All employers realize they must provide a workplace free of sexual harassment. The employer could only be liable when the sexual harassment was committed by a supervisor or co-worker.
In 2003, the California legislature modified the Fair Employment and Housing Act. The statute now includes the following language: “An employer may also be responsible for the acts of non-employees, with respect to sexual harassment of employees, applicants, or persons providing services pursuant to a contract in the workplace, where the employer, or its agents or supervisors, knows or should have known of the conduct and fails to take immediate and appropriate corrective action.” (Gov. Code § 12940, subd. (j)(1).) The purpose of this amendment is to impose liability against an employer for sexual harassment of third parties, namely customers.
The Supreme Court recently held this amendment was a clarification of the statute, and as such applied to all instances of sexual harassment whether they were filed before or after the amendment. (Carter v. California Department of Veterans Affairs (2006) 38 Cal.4th 914.)
The standards of liability for sexual harassment claims are normally broken down into two categories which depend on the position of the “harasser.” If the harasser was a supervisor of the victim, then the employer was strictly liable for the harassment. If, however, the harasser was a co-worker, the employer was only liable if they acted negligently. When the “harasser” is a customer, liability will be imposed only if the employer was negligent.
The starting point of customer liability is when did the employer know about the sexual harassment? If the employee reports an incident of sexual harassment to any agent or supervisor, the company has notice of the harassment. Therefore, all employees should be repeatedly instructed to take every complaint of sexual harassment seriously and report it to the proper department or person.
The Fair Employment and Housing Act does not only limit liability to instances where the employer knows of the harassment. It also imposes liability in situations where the employer should have known about the harassment. This standard does not require someone coming forward to complain about the harassment.
Once the employer knows about the sexual harassment, it is under an obligation to take “immediate and corrective action".
When an employee is harassed by a co-worker, “immediate and corrective action” requires the employer to investigate the charges, take disciplinary action if warranted and take steps to prevent further harassment promptly and fairly. The same type of protocol should be adopted for customers and clients.
When an employee complains a customer sexually harassed them, the employer should immediately begin an investigation. The employee should be consulted and asked to detail the events as soon as possible. The employer should also interview any witnesses and the customer. A written report should be generated which documents the investigation, the testimony of the parties and the conclusions of the employer.
If the complaint is founded, the employer is put into a difficult position. If it does nothing or too little, it risks a lawsuit by the employee. If it does too much, it risks losing a paying client. The employer must explore various alternatives to accommodate the needs of the employee and the necessity of business.
For example, the customer may have to be re-assigned to a different employee. All subsequent meetings with the customer occur off-site at a neutral location or at the customer’s office. The employer may request it deal with a different representative from the customer’s office. If the employee wants to continue working with the customer, another employee may have to be present. The employer must always keep in mind the decision to terminate its relationship with the customer. If lesser attempts to stop the harassment do not work, this may be the only alternative.
The 2003 amendment to the Fair Employment and Housing Act states: “In reviewing cases involving the acts of nonemployees, the extent of the employer’s control and any other legal responsibility which the employer may have with respect to the conduct of those non-employees shall be considered.” (Gov. Code § 12940, subd. (j)(1).) This provision recognizes a company does not have the same control over a customer as it does with employees. However, if there is some level of control which the employer can wield, it should take advantage of that authority.
If a claim of customer harassment is reported, the employer should consider getting its counsel involved in the decision as soon as possible. Once an employee files a lawsuit against the employer, the jury must evaluate the steps taken after the harassment was reported. A successful defense of this claim rests on the jury finding the employer acted both promptly and reasonably to the harassment complaint.
In conclusion, the success of a company often requires it to address complex issues and come up with practical answers. The Legislature has imposed a basis of sexual harassment liability which forces companies to walk a fine line. Dealing with a complaint of sexual harassment by a customer is no different. The solution must be made with an informed understanding of business realities and an appreciation for potential litigation.
This article appeared in the October 16, 2006, issue of the San Diego Business Journal.
