A New Jersey jury recently awarded $2.4 million in damages against a large financial institution for failing to adequately prevent an employee from being sexually assaulted by a customer.
The plaintiff, Damara Scott, worked as a wealth management advisor for a bank in Glen Ridge, New Jersey. In October, 2013 while she was leaving the bank, Patrick Pignatello followed her to her car in a common parking area. Pignatello allegedly uttered vulgar, sexist and racist insults towards Scott and groped her. Scott ultimately broke free and drove away. She reported the incident to the bank's investigation team the following day, and then later to the police. Though Scott had never met or heard of Pignatello prior to this incident, he was a prominent customer of this particular branch, and allegedly had a history of groping and harassing female employees and customers of the bank. Despite these accusations, the bank never closed his accounts or permanently prohibited him from entering the premises.
Scott filed suit against Pignatello and the bank, alleging the bank failed to take reasonable measures to prevent Pignatello's known misconduct, and failed to reasonably protect Scott in the workplace. After a two week trial, a jury awarded Scott $2.4 million in compensatory damages. The case is Scott v. Pignatello (ESX-L-2726-15).
This post is not intended to judge the decision made by the jury in the Scott case (though the size of the verdict is certainly something that should garner attention from compliance departments throughout the State), but rather to note that the threshold question of whether a company can be held liable for the conduct of a non-employee has been answered, at least in the Law Division in New Jersey, in the affirmative.
A similar issue was decided in the Eastern District of Pennsylvania last year, when U.S. District Court Judge Jan E. DuBois ruled that a case involving same-sex harassment of a company employee by an employee of a vendor could proceed under Title VII of the Civil Rights Act of 1964. In Hewitt v. BS Transportation, the plaintiff was a delivery driver for a transportation company and alleged that he was the subject of repeated harassment by an employee of another company that he interacted with regularly as part of his duties. The Court allowed the hostile work environment claim against Hewitt's employer and supervisor to proceed because it found he had made a prima facie case that a hostile work environment existed as a result of the actions of the non-employee, and that no appropriate corrective action was taken.
The Equal Employment Opportunity Commission established standards for dealing with non-employee harassment, and those standards turn on control, more specifically, the control an employer might have over a non-employee. 29 C.F.R. § 1604.11(e). These standards have been used by the Second and Eighth Circuits, among other courts, and have concentrated on whether the response by the employer was "timely and appropriate in light of the circumstances, particularly the level of control and legal responsibility [the employer] has with respect to the...behavior." Crist v. Focus Homes, Inc., 122 F.3d 1107, 1111 (8th Cir. 1997).
There is no question that an employer can be responsible for the sexual harassment of a non-employee. In an era of independent contractors and the gig economy, a bright-line rule requiring the harasser to be an employee no longer makes sense. The Hewitt and Scott decisions are an interesting expansion of this concept. And while expanding liability even where there exists no direct control might seem to be a logical next step, it is not without peril. Presumably, the public policy argument in favor of holding these employers responsible is that they should have put their money where its policies were: the transportation company could have chosen another vendor for the fuel (or threatened it) and the bank could have closed the account of the offending customer.
That said, permitting the expansion of liability to non-employees who are really beyond the control of the employer raises many difficult questions. What happens when the employer does not have a legitimate option of eliminating the situation? What happens if the only reasonable response by the employer would necessarily impact the rights of the non-employee (not to the harassment, but the civil rights of the non-employee)? What happens if the defendant employee is not a large bank but a much smaller operation, and the only option available (e.g. closing the offender's account, as in the Scott case) would devastate the company?
For employers, this line of cases is chilling. Those with large compliance departments are likely aware of these developments and are taking steps to implement appropriate policies, but smaller companies have fewer resources to devote. So, what can be done? In the end, a company's actions are viewed for reasonableness, and that is perhaps the best answer to the questions above. In light of individual circumstances, a response that might be considered an ineffective and inappropriate "stop-gap" measure for a multinational company with a market cap in the billions could be entirely reasonable for a much smaller entity.
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