Employer Found Liable for Harassment By Client

Cromer Food Services, Incorporated (CFS) is a food-stocking company that sells snacks and beverages in vending machines that it places on its clients' premises. CFS's largest client is Greenville Hospital.

Homer Ray Howard began working for CFS as a route driver. He worked the second shift, servicing the vending machines at Greenville Hospital. He had a regularized schedule where he would wind his way upstairs from the snack bar or cafeteria with scheduled stops in between.

Following an incident with a co-worker, who left a note on the hospital canteen calling him “gay,” two hospital employees began to refer to him as “homo Howard.” Howard was harassed on a daily basis by these two employees, who were housekeepers at the hospital.

Starting in early-December 2006, the employees in question made unwanted sexual comments in nearly every encounter they had with Howard, including graphic references to oral sex. Howard wanted to walk away, but because the comments were made while he was stocking the vending machines, he could not leave without abandoning his duties. The two hospital employees knew Howard's schedule and would wait for him at the machines so frequently that Howard felt “stalked.”

CFS failed to take adequate action to combat the harassment by the hospital employees. C.T. Cromer, the chairman of the company's Board of Directors, claims that this was because he was unaware of the harassment or, at least, unaware of the scale on which it was occurring. Howard, however, contended that he made both CFS and the hospital aware of what was going on as soon as it began.

Reporting the Incidents

After the first incident, Howard spoke to his immediate supervisor, telling him that there were some gentlemen at the hospital who were asking him homosexual questions, and asking him if he were gay. The supervisor made light of the events, telling Howard to let it go; that the men were only joking. He did not ask for additional information to investigate or resolve the problem.

Under CFS's sexual harassment policy, employees are required to report harassment to the president of the company. The harassment policy also requires any employee who becomes aware of any harassment of an employee by a non-employee to report such harassment to the president of CFS. Howard's supervisors did not follow that directive.

In addition to reporting the alleged harassment to his immediate supervisor, Howard also reported the problem to another supervisor. Howard asked if there was a way to address the problem without switching routes. The supervisor's reply was that, “it was just a joke,” and not to take things too seriously because, “faggots are ignorant, retarded people and, Howard, I know you're not retarded.”

The next week, Howard told yet another supervisor about the problem. That supervisor replied that it was unfortunate that the situation was being handled as it was, but that the problem had already been resolved.

As the harassment continued, Howard spoke to Chet Cromer, one of the sons of the Chairman of the Board of Directors and a manager with the company. Cromer told Howard that he would speak with his father, which he did. That very night, Howard met with C.T. Cromer, Chairman of the Board, who, according to Howard, was visually upset by the situation.

According to Howard, the first words out of C.T.'s mouth were, “Do you realize this could cost me everything?” Howard testified that he met again with C.T. Cromer to tell him the situation was getting worse and, in response, C.T. allegedly told Howard that he was not responsible for the hospital, but only responsible for CFS employees.

Howard also complained to Greenville Hospital about the conduct of their employees. Nothing happened as a result of that report. Subsequently, Howard asked if he could switch to another second shift route, which he believed was available to avoid going to the hospital. The supervisor told Howard to “quit whining.”

Filing with the EEOC

On March 6, 2007, Howard filed a charge of discrimination with the EEOC. On the same day that CFS received notice of the charge, Howard was summoned to C.T.'s office in which C.T. referred to “this stupid letter from the EEOC.” During the meeting, there was some conflicting testimony as to what Howard was asked or what information he provided, but in the end, C.T. decided that a change needed to be made to protect Howard.

C.T. offered to switch Howard to the first shift to avoid any further confrontations at the hospital. According to Howard, the hours worked as part of the first shift were increased to 55 per week from 40 hours per week on the second shift. The hourly pay for the first shift was also less than the second shift.

According to the EEOC's calculations, the average weekly wage for the first shift had an effective pay rate of $11.26 per hour. By contrast, the pay for the second-shift position, Howard's initial position, was $12.50 per hour. Howard declined to take the new shift, which allegedly conflicted with his child-care responsibilities. Because the shift was a “take-or-leave-it” offer, Howard claims he was terminated as a result of his choice.

Trial Court

The EEOC brought suit on behalf of Howard, alleging that CFS was responsible for the sexual harassing behavior of the hospital employees and that it had failed to take any reasonable steps to remedy that situation. The trial court, however, disagreed ' because CFS lacked the requisite details regarding the harassment to take any corrective action, the EEOC's claims were summarily dismissed.

The Appeal

The EEOC promptly appealed the district court's decision to grant summary judgment. The EEOC maintained that Howard had set forth sufficient facts to show it would be reasonable to conclude that the employer had actual or constructive notice of the harassment and had failed to take any corrective action. The Fourth Circuit agreed.

