United States: Employer Liability for Customer Harassment of its Employees

The Ninth Circuit recently clarified that an employer can be liable under Title VII for harassment of employees by customers based upon race and national origin. The original basis for liability for employee harassment by customers was 29 C.F.R. § 1604.11(e), which provides that an employer may be responsible for sexual harassment of employees by nonemployees in the workplace, if the employer knew or should have known of the conduct and failed to take immediate and appropriate corrective action. In analyzing liability, courts consider the "extent of the employer's control and any other legal responsibility which the employer may have with respect to the conduct of such non-employees."

The focus of customer liability is what steps the employer took to prevent and/or remedy the alleged harassment. For example, employers who forced female employees to work with harassing customers despite complaints or instructed a female employee who had been raped by an important potential client to keep quiet, were all held liable for the third party harassment. Another problem employers encountered was having a broad anti-harassment policy precluding customer harassment which was not followed.

The Ninth Circuit found employer liability for customer harassment of an employee based upon race and national origin, because the employer ratified and acquiesced to the harassment by failing to take immediate and/or corrective action when it knew or should have known of the conduct. Galdamez v. John Potter, Postmaster General (9th Cir. 2005) 2005WL1653618. This type of hostile work environment harassment is not based upon intentional misconduct on the part of the employer, but rather on its negligence in preventing and ratification of the misconduct.

Employers are required to undertake remedial measures reasonably calculated to end the customer harassment of employees. The reasonableness of the measures depends on the employer’s ability to stop the harassment, to deter the potential harassers, and the promptness of the response. Galdamez citing Ellison v. Brady (9th Cir. 1991) 924 F.2d 872, 882. Employers must review their anti-harassment policies in this light, educate its personnel that customer harassment of employees cannot be tolerated and must be treated and investigated like any other harassment complaint, and in the event of a complaint, must promptly investigate the complaint and take immediate reasonable measures to end the harassment.

Employers need to react positively to workplace harassment claims raised against customers. Not only is this prudent as a matter of avoiding possible legal liability, it makes good employee-relations sense. Further, the complaining person will be protected from any retaliatory conduct for raising the complaint, even on a customer harassment claim.

Many of you have by now heard about or read something that references the California Supreme Court decision that found a sexual harassment claim could be based on the consensual affairs conducted by a prison warden. (Miller v. Department of Corrections, 7-18- 05) Understanding that decision and its context may help you answer questions and may provide some guidance as you consider new policies.

The case involved a prison warden, Lewis Kuykendall, and allegations he was having consensual sexual affairs with three different women who worked in the prison. The fact recitation by the court includes references to rumors about the affairs, statements about favoritism in promotion decisions and employees ". . . saying things like, what do I have to do, F*** my way to the top?" The women sleeping with Kuykendall used their relationship with him to gain promotions, to abuse or harass others, and they retaliated against women who complained about their special status. There was "bragging, squabbling, and fondling that occurred." The internal investigation by the California Department of Corrections concluded that "sexual favoritism occurred and was broadly known and resented in the workplace, and that several employees … concluded that engaging in sexual affairs was the way required to secure advancement." This case, the court noted, involves "far more than [a] supervisor engaged in an isolated workplace sexual affair [who] accorded special benefits to a sexual partner."

This case, from a legal perspective, cannot be dismissed as a California aberration. The California court heavily relied on 1990 EEOC policy statement to reach the conclusion that an environment of widespread sexual favoritism can create unlawful sexual harassment. Typically a workplace affair in which one person gets preferential treatment is not viewed as sexual harassment because men and other women not involved in the affair are being treated the same. They are disadvantaged by a personal relationship and there is no direct or implicit message that demeans women or suggests that they need to sleep with the boss to advance.

The facts of this case are seamy and outrageous and it is difficult to sort out the retaliatory and exploitive acts of the women who were sleeping with Kuykendall from the conduct that might constitute sexual harassment. But, there are at least two lessons from the case: (1) widespread consensual affairs between supervisors and subordinates can create liability for employers; and (2) the privacy concerns of those having these affairs do not outweigh the employer’s right, and perhaps duty, to prohibit this kind of conduct. The reality that workplace affairs are very common just makes the employer’s duty to be aware of or to prohibit such conduct more important.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.