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One of the key issues in harassment cases alleging a hostile work environment is whether or not the company is liable for the misbehavior of its employees. This year, the U.S. Third Circuit Court of Appeals and the N.J. Superior Court Appellate Division have issued decisions that expose companies within their jurisdiction to greater potential vicarious liability for workplace harassment. In Suders v. Easton, 325 F.3d 432 (3d Cir. 2003), and Entrot v. BASF Corp., 359 N.J. Super. 162 (App. Div. 2003), the courts held that a constructive discharge, if proved, constitutes a “tangible employment action” within the meaning of the U.S. 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). Thus, if an employee proves that she was constructively discharged, the employer is precluded from asserting the so-called Faragher/Ellerthaffirmative defense to avoid liability for the supervisor’s harassment. Moreover, when assessing whether an employer is vicariously liable for harassment, courts must determine whether the harassing employee is a supervisor or co-worker, since the legal standard for imputing liability to the company differs depending on the status of the alleged harasser. Courts have taken various positions in determining whether the alleged harasser is a “supervisor.” In Entrot, the Appellate Division adopted a broad definition of “supervisor” that focuses on “whether the power the offending employee possessed was reasonably perceived by the victim, accurately or not, as giving that employee the power to adversely affect the victim’s working life.” SUDERS v. EASTON In Suders, plaintiff Nancy Drew Suders was hired as a police communications operator with the Pennsylvania State Police in March 1998. She claimed that she was forced to resign from her job in August 1998 because of a sexually hostile work environment created by her male supervisors, Sergeant Eric Easton, Patrol Corporal William Baker and Corporal Eric Prendergast, as well as their daily harassment because of her age and political affiliation. Some of the alleged conduct included name-calling, repeated sexual gesturing, offensive and obscene sexual conversation and the posting of vulgar images. For instance, Easton allegedly discussed bestiality in front of Suders, as well as made disparaging remarks about her age. Suders alleged that Baker would repeatedly imitate a move by a popular televised wrestler — “cross his hands, grab hold of his private parts and yell, suck it” — in front of her. Suders also asserted that she was accused of stealing papers in the barracks and, as a result, was handcuffed, photographed and held for questioning. After that incident, Suders resigned. Suders filed suit in the Middle District of Pennsylvania, alleging that the State Police and the individual defendants had subjected her to a hostile work environment based on her sex, age and political affiliation and had constructively discharged her, in violation of Title VII, the Age Discrimination in Employment Act and the Pennsylvania Human Relations Act. At the close of discovery, the State Police and individual defendants made motions for summary judgment, which were granted in their entirety. In particular, the district court concluded that, while Suders had established that she endured a hostile work environment, the State Police had met its burden of establishing a Faragher/Ellerthaffirmative defense, and thus could not be held vicariously liable for the alleged harassment. Suders then appealed to the Third Circuit. Circuit Judge Julio Fuentes, who was joined by Circuit Judge Theodore McKee and visiting Judge Donald Pogue of the U.S. Court of International Trade, agreed with the district court’s conclusion that Suders had presented evidence showing that her workplace was a hostile work environment. The Court, however, found the district court’s analysis regarding the availability of the Faragher/Ellerthaffirmative defense flawed for two separate reasons: there were disputed issues of fact as to whether the State Police exercised reasonable care to prevent the harassment and, “more importantly,” the district court failed to consider the merits of Suders’ constructive discharge claim and whether a valid constructive discharge claim would affect the availability of the affirmative defense. Addressing the merits of Suders’ constructive discharge claim, the Third Circuit reiterated the “stringent” and “heavily fact-driven” test for proving such claim, namely: whether a “reasonable person” in the employee’s position would have had no choice but to resign because of the “intolerable” working conditions. After concluding that Suders raised genuine issues of material fact relating to her constructive discharge claim, the Third Circuit addressed “whether a constructive discharge constitutes a tangible employment action, such that the affirmative defense to the liability of an employer for the discriminatory conduct of its supervisors would not be available to the employer.” The court answered that question in the affirmative, stating: “We hold that a constructive discharge, when proved, constitutes a tangible employment action within the meaning of Ellerthand Faragher. Consequently, when an employee has raised a genuine issue of material fact as to a claim of constructive discharge, an employer may not assert, or otherwise rely on, the affirmative defense in support of its motion for summary judgment.” This means that whenever an employee shows that she was constructively discharged because of the harassment, the employer is strictly liable for any actionable harassment without regard to the Faragher/Ellerthaffirmative defense. Rejecting other circuits’ holdings that constructive discharge does constitute a tangible employment action, the Third Circuit concluded that there was no reason to treat a constructive discharge differently than an actual termination. Indeed, the court believed that “removing constructive discharge from the category of tangible employment actions could have the perverse effect of discouraging an employer from actively pursuing remedial measures and of possibly encouraging intensified harassment.” According to Fuentes, employers confronted with allegations of harassment “have a wide range of options, including terminating the offending