When Did Prohibitory Become Proactive? The Courts Ratchet Up Employers' Obligations Under Title VII.

By: Bruce S. Harrison and Randi Klein Hyatt

I. Introduction

Title VII of the Civil Rights of 1964, as amended, (the "Statute" or "Act") sets forth a series of broad prohibitions regarding discrimination on the basis of race, sex, religion, color and national origin. [1] The affirmative obligations contained in the Act are limited. Specifically, employers are required to file EEO-1 forms with the EEOC, [2] and put up the appropriate EEO poster to advise employees of their rights and remedies under the Act. Of somewhat greater substance is the obligation to engage in discussions upon a request for a reasonable accommodation due to religious beliefs. [3] Except for these few affirmative duties, however, Title VII was enacted and has operated to combat discrimination by operating as a "though shall not" statute rather than a "though shall" statute. That condition, however, is changing quickly. Over the last few years a trilogy of Supreme Court decisions regarding sexual harassment and their application by the lower courts is effectively transforming Title VII from a statute that previously limits action into one that may often require it.

II. The Supreme Court Cases In Review

A. In The Beginning -- Faragher and Ellerth.

In 1998, the Supreme Court issued a set of companion decisions, Faragher v. City of Boca Raton, [4] and Burlington Industries, Inc. v. Ellerth, [5] addressing when an employer is liable for the sexually harassing conduct of its supervisors. The Court held that an employer will be vicariously liable under Title VII for actionable discrimination caused by a supervisor, but subject to an affirmative defense looking to the reasonableness of the employer's conduct as well as that of the plaintiff victim. [6] When no tangible employment action is taken against the victimized employee, an employer may raise an affirmative defense to liability by establishing that (a) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and that (2) the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. [7]

Although the Supreme Court cautioned that "proof that an employer had promulgated an antiharassment policy with complaint procedure is not necessary in every instance as a matter of law," [8] as a matter of fact, such proof, at a minimum, has become de rigeur. As is explored more fully below, promulgation of a policy is the first in a series of affirmative steps that flow from the proposition that setting out a policy means nothing if that policy is implemented in an ineffective manner. [9]

B. Then Came Kolstad.

One year following the Faragher and Ellerth decisions, the Supreme Court issued its decision in Kolstad v. American Dental Association. [10] There the Court further expanded its expectations of employer "activism" in the discrimination arena.

The Supreme Court determined the circumstances under which punitive damages were to be assessed against an employer under cases of intentional discrimination, holding that there must be a showing that the employer "engaged in a discriminatory practice or discriminatory practices with malice or with reckless indifference to the federally protected rights of an aggrieved individual." [11]

Kolstad had prevailed on her claim that she was denied a promotion because of her sex. In arguing that she was entitled to punitive damages, she asserted the standard should be the same as for liquidated damages under the Age Discrimination in Employment Act. The Supreme Court instead held that under Title VII, "malice" or "reckless indifference to federally protected rights" must be shown before punitive damages could be awarded.

In rejecting an agency/strict liability approach to imputing liability to the employer for punitive damages, the Court concluded that Title VII's underlying purposes were better advanced "where employers are encouraged to adopt anti-discrimination policies and to educate their personnel on Title VII's prohibitions." [12] Therefore, the Court held "in the punitive damages context, an employer may not be vicariously liable for the discriminatory employment decisions of managerial agents where these decisions are contrary to the employer's ëgood faith efforts to comply with Title VII.'" [13]

Thus, should a Title VII case proceed to the damages phase, an employer needs to establish it has taken good faith efforts to comply with the Act to avoid a punitive damages award. Posting a sexual harassment policy is not sufficient. These three Supreme Court cases, and most particularly, the thought that the law should be interpreted to provide incentives for employer compliance, have caused the lower courts to take that ball and run with it. It is increasingly clear that the courts have ratcheted up the standards by which employers can defend against punitive damage claims.

III. How The Law Affects Employer Practices

Today, many courts view the primary objective of Title VII, as not to provide redress for discrimination, but to avoid the harm in the first place. [14] Of course, making any activity unlawful will encourage a level of compliance. What we are referring to here, however, are judicial rulings imposing compliance responsibilities and changes in employment practices of a sort far beyond those explicitly set forth in the Statute. Some examples are appropriate.

