Thanks to the Faragher/Ellerth defense, many employers may feel immune from the cultural changes that the #MeToo era has signaled because they believe that their robust anti-harassment policy is all they need to successfully defend against sexual harassment claims under Title VII. But Faragher/Ellerth has limits, and #MeToo may be changing how the defense is applied.
The Faragher/Ellerth Defense
The Faragher/Ellerth defense is based on two 1998 U.S. Supreme Court decisions: Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Industries v. Ellerth, 524 U.S. 742 (1998). In each case, the employee sued her employer under Title VII of the Civil Rights Act of 1964 for sexual harassment by a direct supervisor.
Based on common-law agency principles and Title VII’s remedial purpose, the Court established a test to delineate when an employer is liable for sexual harassment by an employee. Ellerth, 524 U.S. at 764. The Court held that an employer is vicariously liable for sexual harassment by a supervisor who has authority over the employee. However, if no tangible employment action is taken, an employer may raise an affirmative defense, which has two necessary elements: (a) that the employer exercised reasonable care to prevent and promptly correct sexual harassment and (b) that the employee unreasonably failed to take advantage of preventive or corrective opportunities provided by the employer or to otherwise avoid harm. Faragher, 524 U.S. at 807; Ellerth, 524 U.S. at 764.
In practice, the Faragher/Ellerth defense often turns on whether the employer had an effective anti-harassment policy and whether the employee complied with that policy and reported harassment. Finnerty v. William H. Sadlier, Inc., 176 F. App’x 158, 162 (2d Cir. 2006). Generally, employers may successfully assert the Faragher/Ellerth defense if they have anti-harassment policies and take prompt action to correct any reported harassment.
However, employers cannot rely solely on an effective reporting policy because Faragher/Ellerth does not apply in all circumstances, including under the proxy doctrine and in quid pro quo cases. If an employee proves harassment by the employer’s proxy or harassment with monetary consequences, an effective anti-harassment policy is irrelevant, and an employer will be liable for harassment even if the employee did not report it.
Limitations on Faragher/Ellerth: The Proxy Doctrine
The proxy doctrine applies when the harasser is “within a class of the employer organization’s officials who may be treated as the organization’s proxy.” Faragher, 524 U.S. at 789 (citing Harris v. Forklift Sys., Inc., 510 U.S. 17 (1993)). The Supreme Court explained that under the “‘proxy’ theory,” “[a supervisor] ‘merges’ with the employer, and his act becomes that of the employer.” Id. at 790. Under the proxy doctrine, liability is automatically imputed to the corporate entity, without any analysis as to whether the employer exercised reasonable care to prevent and correct sexual harassment. See EEOC v. Burlington Med. Supplies, Inc., 536 F. Supp. 2d 647, 663 (E.D. Va. 2008) (citing Faragher, 524 U.S. at 807). Thus, in such cases, the employer cannot raise the Faragher/Ellerth defense, even if the harassment did not result in an adverse employment action.
It is undisputed that the Faragher/Ellerth defense is unavailable in situations of harassment by proxy, but there are differing views as to what constitutes a proxy class of officials. Courts are hesitant to apply a bright-line rule; thus, no single factor is determinative of who qualifies as a “proxy.” Instead, the analysis is an intensive, fact-specific inquiry based on the totality of the circumstances. This has resulted in a nebulous standard that is inconsistent among the circuits.
However, a few general principles apply. When analyzing a question of proxy, “an official must be high enough in the management hierarchy that his actions ‘speak’ for the employer before he may be considered the employer’s alter ego.” Helm v. Kansas, 656 F.3d 1277, 1286 (10th Cir. 2011) (citing Ackel v. Nat’l Commc’ns, Inc., 339 F.3d 376, 384 (5th Cir. 2003)). The U.S. Court of Appeals for the Tenth Circuit further explained that “[o]nly individuals with exceptional authority and control within an organization can” speak for the employer and must “occupy [a] position in the top echelons of . . . management.” Id. at 1287. Job title, policy-making authority, hiring and firing power, position within the chain of command, ability to reverse decisions, and supervisory authority may be factors that determine whether an individual “speaks” for the employer. See Mallinson-Montague, 224 F.3d 1224, 1232–33 (10th Cir. 2000).