supervisor or stepping in and removing the victim from the hostile work environment by, for example, a transfer.” Nonetheless, he emphasized that, “as our ever expanding Title VII caseload shows, there are instances when employers ignore these two alternatives and opt instead to either turn a blind eye or let their internal procedures run their course while the hostile environment remains unchanged.” In the end, the court opined that, “[b]y holding that a constructive discharge constitutes a tangible employment action, we effectively encourage employers to be watchful of sexual harassment in their workplaces and to remedy complaints at the earliest possible moment; otherwise, they risk losing the benefit of the affirmative defense should victimized employees feel compelled to resign.” ENTROT v. BASF CORP . In the Entrotcase, plaintiff Cindylu Entrot was hired in 1988 as a group information systems manager in BASF’s Polymer Division. In 1996, she asked to be assigned to a temporary project involving the implementation of new business software. Entrot was one of five team leaders under “project leader” George Molinet. Molinet’s duties included setting priorities for the team, scheduling implementation dates and helping make strategic decisions. Entrot claimed that Molinet was responsible for directing and evaluating her job performance. In 1997, while on business trips together, Entrot and Molinet developed a sexual relationship, spending time in each other’s hotel rooms. Entrot claimed that she was afraid of the consequences if she turned down Molinet’s advances, and so did not resist his attempt to engage in varied sexual acts. Entrot also asserted that Molinet insisted on giving her a birthday present, wrote love poems to her and had psychological power over her. Entrot’s husband eventually learned of the affair and warned Molinet to stay away from his wife. Thereafter, Entrot’s husband called her supervisor to complain that she was being stalked by Molinet, but Entrot never mentioned to her supervisor that any sexual conduct took place. She later denied allegations of any sexual misconduct by Molinet in a conversation with a corporate security officer. In April 1997, Entrot was diagnosed with bipolar disorder and left work on disability leave in late July 1997. She never returned. In April 1999, Entrot filed suit in Morris County Superior Court against BASF and Molinet, asserting claims for sexual harassment and constructive discharge in violation of New Jersey’s Law Against Discrimination (LAD) and various tort claims. In July 2001, after extensive discovery, BASF and Molinet made motions for summary judgment. The trial court granted BASF’s motion, concluding that, although Entrot had sufficiently raised issues of fact concerning her claim of a hostile work environment, she failed to show that Molinet was a supervisor and, even if he were a supervisor, she failed to show that BASF should be held vicariously liable for sexual harassment. The trial court also rejected Entrot’s constructive discharge claim. The trial court cited a number of factors supporting its conclusion that Molinet was not Entrot’s supervisor: He was not from her department; he had no authority to hire, fire or promote her; he had not selected her for the project; he had no significant input into personnel decisions concerning her; he did not control her day-to-day working environment; she did not report to him on a daily basis or seek redress from him on workplace issues; and the project was temporary. The trial judge denied Molinet’s motion regarding the tort claims against him. Thereafter, Entrot and Molinet entered into a confidential settlement. At the Appellate Division, Judge Harvey Weissbard, joined by Judges Howard Kestin and Robert Fall, reversed the summary judgment in favor of BASF on the hostile environment and constructive discharge claims and remanded the case for trial. In considering an employer’s liability for sexual harassment, the appeals panel turned to Lehmann v. Toys ‘R’ Us, Inc., 132 N.J. 587 (1993), the seminal case outlining the standards of employer liability. The panel noted that “when a court is asked to assess compensatory and punitive damages as a result of the harassing conduct, an employer’s liability for a supervisor’s conduct must be gauged under common-law principles of agency.” According to Lehmann, an employer is vicariously liable for a harassing supervisor’s conduct if the employer “contributed to the harm through its negligence, intent, or apparent authorization of the harassing conduct, or if the supervisor was aided in the commission of the harassment by the agency relationship.” 132 N.J. at 624 (emphasis added). In other words, the harassing employee must receive some degree of “supervisory” authority from the employer. Based on Lehmann, the Appellate Division emphasized that, in determining an employer’s liability, a court must first ascertain whether the harassing employee is a “supervisor.” In fashioning its definition of a “supervisor,” the court reviewed a number of New Jersey cases decided since Lehmann, and concluded that “supervisory status depends on the nature of the employer’s delegation of authority to the harassing co-worker. If the co-worker had the authority to control the work environment, any harassing behavior by him or her will cause the employer to be liable.” The Appellate Division also looked at federal court decisions that have defined the term “supervisor” for purposes of assessing vicarious liability under Title VII. The court acknowledged that the federal courts are “split into two camps”: one camp focusing on the “power to make key personnel decisions” such as the power to hire, fire, demote, promote, transfer or discipline an employee, e.g., Parkins v. Civil Constructors of Illinois, Inc., 163 F.3d 1027, 1034 (7th Cir. 1998). The Appellate Division chose to follow the other camp, focusing on the “power to direct on-the-job activities,” e.g., Dinkins v. Charoen Pokphand USA, Inc., 133 F. Supp.2d 1254, 1266 (M.D. Ala. 2001). The Dinkinscourt held that an employee is a “supervisor” if he is empowered “to recommend tangible employment actions if his recommendations are given substantial weight by the final decision maker or to direct another employee’s day-to-day work activities in a manner that may increase the employee’s workload or assign additional or undesirable tasks.” 