No looking the other way

It’s official. A business can no longer look the other way, or shrug helplessly, when a customer is harassing an employee of the business.

An employer can be liable for a hostile work environment created by a third party not under the employer’s supervision, the 4th U.S. Circuit Court of Appeals has said.

Employment lawyers suspected the law was trending this way, based on decisions by other federal appellate courts, EEOC advisories and a 2011 unpublished decision by the 4th Circuit. Any doubt dissolved with the Richmond-based appeals court’s April 29 decision in Freeman v. Dal-Tile Corp. (VLW 014-2-080).

Ignoring employees’ complaints about race or sex harassment by customers or vendors can subject an employer to liability under a negligence standard, the appellate court said.

With the service sector of the economy steadily growing, this kind of third party harassment “is something you see a lot more than you would think,” said Nicholas Woodfield, a Northern Virginia plaintiff’s lawyer who is president of the Virginia affiliate of the National Employment Lawyers Association.

“Say it’s a fairly pricey, high-end bar and someone is hitting on the wait staff, the employer has to make a choice” to take care of the employee, but try not to lose the customer, he said.

Lawyers who represent employers have been beating the drum about exposure, according to Norfolk lawyer Arlene Klinedinst, and the Freeman case puts the focus on the need for “prompt, meaningful action to stop the conduct.”

Plaintiff Lori Freeman, a customer service representative for tile manufacturing and sales company Dal-Tile, alleged more than three years of racial and sexual harassment by a third party salesman who called frequently at Dal-Tile.

According to evidence – and in some cases, the defendant’s own admissions – he referred to women as “bitches” inside the plaintiff’s office, discussed his sexual encounters with women, used his cell phone to show nude pictures of women to Freeman and others, called the plaintiff, an African-American woman, a “black bitch,” spoke about “hooking up” with a coworker’s daughters, and generally used vulgar language and “racial slang.”

Freeman complained several times to the assistant manager, Freeman’s supervisor, who allegedly responded that the salesman was a “pig.” Freeman said when she complained about a racist comment the salesman made, the manager just “scoffed and shook her head” and went on “trying to pick the nail polish off of her nails.”

When Freeman complained to the human resources manager, that person initially promised the salesman would be banned from the facility, but the company later lifted the ban and told him not to communicate with Freeman.

Freeman alleged the harassment prompted her to take over two months of medical leave and seek treatment for depression and anxiety. She returned to work but voluntarily resigned weeks later.

When she sued under Title VII, a federal court in Raleigh, North Carolina, granted summary judgment to Dal-Tile.

The 4th Circuit reversed. Under both a subjective and objective standard, a reasonable jury could find both the race-based and sexual harassment were severe or pervasive, wrote Judge Dennis W. Shedd for the panel majority. And a reasonable jury also could find that Dal-Tile knew or should have known of the harassment, Shedd said, as the assistant manager personally witnessed the offensive conduct.

The panel majority went too far, according to a dissent by Judge Paul V. Niemeyer. Niemeyer said he had “grave concerns about such an extension when hostile work environment claims were themselves an extension of Title VII.”

The negligence standard builds on what the law overtly says, Woodfield said.

Holding the employer liable makes sense, Woodfield said. After all, if it’s the employee who is the harasser, an employer’s failure to act in effect ratifies the harassment, and the employer is accountable. The flip side is, “if you’re going to profit from the customer who is coming in and treating your employee badly, then you should make the employee whole,” according to Woodfield.

Dramatic allegations like Freeman’s “really push the needle” for employer liability, Woodfield said.

Employers also need to take a close look at Freeman’s treatment of the question of supervisor authority, according to Klinedinst.

The court didn’t really go into whether the Dal-Tile assistant manager had the kind of authority that could make her an agent of the employer, for instance to hire and fire. That’s an issue that may be fleshed out at trial.

Freeman also strengthened her case by following the employer’s policy for reporting harassment, lawyers said.

“She did exactly what she was supposed to do,” Klinedinst said, starting with a report to her supervisor.

That’s really the key to the case, agreed Roanoke employment lawyer Paul G. Beers, who represents plaintiffs. It’s hard for an employer to say it didn’t have notice of offensive conduct when the employee follows chapter and verse of the reporting procedure prescribed by the employer.

“That’s the sure way of putting the employer on notice. When the employee complies with the policy, liability’s going to attach,” Beers said. “That’s what really moved” the panel majority, he said.

When responding to employee complaints of third party harassment, employers have to walk a fine line, Klinedinst said. Just transferring your own employee may not be the best move, even if the employer regards the transfer as a promotion.

If it’s a vendor or customer company whose employee is the problem, the employer has to take decisive action while trying to resolve the matter amicably. Klinedinst recommends notifying the company president in writing of the matter, and discussing whether to ban the offending visitor.

But sometimes that person “will still keep emailing, texting or visiting” in an effort to maintain contact with the targeted employee, she said. Then an employer has to take additional steps.

Klinedinst described a sticky situation with a food processing company whose employee was being harassed by a government inspector. The inspector had a lot of power to cite the company for sanitation or quality control violations. The company had to work its way up the inspector’s chain of command to get him off their inspection beat.

Richmond-based Karen Michael, a former employment lawyer who trains employers, recommends a zero-tolerance policy as the best way for a company to protect itself. The first time an employee uses “the n_ word,” they should be gone, she says. Even though that’s a higher bar than the legal standard, it’s the right thing to do, she said.

When people get away with it, it puts them in a position of power, and the employer has to draw a line in the sand, Michael said.

“You’ve got to sweat the small stuff,” she said.

By tolerating the conduct, the employer allows “a lot of drama that doesn’t need to exist,” Michael said. By taking prompt action after verifying offensive conduct, the company not only avoids liability, it can hang on to valuable employees who might otherwise just walk away.

“Most people who are harassed at work just quit,” Michael said.

Michael recalled a particular offender – another “Rico Suave” – who had exchanged Anthony Weiner-style cellphone pictures with two female coworkers who sent breast shots. When they called each other, the photos popped up to identify the callers.

When the 30-something offender showed the breast shots to the company CEO and asked him to guess who it was, the CEO didn’t hesitate to offer a name.

There needs to be strong leadership on this issue, so people hold each other accountable, Michael said.

Sometimes it takes a lot of work to change a company’s culture, she said.

— with additional reporting by Heath Hamacher, North Carolina Lawyers Weekly