Fourth Circuit holds that employers can be found liable for customer conduct in hostile work environment case

Jennifer E. White, Esquire
June 6th, 2014
By: Jennifer E. White, Esquire

Last month, a split panel of the Fourth Circuit Court of Appeals published an opinion with significant implications for the adjudication of hostile work environment claims under Title VII and Section 1981. The decision, Freeman v. Dal-Tile Corp., No. 13-1481 (4th Cir. Apr. 29, 2014), expands employer liability to include a customer’s actions against an employee and, according to the dissent, without regard for the extent to which the alleged discriminatory conduct permeated the employee’s actual work environment.

Lori Freeman, the plaintiff-appellant, sued her employer, Dal-Tile, Corp., for racial and sexual hostile work environment arising from the actions of Timothy Koester, an independent sales representative for Vo Stone, Incorporated, one of Dal-Tile’s customers. Id. at *3, *5. Freeman would encounter Koester a few times each day while Koester was conducting business with Dal-Tile on behalf of his employer. Id. at *5. Freeman claimed that Koester had used racially and sexually offensive speech directed at her and in her presence. Id. at *5-7. Co-workers confirmed these allegations. Id. at *7-8. The U.S. District Court for the Eastern District of North Carolina dismissed Freeman’s claims on summary judgment, holding that Freeman had insufficient evidence that Koester’s harassment was objectively severe or pervasive, and that Freeman could not establish that Dal-Tile knew or should have known about the harassment or failed to take proper remedial action. Id. at *11-12. The Fourth Circuit reversed, holding that Freeman had sufficient evidence that a reasonable jury could find in her favor. Id. at *21-24. (The opinion is available at: http://www.ca4.uscourts.gov/Opinions/Published/131481.P.pdf)

The opinion is significant for two reasons. First, the Fourth Circuit officially adopted the negligence standard for analyzing an employer’s liability for third-party harassment under Title VII, relied upon by the district court in this case and espoused by other federal courts. Id. at *19. This means that “an employer is liable … for third parties creating a hostile work environment if the employer knew or should have known of the harassment and failed to take prompt remedial action reasonably calculated to end the harassment.” Id. at *20. In other words, an employer cannot take a “see no evil, hear no evil” approach. Id.

Second, and more significant according to dissenting Judge Niemeyer, the Court’s decision expands employer liability beyond co-workers and imbedded third parties (like on-site independent contractors) to customers who, according to the dissent, did not affect the employee’s daily office environment. See id. at *28.

Dal-Tile has sought rehearing by the entire Court, so it is not yet clear if this case will keep its precedential value. For now, this opinion marks an expansion of employer liability under Title VII, making this ever-changing area of the law even more difficult to navigate for business-owners and government entities.

Contact Julia Judkins, Esquire or Jennifer E. White, Esquire at 703 385-1000 for more information about how Bancroft, McGavin, Horvath & Judkins, PC can help address your employment law needs.

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This blog and the information provided has been prepared by Bancroft, McGavin, Horvath & Judkins, P.C. (“BMHJ”) for information purposes only and is not intended nor to be construed as legal advice. This blog may contain the opinions of the members and associates of this firm on various legal issues and is not legal advice. Read More