Limitations on Faragher/Ellerth: Quid Pro Quo Harassment
The Faragher/Ellerth defense is also unavailable if harassment results in a tangible employment action, i.e., quid pro quo harassment. Dulaney v. Packaging Corp. of Am., 673 F.3d 323, 328 (4th Cir. 2012). Employers are held strictly liable when the supervisor has been “aided by the agency relationship” in causing the tangible employment action. Ray v. Int’l Paper Co., 909 F.3d 661, 668 (4th Cir. 2018) (quoting Ellerth, 524 U.S. at 761–62).
There are two primary factors in determining whether there is a tangible employment action.
The first factor is whether the alleged action is a discrete, tangible action or whether it is merely part of a hostile work environment. A “tangible employment action” is “a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.” Ellerth, 524 U.S. at 761. A decision that affects an employee’s compensation typically qualifies as a tangible employment action. Cotton v. Cracker Barrel Old Country Store, Inc., 434 F.3d 1227, 1231 (11th Cir. 2006).
The second factor is whether there is a causal link between the harassment and the employment action. Courts must determine if the action resulted from the employee’s acceptance or rejection of the supervisor’s sexual harassment. Giddens v. Cmty. Educ. Ctrs., Inc., 540 F. App’x 381, 387 (5th Cir. 2013).
In most cases, the alleged tangible action is unfavorable to the employee. However, employers are also liable for harassment resulting in a “favorable” employment action that was conditioned on acceptance of the unwelcome harassment. Min Jin v. Metro. Life Ins. Co., 310 F.3d 84, 94–95 (2d Cir. 2002).
#MeToo: Potential Effect on Faragher/Ellerth Defense
Employers also should be aware of #MeToo’s effect even when Faragher/Ellerth applies. The success of the Faragher/Ellerth defense hinges on reasonableness: whether the fact finder believes that the employer acted reasonably and that the employee acted unreasonably.
At least one circuit court of appeals has already considered how the #MeToo movement may affect a fact finder’s conception of reasonableness. In Minarsky v. Susquehanna County, the U.S. District Court for the Middle District of Pennsylvania, concluding that the employee unreasonably failed to utilize the employer’s sexual harassment complaint procedure, entered summary judgment for the employer. The U.S. Court of Appeals for the Third Circuit disagreed. Minarsky, 895 F.3d 303, 317 (3rd Cir. 2018). The court found that there was a genuine dispute as to whether the employer’s policy was effective and whether the employee’s failure to report the conduct was reasonable in light of the specific facts of the case. Id. at 313–17.
In a footnote discussing the employee’s reasonableness, the Third Circuit explicitly acknowledged “national news regarding a veritable firestorm of allegations of rampant sexual misconduct that has been closeted for years, not reported by the victims.” Id. at 313, n.12. The footnote included several statistics illustrating how common sexual harassment is and how common it is for sexual harassment to go unreported. The court contemplated that “a jury could conclude that the employee’s non-reporting was understandable, perhaps even reasonable. That is, there may be a certain fallacy that underlies the notion that reporting sexual misconduct will end it.” Id.
The key lesson for employees and their attorneys is that failure to report sexual harassment does not render a case dead on arrival. The Faragher/Ellerth defense may not shield an employer from liability if the harasser was a high-level official or if the harassment affected the employee’s compensation. Even if the defense applies, changing perceptions of sexual harassment may result in more cases surviving dispositive motions.
The conclusion that employers and their counsel should draw is that an effective anti–sexual harassment policy may not be enough. Employers must be vigilant about preventing harassment in the first place. And, equally importantly, employers must ensure that employees are empowered to report harassment free from fear of retaliation and that consequences for harassment are prompt and effective.
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