On June 28, 1998, the United States Supreme Court handed down two decisions defining an employer’s potential liability under Title VII of the Civil Rights Act of 1964, as amended, for its supervisory employees’ acts of sexual harassment.  The two decisions, Farragher v. City of Boca Raton, and Burlington Industries v. Ellerth, accordingly warrant careful attention in re-evaluating current employment policies and practices, and in planning responses to future incidents. 
 
Although we usually write concise letters to advise you of significant developments in employment and labor law, this time we felt it more appropriate to provide a detailed analysis.  Accordingly, the first two-thirds of this memorandum will discuss sexual harassment law generally and the two decisions in detail.  The final section contains our advice on what every employer should be doing now in order to protect itself from future lawsuits. 
 
Under existing law, sexual harassment complaints are typically pursued under quid pro quo and/or hostile work environment theories. In a quid pro quo case, a plaintiff alleges that his/her supervisor threatened some aspect of employment, implicitly or explicitly, in connection with making some type of unwelcome sexual advance(s), and that his/her reaction to the advance(s) then motivated the harassing supervisor to take an adverse employment action.  Where a plaintiff demonstrates connections between such unwelcome sexual advances and adverse employment actions taken by a supervisor, courts have held the employer strictly liable for its supervisory employees’ violations of Title VII. 
 
In hostile work environment cases, a plaintiff typically alleges that his/her supervisors discriminated on the basis of sex by creating a workplace in which offensive sexual conduct was so severe and/or pervasive as to create a hostile work environment.  In these types of cases, courts historically have focused on whether the employer had reason to know of the harassment in assessing potential vicarious liability. 

The Faragher and Ellerth decisions hold that, while these two legal theories remain useful in determining whether a supervisor’s conduct constituted unlawful sexual harassment, courts will no longer focus on the technical distinction between hostile environment and quid pro quo allegations when determining whether an employer is liable for a supervisor’s proven act of unlawful sexual harassment. Rather, a distinction will now be drawn between cases where any tangible job action is taken against the "plaintiff-victim" by the offending supervisor, and cases in which no tangible job action is taken (in other words, the "plaintiff-victim" either remains employed, or quits her job).  Where a "tangible job action" is taken by the harassing supervisor, the employer now faces strict liability.  Where no tangible job action is taken, the employer remains vicariously liable for the supervisor’s sexual harassment, but may avail itself of an affirmative defense relating to its efforts to prevent the harassment from occurring in the first place.1  These decisions have important implications in how employers must structure the workplace in order to avoid liability. 
 

Faragher v. City of Boca Raton arose out of a female lifeguard's experience in Boca Raton’s Marine Safety Division from 1985 to 1990. Beth Faragher had three immediate supervisors:  Terry, Silverman, and Gordon.  Over the course of her five-year tenure, Terry and Silverman repeatedly groped Ms. Faragher and other female lifeguards on their staff, and made dozens of comments, gestures and jokes of an explicitly sexual nature.  The City of Boca Raton issued a sexual harassment policy in 1986, which was revised and reissued in 1990.  Unfortunately the policy was never distributed to the Marine Safety Division in which Faragher was employed, with the result that Terry, Silverman, Gordon, and their subordinate lifeguards were unaware of its existence. 

Faragher spoke to Gordon about Terry and Silverman’s behavior on several occasions, but she never made any type of formal complaint to the City. Two months prior to Faragher’s resignation, another female lifeguard did formally complain by letter to the City’s Personnel Director about Terry and Silverman’s behavior.  The City investigated, found that the women had behaved improperly, reprimanded them, and required them to choose between a suspension without pay or forfeiture of annual leave.  Faragher resigned two months later and filed a hostile work environment claim against the City of Boca Raton pursuant to Title VII of the Civil Rights Act of1964, as amended, seeking nominal damages, costs, and attorneys fees. 

