Third Party Harassment Claims: When the Customer is Wrong

Spilman Thomas & Battle, PLLC

Spilman Thomas & Battle, PLLC

Most employers know that they have a legal obligation to protect employees from harassment at work and to prevent it from recurring. Many employers assume that this obligation relates to harassment by employees and managers; however, it actually extends to harassment by third parties, including customers or vendors. Several recent cases brought by the U.S. Equal Employment Opportunity Commission ("EEOC") reinforce the concept that employers can be liable for the harassing conduct of third parties if the employer knew or should have known of the conduct and failed to take timely remedial measures.

In one case, a gas station and convenience store operator recently agreed to pay $75,000 and furnish other relief to settle a lawsuit brought by the EEOC for failure to prevent sexual harassment of an employee by a customer. According to the complaint, a female employee was subjected to months of sexual advances and crude jokes by a male customer. The employee reported the customer’s conduct to management – as did other employees and customers – but the company failed to act promptly to stop the harassment.

It is important to note that under the gas station’s policy, the employee could report harassment to a department manager, to Human Resources, to a company hotline, or “to any member of management.” While it is important to have multiple avenues for an employee to report harassment, allowing an employee to report to “any member of management” can pose an issue unless those members of management are properly trained on how to respond to such complaints. Employers should ensure that persons who are identified as able to receive reports of harassment and discrimination under company policy are properly trained on their legal obligations, including the obligation to respond promptly and effectively. 

In another case brought by the EEOC, a jury found Costco liable for failing to stop a customer’s harassment. The facts revealed – as uncovered through Costco’s own investigation – that the employee was being stalked by a customer. Costco, however, was slow to act because it did not deem the behavior “overtly sexual.” The jury verdict was upheld on appeal with the Court of Appeals holding that the employer acted unreasonably in failing to separate the employee (who reported feeling fear and intimidation) from her stalker. Importantly, the Court also found that harassment need not be sexual to be “based on sex” as required to state a claim under Title VII.
These cases illustrate that employers must take seriously allegations of all forms of harassment, including from third persons. In addition, the longer an employer waits to investigate and take corrective action, the greater the risk for exposure. The employer’s obligation is always to timely investigate and take prompt remedial action.
Practical Tips for Employers for Dealing with Harassment by Third Parties
Ensure that your harassment policy covers harassment by third parties, including customers, clients, contractors, and vendors. Make sure employees know how to bring forth complaints against these third parties. Remember, an employer is liable for harassment by a third party when it knew or should have known of the conduct and failed to take timely remedial measures.

  1. For third parties such as vendors, independent contractors, and consultants, make sure they are familiar with the employer’s policies against harassment and discrimination. An employer has the right to bar such third parties from the property if they are harassing or discriminating against employees.
  2. Consider a harassment policy that goes beyond legally protected conduct to include any type of offensive conduct. Inappropriate conduct that may not rise to the level of actionable harassment should still be brought to the employer’s attention and remedied.
  3. Train managers on how to recognize harassment and establish a clear procedure on how to respond. Claims of harassment by third parties should be treated the same as claims of harassment by a co-employee. Make sure managers know what steps they need to take upon learning of such third-party harassment.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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