In Smith v. First Union National Bank, [15] the Fourth Circuit used the Faragher and Ellerth decisions to hold that the employer had not done enough with its policies and preventative measures to absolve itself of liability for a supervisor's gender-based harassment. In Smith, the plaintiff had claimed that over the course of her career with the bank, her supervisor subjected her to derogatory gender-based insults and ridicule. He allegedly had also made physically threatening statements to her. She was not subjected to any sexual or physical advances. [16]

Initially, the plaintiff's complaints to management focused on her concern for her safety, rather than sexual harassment she was experiencing. The plaintiff explained that because the employer's sexual harassment policy identified sexual harassment as including "unwelcome sexual advances, requests for sexual favors, and other physical conduct of a sexual nature" she did not know that gender-based comments alone were prohibited. [17] The company placed her supervisor on probation for his "management style", as opposed to harassment. The plaintiff was reassigned to a new supervisor, but she and her former supervisor remained in the same work area. [18]

In defending against the sexual harassment suit, the company alleged, in accordance with Faragher and Ellerth, that it exercised reasonable care to prevent and promptly remedy the harassment and the plaintiff has unreasonably failed to avail herself of its sexual harassment complaint policy. The Fourth Circuit disagreed.

It held that the company's policy was so incomplete and vague in its description of what constituted harassment that it was inadequate to prevent employees from engaging in the conduct. [19] Further, because company officials had apparently discouraged the plaintiff's use of the complaint process, the company could not otherwise overcome its deficient harassment policy. [20] Lastly, the Fourth Circuit criticized the company for investigating the complaint as a management style concern rather than a sexual harassment issue and for failing to transfer the plaintiff away from the alleged harasser as part of a prompt remedy. [21]

Smith teaches that Title VII requires sexual harassment policies to educate employees on how to complain, and to alert employees to the vast types of conduct that can give rise to complaints (i.e., make your policies well-written, well-worded and comprehensive). Investigations and corrective action will be unavailing in defending against claims for punitive damages if they are conducted begrudgingly or in a superficial manner. [22]

In Frederick v. Sprint/United Management Co., [23] the Eleventh Circuit held that the employer was required to show that is sexual harassment policy was effectively published, that it contained reasonable complaint procedures, and that it contained no other fatal defect, whatever that can be construed to mean. Because there were disputes regarding the complaint procedures during the time period in question, the Eleventh Circuit deemed a jury should have decided whether the affirmative defense was satisfied.

Similarly, in Gentry v. Export Packaging Co., [24] the Seventh Circuit clarified that a sexual harassment policy must have effective grievance mechanisms in place and examined whether the policy was posted, whether the persons to whom harassment could be reported were identified, and whether it was clear who fit the definition of a person to whom harassment could be reported.

The requirements continue to build. In Madray v. Publix Supermarkets, Inc., [25] the Eleventh Circuit set forth a litany of expectations. Specifically, the Court interpreted Faragher to hold, in part, that dissemination of an employer's anti-harassment policy was fundamental to meeting the requirement for exercising reasonable care in preventing sexual harassment. The Court further expounded that the policy itself must include reasonable complaint procedures and went so far as to require sexual harassment policies to contain assurances of confidentiality, of no reprisal, provide alternative places to report harassment so as to allow complaints to circumvent a supervisor, and suggested that providing a toll-free number to receive complaints was helpful. [26]

Notably, in addition to requiring well-written and comprehensive harassment policies, courts are increasingly requiring training be implemented for managers and employees in order to successfully rely upon a Faragher defense. Harassment procedures are not going to be sufficient if supervisors and employees are not conversant and familiar with the substance of the policy and the logistics of utilizing it. [27] Training is, in essence, the only way to accomplish these tasks. For example, the Seventh Circuit criticized the employer in Molnar v. Booth, [28] because its global anti-discrimination policy addressed various forms of discrimination, but did not specifically mention sexual harassment, nor did it provide direction as to what employees should do if they felt they were victims of such conduct. Moreover, when training and educating employees, courts will make sure that the information is provided in understandable form. [29]

The same concepts apply to other discrimination claims. For example, in EEOC and Otero v. Wal-Mart Stores, Inc., [30] the plaintiff sued under the Americans with Disabilities Act ("ADA"), and was granted summary judgment based on an interview sheet comment in which the plaintiff was asked: "What current or past medical problems might limit your ability to do a job?" [31] The Tenth Circuit held that "the law is clear that an employer is prohibited from making inquiries of a job applicant as to whether such applicant is an individual with a disability or as to the nature or severity of such disability." [32]

The Tenth Circuit further noted that "the law is equally clear that an employer may make pre-employment inquiries into the ability of an applicant to perform job-related functions." [33] In this instance, however, it was undisputed that the company's personnel director never explained to the plaintiff the duties of the job he was seeking or asked the plaintiff to describe how he might perform such duties. The only issue actually submitted to the jury was punitive damages.

