The New Jersey Appellate Division issued a decision which sheds light on the issue of whether an employee’s sexual harassment of a third-party (non-employee) could subject the employer to liability under the New Jersey Law Against Discrimination. This was the first instance where a New Jersey Court considered the “issue of employer liability in the context of an employee’s sexual harassment of a third-party in a housing or real property transaction” under the New Jersey Law Against Discrimination.

The New Jersey Law Against Discrimination prohibits sexual harassment in housing and real estate transactions making it unlawful, “for any person, including but not limited to, any owner, lessee, sublease, assigning or managing agent of, or other person having the right of ownership or possession of or the right the sell, rent, lease, assign, or sublease any property or part or portion thereof, or any agent or employee of any of these… to refuse to sell, rent, lease, assign, or sublease or otherwise to deny to or withhold from any person or group of persons any property or part of portion thereof because of… sex….” N.J.SA. 10:5-12(g).

In Traore v. Fairview Homes Pres., L.P., the Appellate Division considered whether or not an employee who worked for a management company could subject his employer (the management company) and its client (a landlord) to liability based on an allegation that “he touched and tried to touch her and pressure her to meet him at his hotel room to have sex with him in exchange for an apartment lease and housing assistance for her family.” The trial court granted a pre-answer motion to dismiss claims asserted against the employer and the landlord.

The Appellate Court upheld the decision as to the landlord, holding that the landlord never employed the alleged sexual harasser. Under the New Jersey Law Against Discrimination, liability cannot be imposed on an entity for the discriminatory conduct of the employee of an independent contractor. See, Majestic Realty Assocs v. Toti Contracting Co., 30 N.J. 425, 430-31 (1959).

The Appellate Division reversed the dismissal of the claims against the employer of the alleged sexual harasser. The Court held that in the case of a master-server relationship, the finder of fact must engage in a “detailed fact specific analysis” answering the following questions:

1. Did the employer delegate the authority to the supervisor to control the situation of which the plaintiff complains?
2. Did the supervisor exercise that authority?
3. Did the exercise of authority result in a violation of the New Jersey Law Against Discrimination?
4. Did the authority delegated by the employer to the supervisor aid the supervisor in injuring the plaintiff?

Each of the above questions must be answered in the affirmative to impose vicarious liability against the employer.

The Court also addressed the employer’s argument that it should be insulted from liability because it has anti-harassment training and policies in place. The Court held that “although an employer’s anti-harassment policy is a critical factor in determining negligence and recklessness claims…it is an affirmative defense to liability and therefore irrelevant to determining whether plaintiff stated a claim under the LAD.” The Court also pointed out that the training did not include sexual harassment against non-employees/co-workers.

I strongly recommend that employers include workplace discrimination training and employee manuals to include policies and procedures that include discrimination against customers, perspective customers, vendors and other third parties. I also strongly recommend that all employers require that their employees engage in work-place harassment at the inception of their employment and at least once a year. Doing so, could limit suits and potential liability if one is filed.