Most cases of sexual, racial and other forms of harassment involve circumstances and behaviors within the physical confines of the employer’s workplace. But harassment can and does occur outside of the  employer’s place of business. ASE often hears from employers dealing with harassment of employees by vendors or customers.

Recently the Fourth Circuit Court of Appeals joined the Second, Eighth, Ninth, Tenth and Eleventh Circuits in affirming that an employer can be held liable for the harassment of an employee by an outside party under the negligence theory.

In the case of Freeman v. Dal-Tile Corp., Lori Freeman, a female African-American customer service representative, was subjected to a series of conversations and comments from an independent sales representative for one of Dal-Tiles subsidiaries, who was a Caucasian male. The comments included sexual and racial insults and other inappropriate comments. Ms. Freeman repeatedly brought these incidents to the attention of her employers, who told her ignore them as well as the person making them.

Eventually Freeman brought the situation to the attention of the company’s HR department. As a result, the offending sales rep was first banned from the building where Ms. Freeman worked, then later was banned from interacting with her at all. Still, she responded by going out on medical leave for depression and anxiety. She subsequently resigned and then filed an EEO charge asserting racial and sex discrimination.

The District Court decided Freeman’s claims were insufficient to overcome Dal-Tile’s motion for Summary Disposition. The court used a negligence standard in which “an employer is liable [for the actions of a third party] ‘if it knew or should have known of the harassment and failed to take appropriate actions to halt it.’

On appeal, the Fourth Circuit found otherwise. It found that all the elements to establish a hostile environment harassment claim were present. What the Fourth Circuit Court had to decide was whether there was a basis for imposing liability on the employer for the hostile environment harassment caused by this outsider. The Court formally adopted the position that “an employer cannot avoid Title VII liability for [third-party] harassment by adopting a ‘see no evil, hear no evil’ strategy.' “ Applying the standard in this case, the Court concluded that a reasonable jury could find that Dal–Tile knew or should have known of the harassment. Further, the employer took no prompt and remedial action to end the harassment.

Though Michigan is in the Sixth Circuit, employers should note that no fewer than six other Circuits now agree on this standard. Just because the harassment occurs off premises and involves persons outside the control of the employer, the employer will still be subject to liability for the harassment its employees endure.

Attorney Olushola Ayanbule, recommends the following for employers facing such circumstances:

• Avoid taking a “see no evil, hear no evil” approach to harassment complaints. Make sure you have procedures in place to respond reasonably to complaints about harassing conduct in the workplace regardless of whether the bad actor is an employee or a third-party, i.e., a customer, independent contractor, or employee of  a vendor
   
• Review policies. Review your harassment policies to ensure they cover employee complaints of harassment by third parties. These policies should also contain robust procedures for investigating complaints of harassment.
   
• Train supervisory staff. Conduct regular workplace training to ensure that your supervisory staff are equipped to promptly investigate and address any and all claims of workplace harassment or discrimination
   
• Investigate complaints promptly. Make every effort to be prompt in your investigation of harassment complaints. While there is no hard and fast standard for a response time that insulates you from liability for failing to take “prompt remedial action,” a prudent rule of thumb is to investigate allegations of harassment or discrimination (by co-workers, supervisors, or third parties) immediately upon receipt.
   
• Caveat Emptor. Parent or purchasing companies should ensure that newly-acquired entities are complying with all applicable Equal Employment Opportunity policies and procedures.

Sources: Freeman v. Dal-Tile Corp.;  Seyfarth Shaw Employment Law Outlook 6/10/14