Your company works very hard to avoid workplace discrimination claims. Stacks of policy & procedure manuals and hour upon hour of employee training testify to this. But your employees don’t operate in a vacuum. What if a third party, such as a customer or supplier, harasses an employee? Are you legally responsible? Your liability may depend upon your response.

Workplace Harrassment Defined

Federal law, and the law of most states, provides that employers may be responsible for the acts of third parties with respect to the harassment of employees in the workplace. Such harassing conduct violates Title VII of the Civil Rights Act of 1964 when it has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment. Readers should note that these principles apply not only to sexual harassment, but also to harassment on the basis of race, color, religion or national origin.

The Equal Employment Opportunity Commission (“EEOC”) says an employer may be responsible where the employer, or its agents or supervisory employees, knew or should have known of the unlawful conduct and failed to take immediate and appropriate corrective action. This standard is similar to the one used for allegations of co-worker harassment, but the EEOC will additionally consider the extent of the employer’s control over the third party and any other legal responsibility which the employer may have with respect to the conduct of the non-employee.

Evaluating Harassment Claims

Evaluating workplace harassment claims is a fact-intensive process and the EEOC will consider the total facts and circumstances of each case. When evaluating a claim of third party harassment, the EEOC Compliance Manual instructs EEOC investigators to determine whether:

1. The employee or anyone else reported or complained of the harasser’s conduct;

2. The employer, an agent, or a supervisor observed or was in a position to observe the conduct; or

3. The employer, an agent, or a supervisor was or should have been otherwise alerted to the conduct (if, for example, the conduct was discussed in the presence of the employer, an agent, or a supervisor).

In determining whether the employer took immediate and appropriate corrective action, the Compliance Manual directs investigators to ascertain:

1. What action, if any, was taken;

2. When it was taken; and

3. Whether it fully remedied the conduct without adversely affecting the terms or conditions of employment in some manner (for example, by requiring the employee to work less desirable hours or in a less desirable location).

A Real World Example

For a view of how these principles can manifest themselves in the real world, let’s consider a fact scenario from an actual court case. In 1998 a federal appeals court upheld a $200,000 jury verdict (plus $38,000 in attorney fees and costs) against a franchise restaurant for harassment of a waitress by customers.

In that case, the plaintiff/waitress informed her manager that she did not like waiting on two regular male customers of the restaurant. The men had made sexually crude remarks to her, although the court record did not contain evidence that she told the manager the reason for her discomfort or that she ever relayed to the manager the substance of their remarks.

On one evening the men entered the restaurant and the wait staff, including younger males, argued over who would seat them because no one wanted to serve them. The manager ordered the plaintiff to wait on the men. While ordering, one of the men said she “smelled good” and grabbed her by the hair when she refused to tell him what perfume she was wearing. She informed the manager of the incident and asked if someone else could wait on the men. The manager denied the request, adding “You wait on them. You were hired to be a waitress. You waitress.” When she returned to the table, one of the men pulled her to him by the hair, grabbed her breast, and put his mouth on her breast. The plaintiff quit. She had worked in the restaurant only two months.

The plaintiff sued for sexual harassment. At trial, she testified that after this incident she was frightened to be near men, even her father and her husband, and that her condition prevented her from working. A psychologist testified to her post-traumatic stress disorder and depression. More than two years after the incident the plaintiff was employed as a home health care worker, but attended only to female patients.

The franchisor defended itself by essentially arguing that, while outrageous, the physically threatening conduct of the two customers was a one-time incident and was therefore not pervasive enough to create an abusive work environment. The court specifically rejected the argument that a single incident of physically threatening conduct can never be sufficient to create an abusive environment.

The root of the franchisor’s liability was the poor response of its manager. Prior to the sexual assault, the plaintiff had informed the manager of the hair-pulling incident and had also told him on three occasions that she did not wish to serve these customers. Receipt of this information triggered the manager’s obligation to respond adequately and promptly. Instead, the manager put the plaintiff in an abusive and potentially dangerous situation, although he had the means and the authority to avoid doing so by ordering a male waiter to serve them, waiting on them himself, or asking them to leave the restaurant.

Reducing Risks

The facts in this court case were extreme. Many workplace harassment situations will not be so overt. That’s all the more reason to develop guidelines to reduce the risk of third party harassment. Here are some starting points:

1. Make sure your harassment reporting policy includes conduct by non-employees. Managers need to know the potential for liability from the conduct of third parties.

2. Don’t ignore a complaint of third party harassment from an employee. Investigate complaints quickly, yet thoroughly.

3. A third party harasser may work for a regular customer or supplier to your company. Your response may require written notice to the harasser’s employer, including a statement of what you expect it to do to correct the problem.

4. Inquire further if an employee reports discomfort in continuing to work with other co-workers or third parties. The situation could grow into a discrimination claim without early intervention by management.

The risk of liability for third-party workplace harassment cannot be totally eliminated. But well-reasoned policies and procedures, backed up by conscientious managers or supervisors, go a long way toward minimizing an employer’s risk.