On June 26, 1998, the United States Supreme Court ruled in two landmark sexual harassment cases that employers may be vicariously liable for unlawful harassment committed by their supervisors, subject to an affirmative defense based on the reasonableness of the employer’s and the victim’s conduct. These holdings underscore the importance employers must place on preventing and limiting liability for harassment. This can be done through the implementation of a clear, effective policy addressing all forms of harassment. The policy should include, among other things, clear reporting procedures, prompt and thorough investigations, a disciplinary process, and training for all employees, especially supervisors.

In Burlington Indus., Inc. v. Ellerth, No. 97-569 (June 26, 1998), the plaintiff quit her job after 15 months claiming that her supervisor’s constant sexual harassment made her job intolerable. The plaintiff then brought sexual harassment and constructive discharge claims under Title VII alleging that her supervisor made unwelcome sexual advances and threatened to influence her employment negatively if she did not submit to his advances. The plaintiff admitted that her supervisor never carried out any of his threats, and she was actually promoted. The district court granted summary judgment in favor of Burlington Industries, Inc. ("Burlington"), and the Court of Appeals Seventh Circuit sitting en banc reversed. The United States Supreme Court granted certiorari to clarify an employer’s liability for a supervisor’s sexual harassment of subordinate employees.

In a 7-2 decision, the Court held that even unfulfilled threats made by a supervisor could make an employer vicariously liable for sexual harassment because of the supervisor’s creation of a sexually hostile work environment. Justice Kennedy writing for the Court explained that "[a]n employer is subject to vicarious liability to a victimized employee for an actionable hostile environment created by a supervisor with immediate (or successively higher) authority over the employee." When, however, the victim has suffered no negative tangible employment action, e.g., discharge, demotion, or undesirable reassignment, the employer may receive the benefit of an affirmative defense if the employer can prove by a preponderance of the evidence two necessary elements:

1. "[T]hat the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior," and
2. "[T]hat the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise."

In the second case, Faragher v. City of Boca Raton, No. 97-282 (June 26, 1998), the plaintiff alleged that, during her five years of employment as a lifeguard with the city of Boca Raton, she had been subjected to a sexually hostile work environment by two of her supervisors who repeatedly subjected her to "uninvited and offensive touching," lewd remarks, and discussions of women in offensive terms. The plaintiff never officially reported any of these incidents. Although the city had a sexual harassment policy, it was not widely disseminated and the harassing supervisors and the victim were unaware of the policy. After a bench trial, the district court found the city liable under Title VII for the supervisors’ creation of a sexually hostile work environment. On appeal, however, the Court of Appeals for the Eleventh Circuit sitting en banc reversed the district court’s verdict and held that the supervisors’ conduct should not be attributable to the city because the supervisors’ sexual harassment was not within the scope of their employment. As in the Burlington case, the Supreme Court granted certiorari to clarify an employer’s liability for sexual harassment committed by its supervisors.

Writing for the Court in a 7-2 decision, Justice Souter reinstated the district court’s verdict holding the city vicariously liable for the sexual harassment of its supervisors. In doing so, the Court employed the same test and affirmative defense it announced in Burlington concluding that the city could not assert the affirmative defense to liability because there was evidence that the city acted unreasonably. For example, the evidence showed that, although the city may have had a sexual harassment policy, it was not widely disseminated and, consequently, most of the lifeguards were unaware of its existence.

Both Burlington and Faragher make clear that employers will be held liable for unlawful harassment committed by their supervisors. The claim that a supervisor is acting outside the scope of his or her employment when committing such acts will not provide protection from liability. Thus, employers must now more than ever take affirmative steps to prevent harassment and limit their potential liability. Taking affirmative steps will help prevent negative employment consequences related to harassment and, in cases like Burlington where the victim suffered no negative employment consequences, help an employer establish an affirmative defense to charges that a supervisor harassed a subordinate employee. For example, the more reasonable an employer’s conduct, the more likely an employer can successfully assert the affirmative defense to harassment.

An employer’s strategy in preventing harassment and limiting liability should include the following:

1. 1. Establish a written policy against all forms of unlawful discrimination and harassment that identifies prohibited conduct, that sets up a confidential and accessible complaint procedure which assures appropriate corrective action in the event of a policy violation, up to and including discharge, and that prohibits retaliation.
2. 2. Establish a system to prove the dissemination of the policy. For example, have employees sign an acknowledgment that they have received the company’s policy.
3. 3. Set up an effective complaint/investigatory process. Ensure that the complaint procedure allows a victim to report the unlawful conduct to someone other than a supervisor.
4. 4. Disseminate the policy widely and discuss it with employees.
5. 5. Educate supervisors thoroughly on all aspects of the policy, emphasizing their special obligation not to engage in discrimination or harassment and to deal with, rather than ignore, potential discrimination and harassment, and document attendance at and the contents of such training meetings.
6. 6. Respond to claims of harassment or discrimination promptly by following clear procedures such as interviewing the accuser, the accused, and witnesses, gathering any documentary or other evidence, and documenting the investigatory process.
7. 7. Resolve all complaints with a written report that thoroughly and fairly summarizes the factual findings and the bases for them in a way that avoids making unnecessary "admissions" that can later be mischaracterized in the course of any litigation, and attach supporting documents.
8. 8. If a policy violation is found, based on the seriousness of the offense, the perpetrator’s past record, take (and document) appropriate corrective action that is reasonably calculated to prevent any further harassment or discrimination. What is reasonable will vary depending on factors such as the action taken against others for similar offenses, the victim’s input and any other relevant circumstances.
9. 9. Communicate results on a "need to know" basis in confidence, and give closure to the matter with those involved, keeping in mind that unnecessary or improper disclosure may result in liability for defamation.
10. 10. Follow-up by checking with the victim to make sure that the problem has been resolved and that no retaliation has occurred and with the perpetrator to make sure that all mandatory steps are followed and that the conduct has not been repeated, and document the follow-up.