The District Court initially found in Faragher’s favor, reasoning that the sexual harassment was sufficiently pervasive to conclude that the City had constructive knowledge of Terry and Silverman’s harassment.  The United States Court of Appeals reversed in favor of the City, reasoning that Terry and Silverman were not acting within the scope of their employment. The Court of Appeals also found that Terry and Silverman’s "agency relationship" with the City did not assist them in harassing Ms. Faragher because they never threatened to fire or demote her. 

The Supreme Court framed the issue before it as determining the circumstances under which an employer may be held liable under Title VII for a supervisory employee's actions in creating a hostile work environment.  The Court held that an employer is vicariously liable for actionable harassment by a supervisor, subject to an affirmative defense looking to the reasonableness of the employer’s conduct as well as that of the plaintiff victim.² 

Because Boca Raton failed to distribute its policy to the Marine Safety Division, the Court concluded there was no point in remanding the case to the lower court to permit the City to attempt to establish the affirmative defense of reasonable care. 

Under the law as it existed prior to the issuance of the Faragher decision, it has generally been the case that an employer could avoid liability for a supervisor’s creation of a hostile work environment by demonstrating that it took prompt corrective action, once notified of the plaintiff's complaints, or that it had no notice, constructive or otherwise, that the harassment occurred.  Faragher shifts the emphasis from demonstrating a lack of notice or from proving a reactive response, to focusing upon the employer’s overall exercise of reasonable care in trying to prevent the harassment in the first place.  It thereby emphasizes the importance of (1) clearly stated zero- tolerance sexual harassment policies, including instructions to any potential victims to by-pass offending supervisors when making internal complaints; (2) the effective distribution and dissemination of those policies; and (3) the use of training and other preventative procedures for supervisory personnel, and, optimally, for all personnel on a regular basis.  Most important, Faragher holds that, if a supervisor’s harassment "culminates" in taking some adverse job action against his or her subordinate victim, the employer will beheld strictly liable for that action even if the employer did not know about the harassment and even if the employer made every reasonable effort to keep it from occurring. 

Burlington Industries v. Ellerth, the companion case to Faragher, stemmed from a supervisor’s remarks which plainly threatened his subordinate’s employment in connection with the supervisor's accompanying sexual advances, and yet those threats were never carried out in any way.  The offending supervisor in Ellerth, Ted Slowik, was a mid-level supervisor, whose authority to hire and fire subordinates was subject to the approval of a higher-ranking supervisor. Over the course of Kimberly Ellerth’s fifteen-month employment with Burlington, Slowik subjected her to a series of remarks in which he linked Ellerth’s prospects for success at Burlington to her willingness to engage in sexual activities. 

Although Burlington had a sexual harassment policy in place, containing internal complaint procedures, Ellerth never complained.  Instead, she resigned her employment, initially providing reasons unrelated to the sexual harassment.  Three weeks later, Ellerth sent a letter to Burlington indicating that she quit because of Slowik’s behavior.  She then sued Burlington, alleging that she was sexually harassed and forced to resign from her job in violation of Title VII.  The District Court awarded summary judgment to Burlington, finding it had no knowledge or reason to know of the harassment.  The United States Court of Appeals reversed on the question of Burlington’s vicarious liability in a decision that was so fragmented that it produced eight separate opinions. 

The Supreme Court first held that a supervisor’s unfulfilled threats do not give rise to a quid pro quo claim, but, rather, are to be analyzed under the hostile work environment theory.  That conclusion seems consistent with existing law, and confirms the highly controversial ruling in the Paula Jones v. Clinton case in which Jones' case was dismissed by the District Court where she could not demonstrate that she was fired or demoted in connection with the Clinton incident.  On the facts of Ellerth’s case, it was clear that Slowik’s conduct created a hostile work environment. 
 
In conjunction with its simultaneous issuance of the Farragher decision, the Ellerth Court held that, whenever a supervisor takes some tangible job action against the victim of his or her harassment, that action can be attributed to the employer for purposes of determining vicarious liability.  The Court reasoned that the taking of tangible job action cannot occur unless the supervisor uses his or her power as an agent of the employer, such that the law will deem the employment action taken by the supervisor to be the action of the employer. 

