Picture this: It’s late Friday evening and you are almost packed up for the weekend when your human resources manager knocks on your office door. Judging by the look on his face, you two aren’t going home just yet. He explains to you that he has received a complaint from an employee working at one of the company’s restaurants. She is being harassed—not by a co-worker, but by a customer.
The customer is a regular, a 50-something man who dines at the restaurant at least once a week and visits the bar even more often. According to your employee, about a month ago, this customer began making comments to her, like “You’re too pretty to be working here,” and asking whether she is single.
The employee has done her best to ignore him, but the customer’s behavior hasn’t changed. He rarely misses her shift, routinely asks her on dates in front of her co-workers and other customers, and, most recently, brought her a gift.
Your employee reported the situation to her supervisor, who brushed it off, saying “the customer is always right.” Unsatisfied, the employee has now come to the human resources manager, who poses the question to you: Can we be held liable for workplace harassment committed by a customer? After a recent decision from the Sixth Circuit Court of Appeals, the answer may depend on where in the country your business is located.
The Case: Can Employers Be Liable for Customer Harassment?
Last month, the U.S. Court of Appeals for the Sixth Circuit (which covers Kentucky, Michigan, Ohio, and Tennessee) was asked to consider that very question: Can an employer be held liable for workplace harassment committed by a non-employee.[1]
An outside sales representative for a manufacturer and distributer of cleaning products sued her employer, alleging such harassment. According to her complaint, a few months into her employment, the sales representative went to visit a company client, a motel. When she walked into the motel manager’s office, the manager locked the door behind her. He then asked her if they could date.
After leaving the motel, the employee reported the incident to her supervisor, who reassigned the client to a different salesperson. Not long after, the employee was terminated. She then sued her former employer, alleging that the client’s actions had created a hostile work environment.
The trial court ruled against the employee, and she appealed to the Sixth Circuit.
The Sixth Circuit’s Decision: A New Employer-Friendly Approach to Liability for Employee Harassment
The Sixth Circuit affirmed the trial court’s dismissal of the employee’s hostile work environment claim. In doing so, however, the Sixth Circuit adopted a new, employer-friendly test for analyzing whether employers are liable for harassment perpetrated by their customers.
Specifically, the Sixth Circuit held that Title VII “imposes liability for non-employee harassment only where the employer intends for the harassment to occur.” With this holding, the Sixth Circuit has fashioned an intent-based standard for determining whether employer liability arises from a non-employee’s actions.
The Sixth Circuit’s intent-based test for non-employee harassment is a clear departure from the position of the Equal Employment Opportunity Commission (EEOC) and several other circuit courts. Under long-standing EEOC regulations, employers may be subject to liability under a much less stringent negligence test, with liability arising when the employer “knew or should have known of the conduct and failed to take immediate and appropriate corrective action.”[2]
As the Sixth Circuit recognized, most other circuits (including the First, Second, Eighth, Ninth, Tenth, and Eleventh—covering a total of 32 states, as well as Puerto Rico, Guam, and Northern Mariana Islands—have adopted the EEOC’s negligence approach to liability.
Employer Takeaways: Reducing Liability for Customer Harassment
The Sixth Circuit’s decision marks a significant shift in the legal landscape of employer liability for customer harassment. Considering this change, employers should keep in mind:
- The Sixth Circuit’s decision is immediately binding for employees in Kentucky, Michigan, Ohio, and Tennessee and will offer employers greater protection against Title VII liability when non-employee harassment occurs in the workplace. The decision is not, however, an excuse to allow harassment perpetrated by customers to go unchecked. At some point, allowing an employee to continue to be subjected to such conduct will rise above even the high bar set by the Sixth Circuit and result in employer liability.
- The Sixth Circuit’s decision is the minority approach to third-party harassment. In most of the country, employers can still be held liable for third-party conduct if they knew or should have known of the conduct and failed to take immediate and appropriate corrective action. There is no indication that the EEOC or other courts will adopt the Sixth Circuit’s new approach.
- The Sixth Circuit’s decision is a great opportunity to remind supervisors and managers that third-party harassment is still harassment, and that when such harassment (or any other) is reported to them, it needs to be taken seriously and reported up the chain. What a supervisor knows, the company knows. Employers should ensure that anti-harassment policies and training explicitly cover harassment committed by customers or other third parties and actively encourage the use of reporting channels for any such conduct.
If your company has any questions about the latest developments in employer exposure to third-party harassment liability, or how to effectively train employees to respond to complaints about harassment, please contact the authors of this article or any attorney in Venable's Labor and Employment Group.