Employers Are Strictly Liable For Sexual Harassment By High-Level Managers
In the landmark cases of Faragher v. City of Boca Raton, 524 U.S. 775 (1998) and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998), the U.S. Supreme Court addressed the issue of an employer’s liability for sexual harassment by a supervisor. In Faragher and Ellerth, the Court held that that an employer is subject to vicarious liability for hostile work environment sexual harassment by a supervisor with immediate or successively higher supervisory authority over the victim. When the supervisor’s sexual harassment culminates in the taking of a tangible employment action against the victim, such as a discharge, demotion, or reduction in pay, the employer is automatically vicariously liable for the hostile work environment sexual harassment. When no tangible employment action is taken against the victim, the employer is permitted to assert an affirmative defense to liability for the supervisor’s sexual harassment. In order to establish the affirmative defense and avoid liability, the employer must prove two necessary elements: (1) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and (2) the victim unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer. Unless it proves both elements of the affirmative defense, the employer is liable for the supervisor’s sexual harassment.
In Faragher and Ellerth, the Court also held that an employer is automatically vicariously liable for hostile work environment sexual harassment when the harassing employee’s high rank in the company makes the harasser the employer’s alter ego. In Faragher, the Court cited with approval cases holding that presidents, owners, proprietors, partners, corporate officers, and supervisors with a high position in the management hierarchy are the types of employees who can be considered a company’s alter ego. However, as observed by the U.S. Tenth Circuit Court of Appeals in Helm v. Kansas, 656 F.3d 1277 (10th Cir. 2011), the “contours” of the alter ego theory of liability “are not well defined.” In Townshend v. Benjamin Enterprises, Inc., 679 F.3d 41 (2d Cir. 2012), the U.S. Second Circuit Court of Appeals addressed the scope of the alter ego theory of liability in determining whether the harasser held a sufficiently high managerial rank to qualify as the company’s alter ego.
In Townsend, Martha Townsend (Townsend) alleged that she was sexually harassed by Hugh Benjamin (Benjamin) in violation of Title VII of the Civil Rights Act of 1964. Benjamin was the sole Vice-President of Benjamin Enterprises, Inc. (BEI). Townsend claimed that Benjamin sexually harassed her while she worked at BEI by directing sexually offensive comments to her, propositioning her, touching her sexually, and sexually assaulting her. Townsend maintained that BEI was automatically vicariously liable for the hostile work environment sexual harassment because Benjamin was BEI’s alter ego. On appeal, BEI argued that there was insufficient evidence to establish that Benjamin was the alter ego for BEI.
In finding that Benjamin held a sufficiently high managerial rank to qualify as BEI’s alter ego, the Second Circuit pointed to evidence showing that Benjamin was the only Vice-President of BEI, was second-in-command in the company, and held a position immediately below the President of BEI in the corporate hierarchy. As further support for its conclusion that Benjamin was BEI’s alter ego, the Second Circuit pointed out that Benjamin also “exercised a significant degree of control over corporate affairs, which is consistent with alter ego liability.” For example, the Second Circuit explained, Benjamin collaborated with the President on corporate decisions, and the supervisors and managers in the field reported directly to him. The Second Circuit also observed that although stock ownership is not a prerequisite for acting as a company’s alter ego, Benjamin owned 34% of the corporate shares of BEI while the alleged sexual harassment took place.
Legal Significance Of Showing Harasser Was Employer’s Alter Ego
Establishing that the harasser holds a sufficiently high managerial rank to qualify as the company’s alter ego is somewhat of a nuclear bomb for purposes of holding an employer liable for hostile work environment sexual harassment. When the individual creating the hostile work environment holds a sufficiently high managerial rank to qualify as the company’s alter ego, the employer is automatically vicariously liable for the sexual harassment. In other words, the employer is strictly liable for the hostile work environment sexual harassment and the employer has no defense against the imposition of liability. This means that the employer is liable for the sexual harassment even if the employer can prove that: (1) it maintained an effective policy prohibiting sexual harassment in the workplace; (2) it provided training to managers and supervisors regarding sexual harassment in the workplace; and (3) it took prompt remedial action to prevent the sexual harassment from recurring against the victim upon learning of it. This also means that the employer is liable for the sexual harassment even if the victim never made a complaint about the harassment, including a complaint in compliance with the employer’s procedure for reporting sexual harassment in the workplace.
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