate in a tangible employment action, employers have an affirmative defense to liability if they have exercised reasonable care in attempting to prevent, and promptly correct, workplace harassment. These two new cases emphasize that, to avoid liability for sexual harassment, the employer must be very proactive in undertaking serious, affirmative efforts to prevent sexual harassment. They must implement strict company guidelines and rapid response procedures. They must create mechanisms that encourage victims to report incidents of sexual harassment and that result in effective corrective action where appropriate. An additional upshot of the Ellerth and Faragher decisions is that our courts will now entertain a broader set of sexual harassment claims against employers. Courts will no longer focus on whether the employer knew or should have known of the conduct where supervisorial conduct is at issue. Rather, in hostile environment cases, the focus will be on the employer's procedure for, and response to, complaints. All employers should update their current sexual harassment policies and training regimens in light of these very important cases.

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ASAP^TM is published by Littler Mendelson in order to review the latest developments in employment law. ASAP^TM is designed to provide accurate and informative information and should not be considered legal advice.

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