According to the appellate court, to make out a claim for sexual harassment, the employee must establish four elements: 1) the harassment was unwelcome; 2) it was based on sex; 3) it was sufficiently severe or pervasive to alter conditions of employment and created an abusive atmosphere; and 4) it was imputable to the employer. The last element was the only one at issue.

In considering this issue, the Fourth Circuit acknowledged that it had yet to decide whether an employer may be liable for the activities of non-employees for a claim for sexual harassment. The court noted that numerous other circuits have addressed this issue, finding that an employer can be liable if it took no steps to protect its employees and if it had actual or constructive knowledge of the harassment.

CFS argued that it did not have actual or constructive knowledge of the harassment because the complaints that Howard lodged were vague and inefficiently detailed for CFS to take action. CFS also argued that Howard failed to follow the sexual harassment protocol that required incidents to be made known to the company president.

According to the court, however, such reasoning ignored the clear evidence in the record that Howard tried to communicate the nature and extent of the harassment to several supervisors, including top officials, and was effectively ignored at all levels. Many of those supervisors scoffed at Howard's complaints, telling him to stop being such a “cry baby.”

On these facts, the court found that it was hardly fair to fault Howard for failing to communicate more information about the incidents or for ineffectively conveying the gravity of the misconduct. Even if Howard refused to give the names of the alleged harassers, CFS still had a duty to investigate or take other measures to combat the harassment.

CFS also contended that it had acted promptly to protect Howard as soon as it had sufficient information about what was occurring at the hospital. In other words, the offer to transfer Howard from second shift to first shift, which would have changed his route not to include Greenville Hospital, was enough to fulfill its obligations to him. However, Howard had explained that he preferred the second-shift position because he needed time in the morning to drive his young child for medical treatments. The court found that switching Howard's shift was, therefore, unacceptable as a remedial measure.

As the court noted, there were many alternatives that may have been available to remedy this situation. For example, CFS could have contacted Greenville Hospital to ask for its assistance in investigating Howard's complaints and, if appropriate, discipline the hospital employees. Alternatively, CFS could have requested its employees who were on the second shift to see if they would switch routes with Howard so that he would not have to work at Greenville Hospital. Apparently, none of those actions were taken.

Retaliation Claim

On appeal, the court also considered whether a reasonable jury could find that CFS's decision to switch Howard from the second to the first shift constituted unlawful retaliation for his decision to file any EEOC complaint. In order to support a claim for retaliation, there must be sufficient evidence that the employee engaged in protected activity, the employee acted adversely and a causal connection between the protected activity and the employer's action exists. CFS argued on appeal that its decision to transfer Howard was not adverse.

According to the court, any action that might “dissuade a reasonable worker from making or supporting a charge of discrimination” could be considered an adverse action. Here, the court found that a jury could easily conclude that the actions taken by CFS toward Howard were adverse. First, there was a question over whether Howard's salary per hour increased or decreased. According to the EEOC, Howard was paid $11.26 per hour for the new shift. He had received $12.50 per hour in his second-shift position. Further, switching to the first shift interfered with Howard's child care obligations. As a result, someone in Howard's position could find the material effects of the new shift adverse. On remand, a jury would decide that issue. (EEOC v. Cromer Food Services, Incorporated, Fourth Circuit, Docket No. 10-1476, March 3, 2011.)

Bottom Line

As many employers know first-hand, it is a very difficult situation when a client or customer harasses your employees. On one hand, you do not want to jeopardize the business relationship and lose the customer. However, as an employer, you have an obligation to ensure that your employees have a safe and healthful work environment, free from harassment.

As this case demonstrates, you also have a clear legal responsibility to treat any employee claim of sexual harassment involving customers the same way you would treat a claim involving your own company. Under the test adopted by the court, an employer may be liable for the sexual harassment of its employees caused by a client or customer if the employer knew or should have known of the harassment and failed to take appropriate actions to halt it.

As in this case, most employers have harassment policies that clearly apply to their own workforce. In light of this decision, employers should review their current harassment policy and make sure that it covers any harassing behavior ' not just by their own employees, but by any other third parties, such as clients and customers.

In fact, when employers conduct employee training concerning their harassment policies, they should remind the employees that the policies apply to customers and clients, as well as the employees; and that if any employees are subject to any unwelcome or allegedly harassing behavior at the hands of a customer or client, they should follow the employer's policy and report it as soon as possible.

Kevin McCormick, a member of this newsletter's Board of Editors, is a Partner in the Baltimore, MD, office of Whiteford Taylor Preston, LLP. He provides advice and counsel to public and private employers on all phases of the employment relationship.