133 F. Supp.2d at 1266. Dinkinsalso acknowledged another basis for qualifying as a “supervisor”: when the harasser, while not really a supervisor, has “apparent authority” that causes the victim to reasonably believe that the harasser possesses supervisory powers. The Dinkins court’s definition of a “supervisor” was consistent with the Equal Employment Opportunity Commission’s enforcement guidance, which provides that “[a]n individual qualifies as an employee’s ‘supervisor’ if: … the individual has authority to direct the employee’s daily work activities.” EEOC Enforcement Guidance on Vicarious Employer Liability for Unlawful Harassment By Supervisors, 8 FEP Manual (BNA) 405:7654 (1999). In following Dinkinsand the EEOC’s view, the Appellate Division in Entrotstated: “Our reading of Lehmann and its progeny … suggests that the Court, instead of requiring a litmus test depending on specific factors (e.g., power to fire or power to control daily tasks), would make the decision turn on whether the power the offending employee possessed was reasonably perceived by the victim, accurately or not, as giving that employee the power to adversely affect the victim’s working life. Thus, such indicia as the power to fire and demote, to influence compensation, and to direct all job functions would be probative of supervisory status, but would not exclude other indicia. Also relevant would be any evidence that the alleged harasser controlled the workplace in subtler and indirect ways, as long as the effect was to restrict the victim-employee’s freedom to ignore sexually harassing conduct.” Applying this new test to the evidence in the record, the Appellate Division concluded that there was a disputed issue of fact as to Molinet’s “supervisor” status, and thus summary judgment should not have been granted in favor of BASF on the harassment claim. The Appellate Division also ruled that the trial court erred in granting summary judgment to BASF on the ground that it had a valid Faragher/Ellerthaffirmative defense to vicarious liability for Molinet’s conduct. In reaching that decision, the appeals court concluded that the trial court improperly rejected Entrot’s constructive discharge claim. That error was significant because the panel went on to hold that a constructive discharge resulting from sexually harassing conduct of a supervisor constitutes a “tangible employment action” within the meaning of the Faragher/Ellerthstandard, and therefore would deprive an employer of the Faragher/Ellerthaffirmative defense to vicarious liability. The Appellate Division’s rationale for this ruling is substantially similar to the reasons articulated by the Third Circuit in Suders. There is, however, some good news for employers from this ruling: the Appellate Division stated that, while no New Jersey court has expressly adopted the Faragher/Ellerthaffirmative defense to a claim under the LAD, “there is no barrier to the application of a Title VII defense to an LAD action.” In remanding, the Appellate Division provided a road map for the trial of such cases: “At the trial on remand, plaintiff must first prove that Molinet was her ‘supervisor,’ as discussed above. Then she must prove that defendant was vicariously liable for Molinet’s harassment. As we have held, if plaintiff was constructively discharged based upon Molinet’s actions for which defendant was responsible, the Ellerth/Faragher[affirmative defense] is not available and defendant would be liable.” Implications for Employers The implications of Sudersand Entrotare significant for employers doing business in New Jersey and within the Third Circuit. Indeed, the Appellate Division’s adoption of a broad definition of the term “supervisor” will likely expose companies to vicarious liability under the LAD for harassment by employees who exercise the authority to make and oversee work assignments, including those employees who have no power to, and do not, make decisions that affect others economically. This is particularly true if there is no other person at the work site or even on a specific project with higher supervisory authority. An employer, however, can avoid such liability by proving its Faragher/Ellerthaffirmative defense (assuming that the defense is available). Given the ruling in Entrot, employers should examine employees’ job descriptions and reporting relationships to avoid the situation in Entrot. Employers also should consider revising their existing anti-harassment policies and complaint procedures to ensure that employees have several avenues of complaint beyond their immediate “supervisor.” In addition, because a viable constructive discharge claim constitutes a tangible employment action, employers should heed the advice of the Third Circuit in Suders: “We effectively encourage employers to be watchful of sexual harassment in their workplaces and to remedy complaints at the earliest possible moment; otherwise, they risk losing the benefit of the affirmative defense should victimized employees feel compelled to resign.” Thus, employers have to put a premium on prompt and effective internal investigations and remedial measures. Employers also should take reasonable steps to ensure that the alleged victim does not feel compelled to resign. In this respect, Fuentes noted that one of the options available to an employer is to “transfer” the victim. Despite that statement, employers should be cautious about transferring the purported victim, since that transfer could be viewed as a tangible employment action and/or retaliatory. Finally, both Entrotand Sudersmake clear — now more than ever — that employers should provide nonharassment training to all levels of supervision, including even low-level supervisors and “team leaders.” By doing so, an employer will at least be able to argue that it should not be held vicariously liable for punitive damages for harassment by a supervisor because it made good-faith efforts to comply with the anti-discrimination laws. Cerasia is a partner and Labbe is an associate in the labor and employment department of Proskauer Rose in Newark. If you are interested in submitting an article to law.com, please click herefor our submission guidelines.

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