No Intent, No Liability: Sixth Circuit Narrows Employer Liability For Third-Party Harassment

Most employers understand their obligation to prevent discrimination and harassment at work, and the significant consequences that can come if such treatment is allowed to occur. But what if an employee alleges harassment not from a co-worker, but from a company's customer or other non-employee? In a decision announced last week, the 6^th Circuit (covering Kentucky, Michigan, Ohio, and Tennessee) announced a new framework for reviewing these claims, one which conflicts with official agency guidance and other courts across the country.

Bivens v. Zep, Inc. involved claims raised by a former sales representative of a cleaning product manufacturer and distributer after she was included in a company-wide reduction in force. Some time prior to that reduction, she complained to her supervisor that a manager of one of the company's customers had pulled her into a locked office and propositioned her for a date. She declined and was able to leave, but felt uncomfortable with the interaction. After receiving this report, her supervisor immediately reassigned the customer so she would have no further contact with that manager. When the employee was later included in the company-wide reduction in force, her claims against the company included a harassment claim based upon that interaction.

The 6^th Circuit found there are two ways an employer can be liable for actions of individuals within its organization. First, the employer can be directly liable for its own official actions, which are those taken by "officials" of an organization and are treated as the organization's proxy. Liability is imputed to the employer based upon the official's intent to commit harassment. Second, employers can be held vicariously liable for actions taken by lower-level employees because employees are defined under the statute as "agents" of the employer. Under agency law, liability may be imputed to the employer based upon the employer's negligence in allowing the harassment committed by the agent.

The Equal Employment Opportunity Commission ("EEOC") has long taken the position that harassment alleged to have been committed by customers is akin to harassment committed by co-workers. Therefore, liability may be imputed to the employer based upon the employer's negligence. Although other circuit courts have adopted this approach, the 6^th Circuit disagreed. The 6^th Circuit concluded that since the negligence standard only applied based upon principals of agency law—and since customers were not agents of the employer—the negligence standard could not apply. The only other theory of liability would therefore be direct liability based upon the employer's own actions. Accordingly, the Court held that an employer could only be liable for harassment alleged to have been committed by a customer or other non-employee if it intended for the harassment at the hands of the non-employee to occur.

This ruling in no way suggests that employers have no obligation to protect their employees from harassment from non-employees. The Court noted intent is found where the employer either desires the unlawful consequence or is substantially certain it would result from the employer's actions. In this instance, once the sales representative reported her allegations, her supervisor immediately reassigned the customer so that she would have no more interaction with him. Had the employer failed to take such remedial action and the harassment continued, a Court could find intent that the employer would then be substantially certain that harassment could continue.

The 6^th Circuit's ruling makes prompt investigation and response to employee allegations all the more important. Failing to take complaints seriously or not properly investigate allegations could lead to a finding that an employer had reason to believe harassment was substantially certain to occur, and therefore intended for it to occur. Conversely, prompt investigation of complaints and taking appropriate action early could provide a valuable defense to later harassment claims. Employers should review their internal reporting policies and investigating procedures, and should reach out to counsel to discuss ways to ensure they are equipped to respond quickly to any allegations.

Given the 6^th Circuit's departure from EEOC guidance and rulings from other circuits, it is possible that the Supreme Court ultimately steps in to confirm a uniform standard. The KMK Labor & Employment team will continue to monitor any developments and is here to assist employers in reviewing their policies to ensure there are reporting mechanisms in place, assessing risk, training supervisors, and defending against harassment, retaliation, and discrimination claims.