On April 29, 2014, the Fourth Circuit Court of Appeals held that employers can be liable for third-party harassment under a negligence standard.  In doing so, the court joined other circuits in establishing that employers can be liable under Title VII for third parties that create a hostile work environment, provided the employer knew or should have known of the harassment and failed to take prompt remedial action to end it.

The Case

In Freeman v. Dal-Tile Corporation, the plaintiff, Lori Freeman, had been employed by Dal-Tile in various roles, lastly as a customer service representative.  Freeman, a black female, complained that she was subject to numerous instances of harassment and discrimination by Timothy Koester, an independent representative for a vendor of Dal-Tile.

Freeman alleged that Koester often made jokes and inappropriate comments regarding sexual and racial topics.  She claimed that the harassment had been ongoing for three years and that she had complained to Sara Wrenn, her supervisor, multiple times with little response.  Wrenn admitted she was aware of the ongoing inappropriate behavior displayed by Koester, even testifying that Koester was a "pig."  However, Dal-Tile did not take action until Freeman went directly to human resources after Wrenn ignored her complaint regarding an incident in which Koester called her a particularly offensive term.

Freeman was initially promised by a human resources manager that Koester would be permanently banned from entering the facility.  Instead, however, Dal-Tile lifted the ban and prohibited Koester from any direct communication with Freeman, believing this was an adequate remedy for the situation.  Freeman, however, was so distressed with the thought of any potential interaction with Koester that she took a medical leave of absence from Dal-Tile, citing anxiety and depression.  Shortly after returning from leave, Freeman resigned out of concern she would still encounter Koester at work.

The trial court granted Dal-Tile's motion for summary judgment, finding that Freeman could not establish a claim for hostile work environment based on race or gender.  However, the Fourt Circuit reversed that decision, holding that a reasonable jury could conclude that Dal-Tile failed to take prompt remedial action to end the harassment despite its communication ban.  In particular, the Fourt Circuit noted that the communication ban might have been an adequate response if implemented earlier; however, the ban was not issued until Freeman had been subject to years of inappropriate comments and behavior by Koester.  The Fourth Circuit remanded the case to determine whether Freeman was subject to a racial and sexual hostile work environment.

Considerations for Employers

In light of the Fourt Circuit's adoption of a negligence standard for liability for third-party harassment under Title VII, employers may do the following:

• Review discrimination and harassment policies to make sure they cover harassment by third parties, like vendors, customers, and business partners, and not just by other employees.
• Provide employees with multiple avenues to report harassment.
• Be aware of interactions between third parties and employees, and alert vendors to inappropriate remarks or actions by their employees.

Although Freeman's success in the lawsuit is still uncertain, the Fourth Circuit has opened the door to imposing liability on employers for third-party harassment.  Employers should review the above-mentioned considerations and look at other preventive measures to help reduce the risk of litigation and liability.