The Court stated:  "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 the employee.  When no tangible employment action is taken, a defending employer may raise an affirmative defense to liability or damages, subject to proof by a preponderance of the evidence."  The Court went on to restate the affirmative defense also articulated in Faragher: (a) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) the plaintiff employee unreasonably failed to take advantage of any preventative or corrective opportunities presented by the employer or to avoid harm otherwise.  The Court then concluded that the case should be sent back to the lower court so that Faragher could present any evidence as to whether she suffered a tangible job action by Slowik (her resignation was therefore implicitly not sufficient), and so that Burlington Industries could establish its affirmative defense of reasonable care, assuming that Faragher could not prove that Slowik implemented some tangible job action against her. 
 

Clear implications emerge from the Ellerth and Farragher decisions, the solutions to which, in many instances, are already in place. Thus, we strongly recommend that you take the following actions if your company has not already done so. 

First, it is more important than ever before for every employer to have a clearly-stated, strongly worded sexual harassment policy in place. Such a policy should state the company’s goal of zero tolerance for all types of harassment and should provide a process for a victim to make a complaint.  The policy should explain the complaint resolution process in some detail and should provide for more than one person to whom an employee can complain.  Having two such persons provides a solution to the situation where the harasser and the "complaint-receiver" happen to be the same person.  In addition, the policy should be written in very basic language, such that every employee can understand the policy. The policy also should include real life examples of what is sexual harassment in order to help avoid misunderstandings.  Finally, the policy should address issues such as confidentiality, retaliation and the consequences to an employee who engages in unlawful harassment. 
 
Second, communication of the policy needs to be made as comprehensively as possible.  The policy should be posted anywhere that other policies are posted and alongside those postings that are required by law. In some states, such as Maine, such a posting is required by statute. If the company maintains an employee handbook, the policy should be published there as well.  The company should also initiate a practice of annual notification of the policy to all employees, a requirement already required under Maine statute and in other states as well.  During a new employee's orientation, the employer should conduct a documented review of the company’s anti-harassment policy.  As part of that documented review, the new hire should be required to sign a form indicating receipt and understanding of the policy as well as acknowledgement that an opportunity to ask questions has been provided as well. 
 
Third, training is more essential than ever.  New employees should be trained as soon as possible and periodic refresher courses make sense. Supervisory personnel should be trained on a regular basis and should receive an advanced level of training in order that they learn how to handle these situations properly.  We have developed training programs at both levels using combinations of lecture, video and slide based education. We have found that the most effective education process is an interactive one.  Such programs run from one to three hours in length depending upon the level of training desired by the client. 
 
Fourth, every company needs to document its efforts in this area. Documentation should be maintained to establish individual receipt of the company's policy, of training session attendance, of any notices provided to employees, and with regard to any complaint of sexual harassment, documentation must be maintained to establish that the company acted promptly and in an effective manner upon receipt of the complaint.  Such practices should enable companies to successfully defend any sexual harassment cases in which a plaintiff is not fired, demoted, or reprimanded by a harassing supervisor. 
 
Finally, because employers will be held strictly liable under TitleVII for sexual harassment committed by a supervisor which culminates in the supervisor taking adverse job action against a subordinate victim, employers should carefully re-evaluate several aspects of their personnel procedures.  Employers should re-evaluate the procedures by which they execute or approve tangible job actions to ensure that legitimate bases for such actions are well documented – and that those legitimate bases are the sole motivation for the imminent job action.  In addition, clear, open, and effective communication will help reveal potential problems before a tainted job action is actually executed.  Most important, employers must be very cautious about the people they select to fill supervisory positions:   it may be a very costly decision to hire or continue to employ a supervisor who demonstrates any tendency to engage in sexually harassing behavior in the workplace, regardless of his or her otherwise impressive qualifications.  At a bare minimum, any supervisor reasonably suspected of having difficulty adhering to a company’s sexual harassment policy should be relieved of any authority to take any tangible job actions against subordinate employees unless and until confidence is restored in that individual’s ability to respect and comply with both the spirit and letter of the company’s sexual harassment policy.