Second Circuit Rules that Employer Cannot Raise Faragher/Ellerth Affirmative Defense for “Alter Ego” or “Proxy” Harassment

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[author: Jennifer McLaughlin]

Townsend v. Benjamin Enterprises, Inc., No. 09-0197 (2d Cir. May 9, 2012).

Attorneys who work in the employment and labor field are generally aware of the affirmative defense set forth by the Supreme Court’s decisions in Faragher v. City of Boca Raton, 524 U.S. 775(1998) and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998), which applies to  sexual harassment claims.  Simply put, under Faragher/Ellerth, an employer is not liable for supervisory harassment if the employer took effective remedial measures after the employee complained about a hostile work environment.  This affirmative defense, however, has its limitations.  On May 9, 2012, the Second Circuit ruled that an employer cannot raise the Faragher/Ellerth affirmative defense if the sexual harassment was committed by a “proxy” or “alter ego” of the defendant.

Townsend v. Benjamin Enterprises, Inc., No. 09-0197 (2d Cir. May 9, 2012), involved the sexual harassment of an employee by her supervisor.  The Plaintiff alleged that she was sexually harassed by her supervisor, the vice president of the company, who had decision-making authority on corporate matters.  According to the opinion, the harassment allegedly included sexually offensive comments, sexual propositioning, sexual touching, and sexual assault.  The plaintiff subsequently brought a hostile work environment claim against the company and its vice president. Upon hearing the case, a jury awarded the Plaintiff $5,200 against the company because the district court determined that the vice president was an “alter ego” of the company, an additional $25,200 against him for a tort claim under state law, and $141,308 in attorney’s fees and costs.

In deciding this issue of first impression for the Second Circuit, the Court concluded that an employer may be liable for an employee’s wrongful conduct under Title VII where that employee is in a “sufficiently high position … in the corporate hierarchy” to be viewed as the employer’s “proxy” or “alter ego.”  When determining if such liability exists, the Second Circuit followed other Circuits, holding: “Courts of Appeals have considered supervisors to be of sufficiently high rank to qualify as an employer’s proxy or alter ego when the supervisor is a ‘president, owner, proprietor, partner, corporate officer,’ or otherwise highly-positioned in the management hierarchy.” Applying this reasoning to the case at hand, the Court ruled that the vice president was an alter ego of the company:

Here, [the Defendant] is the only corporate Vice President of [the company], operating as second-in-command, with a position immediately below [the President] in the corporate hierarchy. He is also a corporate shareholder with a financial stake in [the company]. All of [the company]’s corporate shares are held by [the Defendant], [the President], and their two children. Given these facts, the jury reasonably could have concluded that [the Defendant] was sufficiently high within the corporate hierarchy to qualify as [the company]’s alter ego. … Moreover, [the Defendant] exercised a significant degree of control over corporate affairs, which is consistent with alter ego liability. He collaborated with [the President] on corporate decisions including hiring, and the supervisors and managers in the field reported directly to him.

Therefore, after considering all of the arguments of the parties the Court determined that the Faragher/Ellerth defense was unavailable for the company and affirmed the district court’s decision in its entirety.

If you or your company has questions or concerns about employer liability for sexual harassment or any other related topic, please email Jennifer A. McLaughlin at jmclaughlin@cullenanddykman.com or call her at 516-357-3713. A special thanks to Sean Gajewski for helping with this post.  Sean is a recent graduate from Hofstra University School of Law.