New EEOC Guidance on Vicarious Employer Liability for Harassment by Supervisors
by Darrell R. VanDeusen

The EEOC has published Guidance regarding employer liability for harassment by supervisors under Title VII of the Civil Rights Act of 1964. The Guidance, Notice No. 915.002, was effective the week of June 21, 1999. The Guidance makes clear that an employer may be vicariously liable for harassment by its supervisors, including harassment based on race, color, religion, national origin, age, disability, or in retaliation for engaging in protected activity. 29 C.F.R. § 1604.11 n.1. The EEOC promulgated this Guidance in response to the Supreme Court's decisions in Burlington Industries, Inc. v. Ellerth, 118 S. Ct. 2257 (1998) and Faragher v. City of Boca Raton, 118 S. Ct. 2275 (1998). This outline explains the scope of the Guidance. It does not provide legal advice, however, which can only be provided when related to specific fact situations.

Who Qualifies as a Supervisor?

The Supreme Court has held that an employer is subject to vicarious liability for harassment if the harassment was committed by a "supervisor with immediate (or successively higher) authority over the employee." Ellerth, 118 S. Ct. at 2257. An individual qualifies as a supervisor if:

1. The individual has the authority to undertake or recommend tangible employment actions affecting the employee even if the individual does not have the final say. Ellerth, 118 S. Ct. at 2269. Tangible employment actions include hiring, firing, promoting, and demoting, as well as compensation decisions, undesirable reassignments, and work assignments. Ellerth, 118 S. Ct. at 2268-70.

2. The individual has authority to direct the employee's daily work activities even though he or she has no authority to undertake or recommend tangible job decisions. Grozdanich v. Leisure Hills Health Center, 25 F. Supp. 2d 953, 973 (D. Minn. 1998).

The Guidance states that in some cases an employer may be subject to vicarious liability for a supervisor with no actual authority over the employee, if the employee reasonably believes the individual has supervisory power. Ellerth, 118 S. Ct. at 2268. This can occur when the chains of command are unclear or the employee reasonably believes that a supervisor with broad delegated powers has the ability to influence employment decisions affecting her. Llampallas v. Mini-Circuit Lab, Inc. 163 F.3d 1236, 1247 (11th Cir. 1998).

Types of Employer Liability for Harassment by Supervisors

The Guidance points to three forms of vicarious liability for harassment by supervisors: (1) harassment by supervisors that results in a tangible employment action; (2) harassment by supervisors that does not result in a tangible employment action; and (3) harassment by the "alter ego" of the employer.

1) An employer is always liable for harassment by a supervisor that culminates in an adverse tangible employment action. There is no affirmative defense available for an employer in such cases.

The Guidance stresses that in such cases the employer has worked through its supervisors and the adverse action is an implied act of the employer. A tangible employment action is defined as a "significant change in employment status." Ellerth, 118 S. Ct. at 2268. Characteristics of a tangible employment action are:

The means by which the supervisor brings the official power of the company to bear on subordinates and is demonstrated by the following:

• it requires an official act of the company;
  
  

• it usually is documented in official company records;
  
  

• it may be subject to review by higher level supervisors; and
  
  

• it often requires the formal approval of the company and use of its internal processes.

It usually inflicts direct economic harm. In most instances, it can only be caused by a supervisor or other person acting with authority of the company. For example, significant changes in an individual's existing job, regardless if salary or benefits are effected, is a tangible employment action. However, a new job title without a significant change in duties, salary, benefits, or prestige probably does not qualify as a tangible employment action. Flaherty v. Gas Research Institute, 31 F.3d 451, 457 (7th Cir. 1994).

The standard McDonnell-Douglas analysis applies in these cases: If an employee claims that supervisor harassment culminated in a tangible employment action, the burden of production is on the employer to provide a nondiscriminatory explanation for the action. The employee must then establish that the employer's explanation is a pretext for intentional discrimination.

2) An employer may be vicariously liable when harassment by a supervisor creates an unlawful hostile environment, but it does not result in a tangible employment action.

An employer faced with this situation can avoid liability by establishing that:

The employer exercised reasonable care to prevent and correct promptly any harassment. A written harassment policy and effective complaint procedure which includes, at a minimum, a clear explanation of prohibited conduct, assurance that harassment complaints will be kept confidential and there will be no retaliation for making such complaints, an accessible avenue of complaint with assurance of a prompt, thorough and impartial investigation, and an assurance that immediate action will be taken if the harassment has occurred; and

The employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm.

3) An employer will be vicariously liable if the harassing individual is of a sufficiently high rank to fall "within that class. . . who may be treated as the organization's proxy."

In Faragher, the Supreme Court stated that in such circumstances, the high ranking individual's harassment is imputed automatically to the employer. Faragher, 118 S. Ct. at 2284. Such high ranking individuals include presidents and company owners.

The EEOC's Guidance reinforces the need for employers to provide harassment training for employees. All employees should receive training on what constitutes harassment. In this manner employees are: (1) made aware of the employer's harassment policy; (2) more alert to inappropriate workplace conduct; and (3) put on notice that the company wants to be notified of inappropriate conduct so as to provide it the opportunity to investigate and take corrective action.

Employers should keep accurate records as to the training measures undertaken, including, but not limited to, keeping an agenda of what is discussed and a list of individuals in attendance. If possible, employees should be required to personally sign attendance forms.

In order to minimize the risk of harassment claims, employers should create safety mechanisms to ensure that its policies are enforced in a fair and non-discriminatory manner. In other words, employers should adopt "checks and balances" procedures. For example, in order to ensure that investigations of harassment complaints are completed in a thorough and unbiased manner, a policy for independent review by a manager to check the investigators' mode of investigation and conclusions should be implemented.

A similar review process should also be implemented to ensure that employees filing harassment complaints are not retaliated against in any manner. For example, after filing a claim of harassment, any employment decisions affecting the complaining party (including performance appraisals, pay changes, transfers, demotions, etc.) should require (1) review by the human resources department, (2) approval by a second, independent manager and (3) exclusion of the alleged harasser from the decision making process. The same procedures should also be followed for all employees participating in the investigative process.

Special Note:

The Fair Credit Reporting Act is Interpreted to Require Notification and Consent of Employees Before Conducting An Investigation.

In an unusual interpretation of the Fair Credit Reporting Act (FCRA), the Federal Trade Commission announced in May 1999 that an employer who plans to use an outside investigator to report on a complaint of workplace harassment must first obtain the alleged harasser's written consent before obtaining the report, just as if the information was a credit report.

The FCRA requires an employer that plans to obtain consumer reports for employment purposes to disclose this fact to each affected applicant or employee, and to obtain the individual's written authorization before obtaining the report. A "consumer report" is the communication of information by a consumer reporting agency bearing on an individual's "character, general reputation, personal characteristics, or mode of living" that may be used as a factor in determining whether the individual is eligible for starting or continuing employment. Creative plaintiff's lawyers have suggested that an employee who is fired based upon information obtained from an investigation without the employee's permission may have the basis for a wrongful discharge claim.

Under this scenario, a company that has outside counsel or some other investigator look into a claim of harassment, and then fires the alleged harasser based on the investigation, needs to have the permission of the alleged harasser to have conducted the investigation in the first place.

The FTC has stated that employers may avoid the problem by telling all applicants and employees that they may be subject to an outside probe if they are accused of wrongdoing. The best way to do this is to incorporate the information in the company's employment application and in the employee handbook.

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