In a recent, unpublished decision, the Fourth U.S. Court of Appeals held that an employer may be responsible for the sexual harassment of one of its employees by the employer's client. This is an interesting issue that the Fourth Circuit had failed to address ' until this decision.

Other circuits, including the Seventh, Ninth and Tenth U.S. Circuit Courts of Appeal, have held that an employer can be liable if it took no steps to protect its employees and if it had actual or constructive knowledge of the alleged misconduct. Upon careful review of the facts and the law, the Fourth Circuit decided that such an approach was appropriate. This article takes a closer look at this important decision.

Background Facts

Cromer Food Services, Incorporated (CFS) is a food-stocking company that sells snacks and beverages in vending machines that it places on its clients' premises. CFS's largest client is Greenville Hospital.

Homer Ray Howard began working for CFS as a route driver. He worked the second shift, servicing the vending machines at Greenville Hospital. He had a regularized schedule where he would wind his way upstairs from the snack bar or cafeteria with scheduled stops in between.

Following an incident with a co-worker, who left a note on the hospital canteen calling him “gay,” two hospital employees began to refer to him as “homo Howard.” Howard was harassed on a daily basis by these two employees, who were housekeepers at the hospital.

Starting in early-December 2006, the employees in question made unwanted sexual comments in nearly every encounter they had with Howard, including graphic references to oral sex. Howard wanted to walk away, but because the comments were made while he was stocking the vending machines, he could not leave without abandoning his duties. The two hospital employees knew Howard's schedule and would wait for him at the machines so frequently that Howard felt “stalked.”

CFS failed to take adequate action to combat the harassment by the hospital employees. C.T. Cromer, the chairman of the company's Board of Directors, claims that this was because he was unaware of the harassment or, at least, unaware of the scale on which it was occurring. Howard, however, contended that he made both CFS and the hospital aware of what was going on as soon as it began.

Reporting the Incidents

After the first incident, Howard spoke to his immediate supervisor, telling him that there were some gentlemen at the hospital who were asking him homosexual questions, and asking him if he were gay. The supervisor made light of the events, telling Howard to let it go; that the men were only joking. He did not ask for additional information to investigate or resolve the problem.

Under CFS's sexual harassment policy, employees are required to report harassment to the president of the company. The harassment policy also requires any employee who becomes aware of any harassment of an employee by a non-employee to report such harassment to the president of CFS. Howard's supervisors did not follow that directive.

In addition to reporting the alleged harassment to his immediate supervisor, Howard also reported the problem to another supervisor. Howard asked if there was a way to address the problem without switching routes. The supervisor's reply was that, “it was just a joke,” and not to take things too seriously because, “faggots are ignorant, retarded people and, Howard, I know you're not retarded.”

The next week, Howard told yet another supervisor about the problem. That supervisor replied that it was unfortunate that the situation was being handled as it was, but that the problem had already been resolved.

As the harassment continued, Howard spoke to Chet Cromer, one of the sons of the Chairman of the Board of Directors and a manager with the company. Cromer told Howard that he would speak with his father, which he did. That very night, Howard met with C.T. Cromer, Chairman of the Board, who, according to Howard, was visually upset by the situation.

According to Howard, the first words out of C.T.'s mouth were, “Do you realize this could cost me everything?” Howard testified that he met again with C.T. Cromer to tell him the situation was getting worse and, in response, C.T. allegedly told Howard that he was not responsible for the hospital, but only responsible for CFS employees.

Howard also complained to Greenville Hospital about the conduct of their employees. Nothing happened as a result of that report. Subsequently, Howard asked if he could switch to another second shift route, which he believed was available to avoid going to the hospital. The supervisor told Howard to “quit whining.”

Filing with the EEOC

On March 6, 2007, Howard filed a charge of discrimination with the EEOC. On the same day that CFS received notice of the charge, Howard was summoned to C.T.'s office in which C.T. referred to “this stupid letter from the EEOC.” During the meeting, there was some conflicting testimony as to what Howard was asked or what information he provided, but in the end, C.T. decided that a change needed to be made to protect Howard.

C.T. offered to switch Howard to the first shift to avoid any further confrontations at the hospital. According to Howard, the hours worked as part of the first shift were increased to 55 per week from 40 hours per week on the second shift. The hourly pay for the first shift was also less than the second shift.

According to the EEOC's calculations, the average weekly wage for the first shift had an effective pay rate of $11.26 per hour. By contrast, the pay for the second-shift position, Howard's initial position, was $12.50 per hour. Howard declined to take the new shift, which allegedly conflicted with his child-care responsibilities. Because the shift was a “take-or-leave-it” offer, Howard claims he was terminated as a result of his choice.