The jury awarded $150,000 in punitive damages, and Wal-Mart appealed. The Tenth Circuit upheld the award, based on the fact that the persons engaged in making the improper inquiry were the company's personnel manager and its training coordinator. The Court also concluded that a reasonable jury could clearly have found that the company knowingly discriminated against the Plaintiff in disregard of federal law.

The Tenth Circuit further noted the company should be required to "conduct ADA compliance training for all supervisory and managerial employees." [34] It believed that absent such training there was a real danger that the defendant would engage in future violations of the law.

Another Tenth Circuit decision coincidentally also involved Wal-Mart defending a suit involving punitive damages, EEOC v. Wal-Mart Stores, Inc. [35] There, Wal-Mart sought to establish that it had made good-faith efforts to comply with the ADA. Relying on Kolstad, which, as explained above, interpreted the law governing punitive damages as to encourage "employers to adopt anti-discrimination policies and to educate their personnel on [federal] prohibitions" against work place discrimination, the Tenth Circuit held that Wal-Mart's written policy against discrimination "alone is not enough." The Court found that its "review of the record leaves us unconvinced that Wal-Mart made a good-faith effort to educate its employees about the ADA's prohibitions." [36]

The potential for courts to apply these same principles to cases involving race, national origin or religious discrimination was confirmed by the United States Court of Appeals for the Fifth Circuit in Deffenbaugh-Williams v. Wal-Mart Stores, Inc. [37] In that case, the Court ruled that Wal-Mart had failed to establish a good faith defense to the plaintiff's claim for punitive damages where it only presented evidence that it encouraged employees to contact higher management with grievances. Notably, the Court focused on Wal-Mart's failure to present any evidence regarding its response to the employee's complaints or of any specific Title VII efforts. [38]

Other federal trial courts have issued similar rulings. For example, in Booker v. Budget Rent-A-Car Systems, [39] the Middle District of Tennessee held that an employer was vicariously liable under Title VII, for its supervisor's racial harassment of an African-American employee, because the employer failed to establish that its management had received any training on the racial harassment policy it had in place.

The importance of these Title VII cases, ADA cases and the Supreme Court's trilogy of decisions regarding sexual harassment cannot be minimized. The message is clear: employers who fail to provide managers with adequate training to avoid meritorious employment discrimination claims risk significant punitive damages awards.

In sum, not only are written policies necessary, they need to be well written and well worded. These policies need to be reviewed and updated. Language needs to be clear and needs to cover all categories of discrimination. The workforce needs to be trained on what the policies prohibit and how complaints can be made under the policy. Dissemination of policies is "fundamental" to the prevention prong. [40] The lengths the courts have required employers to go to satisfy these burdens are telling.

IV. Conclusion

The practice of increasingly raising the hurdle for affirmative action steps necessary to effectively avoid punitive damages is not likely to abate. For one thing, if it serves its stated purposes, it would also have the effect of reducing the courts' docket of Title VII claims. It is not coincidental, we believe, that the courts have been most forceful in amplifying an employer's affirmative obligations to avoid discrimination claims in instances where the defendant is a "repeat offender." In any event, the fact remains that for employers to avoid liability for punitive damage, they need a rock solid harassment policy and they need to train their managers and employees regarding the requirements of that policy on a regular basis.

The standard of exercising reasonable care and taking good faith efforts to comply with Title VII is a dynamic concept. Clearly, the courts' expectations of employers can often be unpredictable and varying. Prior to 1998, training and educating on sexual harassment was reserved typically for the large companies and the upper-echelon of corporate management. Today, everyone from the janitor to the CEO needs to be privy to this information, as well as the prohibitions against all other forms of harassment and discrimination.

An interesting aspect of what has transpired is that employers have to juggle multiple considerations in assessing their approach to preventative employment practices. The ultimate question is how much more should an employer spend to reduce the risk of punitive damages to an "acceptable" level? The short answer is, more than they are used to spending.