Think Third Party Harassment Can’t Harm You? Think Again

by Spilman Thomas & Battle, PLLC

On April 29, 2014, the United States Court of Appeals for the Fourth Circuit’s ruling of Freeman v. Dal-Tile Corp., No. 13-1481, 2014 WL 1678422 (4th Cir. Apr. 29, 2014) addressed third-party harassment.
The Court held that an employer can be liable under Title VII for the harassment of an employee by a third-party where it knew - or should have known - that a third-party was harassing an employee, but failed to take prompt remedial action reasonably calculated to end the harassment.
Background Facts
Lori Freeman, an African-American female, had worked at a stone yard in Raleigh, North Carolina, known as Marble Point, Inc., since August 2006. In June 2008, Dal-Tile acquired Marble Point, and Ms. Freeman became an employee of Dal-Tile. From the beginning of her employment, Ms. Freeman interacted daily with Timothy Koester, a sales representative for VoStone, Inc., a Raleigh-based kitchen and bath remodeling center that did significant business with Dal-Tile. Throughout Ms. Freeman’s employment, Koester engaged in sexually and racially harassing behavior.
Koester frequently discussed his sexual exploits with Ms. Freeman and other Dal-Tile employees. Once Koester showed Ms. Freeman a photograph of a naked woman and claimed he had left the woman in his bed to come to work. On another occasion, Koester used Ms. Freeman’s phone, but prior to ending the call, he placed the phone up to his buttocks and passed gas on the phone.
In addition to sexually charged comments, Koester also made numerous racial remarks. On multiple occasions, Koester referred to Dal-Tile employees, including Ms. Freeman, as black b****es. One time, Koester called Ms. Freeman “the black b**** over at Marble Point.” In another instance, Koester asked Ms. Freeman to cover a customer appointment for Koester because he had partied the night before and was “too f***ed up,” describing himself as being “as f***ed up as an n***r’s checkbook.” Following the election of Barack Obama in 2008, Koester told Ms. Freeman that “you guys won,” referring to the fact Ms. Freeman is African-American.
Ms. Freeman reported most of these incidents to Sarah Wrenn, her direct supervisor, in accordance with Dal-Tile’s harassment policy. Wrenn herself personally witnessed a number of these reported incidents. In fact, Wrenn testified that Koester was a “pig.” Nonetheless, despite Wrenn’s familiarity with Koester’s behavior, nothing was done until Ms. Freeman reported Koester to Dal-Tile’s human resources department. In response, Dal-Tile prohibited Koester from communicating with Ms. Freeman. By this time, however, Koester had been harassing Ms. Freeman for nearly three years.
The Fourth Circuit Ruling
Ms. Freeman eventually filed suit against Dal-Tile asserting claims that the company had allowed a racially and sexually hostile work environment to exist under Title VII. Ms. Freeman also asserted claims for constructive discharge and common law obstruction of justice, which are not discussed here. The district court granted summary judgment to Dal-Tile on Ms. Freeman’s hostile work environment claims, finding no basis for imposing liability on Dal-Tile for the actions of a third-party.
On appeal, the Fourth Circuit reversed.
Under Title VII, to state a viable claim for hostile work environment, a plaintiff/employee must prove she was subjected to harassment that was (1) unwelcome, (2) based on the plaintiff’s gender or race, (3) sufficiently severe or pervasive so as to alter the conditions of employment and create an abusive environment, and (4) imputable to the employer. After reviewing the facts presented, the Court held that Ms. Freeman had sufficiently pled facts that would support the first three elements of a hostile work environment claim.
In evaluating the fourth element of a claim for hostile work environment – whether the harassment could be imputed to Dal-Tile – the Fourth Circuit adopted, for the first time in a published opinion, a negligence standard for analyzing an employer’s liability for third-party harassment. Specifically, the Fourth Circuit held an employer would be liable for harassment by a third-party where it knew or should have known of the harassment and failed to take prompt remedial action reasonably calculated to end the harassment.
Based on the facts presented, the Court found that Dal-Tile had both actual and constructive knowledge of Koester’s harassing behavior. Moreover, while the communication ban, which prohibited Koester from having any interactions with Ms. Freeman, did operate to end the harassment, it occurred only after Koester had been harassing Ms. Freeman for three years. Thus, the Court found the remedial action was not prompt. The summary judgment was reversed and case remanded for further proceedings.
The Impact of this Decision
Employers can be liable for harassment of employees by third-parties where the employer knew or should have known of the harassment and failed to promptly take steps reasonably calculated to end the harassment. To adequately defend against these types of claims, employers should:
1.  Take all complaints of harassment seriously. Investigate the claims in a timely fashion, documenting actions and the reasons for selecting a given course of action.
2.  Maintain a written harassment policy describing the method by which an employee can report harassment.
3.   Ensure the harassment policy (and the method for reporting complaints of harassment) applies to complaints of co-worker harassment as well as complaints against any third-parties with whom the employee interacts in the course of their employment.
4.   Investigate claims against third parties (customers, suppliers, vendors) as vigorously as you would claims by your supervisors.

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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