Trial Court

The EEOC brought suit on behalf of Howard, alleging that CFS was responsible for the sexual harassing behavior of the hospital employees and that it had failed to take any reasonable steps to remedy that situation. The trial court, however, disagreed ' because CFS lacked the requisite details regarding the harassment to take any corrective action, the EEOC's claims were summarily dismissed.

The Appeal

The EEOC promptly appealed the district court's decision to grant summary judgment. The EEOC maintained that Howard had set forth sufficient facts to show it would be reasonable to conclude that the employer had actual or constructive notice of the harassment and had failed to take any corrective action. The Fourth Circuit agreed.

According to the appellate court, to make out a claim for sexual harassment, the employee must establish four elements: 1) the harassment was unwelcome; 2) it was based on sex; 3) it was sufficiently severe or pervasive to alter conditions of employment and created an abusive atmosphere; and 4) it was imputable to the employer. The last element was the only one at issue.

In considering this issue, the Fourth Circuit acknowledged that it had yet to decide whether an employer may be liable for the activities of non-employees for a claim for sexual harassment. The court noted that numerous other circuits have addressed this issue, finding that an employer can be liable if it took no steps to protect its employees and if it had actual or constructive knowledge of the harassment.

CFS argued that it did not have actual or constructive knowledge of the harassment because the complaints that Howard lodged were vague and inefficiently detailed for CFS to take action. CFS also argued that Howard failed to follow the sexual harassment protocol that required incidents to be made known to the company president.

According to the court, however, such reasoning ignored the clear evidence in the record that Howard tried to communicate the nature and extent of the harassment to several supervisors, including top officials, and was effectively ignored at all levels. Many of those supervisors scoffed at Howard's complaints, telling him to stop being such a “cry baby.”

On these facts, the court found that it was hardly fair to fault Howard for failing to communicate more information about the incidents or for ineffectively conveying the gravity of the misconduct. Even if Howard refused to give the names of the alleged harassers, CFS still had a duty to investigate or take other measures to combat the harassment.

CFS also contended that it had acted promptly to protect Howard as soon as it had sufficient information about what was occurring at the hospital. In other words, the offer to transfer Howard from second shift to first shift, which would have changed his route not to include Greenville Hospital, was enough to fulfill its obligations to him. However, Howard had explained that he preferred the second-shift position because he needed time in the morning to drive his young child for medical treatments. The court found that switching Howard's shift was, therefore, unacceptable as a remedial measure.

As the court noted, there were many alternatives that may have been available to remedy this situation. For example, CFS could have contacted Greenville Hospital to ask for its assistance in investigating Howard's complaints and, if appropriate, discipline the hospital employees. Alternatively, CFS could have requested its employees who were on the second shift to see if they would switch routes with Howard so that he would not have to work at Greenville Hospital. Apparently, none of those actions were taken.

Retaliation Claim

On appeal, the court also considered whether a reasonable jury could find that CFS's decision to switch Howard from the second to the first shift constituted unlawful retaliation for his decision to file any EEOC complaint. In order to support a claim for retaliation, there must be sufficient evidence that the employee engaged in protected activity, the employee acted adversely and a causal connection between the protected activity and the employer's action exists. CFS argued on appeal that its decision to transfer Howard was not adverse.

According to the court, any action that might “dissuade a reasonable worker from making or supporting a charge of discrimination” could be considered an adverse action. Here, the court found that a jury could easily conclude that the actions taken by CFS toward Howard were adverse. First, there was a question over whether Howard's salary per hour increased or decreased. According to the EEOC, Howard was paid $11.26 per hour for the new shift. He had received $12.50 per hour in his second-shift position. Further, switching to the first shift interfered with Howard's child care obligations. As a result, someone in Howard's position could find the material effects of the new shift adverse. On remand, a jury would decide that issue. (EEOC v. Cromer Food Services, Incorporated, Fourth Circuit, Docket No. 10-1476, March 3, 2011.)

Bottom Line

As many employers know first-hand, it is a very difficult situation when a client or customer harasses your employees. On one hand, you do not want to jeopardize the business relationship and lose the customer. However, as an employer, you have an obligation to ensure that your employees have a safe and healthful work environment, free from harassment.

As this case demonstrates, you also have a clear legal responsibility to treat any employee claim of sexual harassment involving customers the same way you would treat a claim involving your own company. Under the test adopted by the court, an employer may be liable for the sexual harassment of its employees caused by a client or customer if the employer knew or should have known of the harassment and failed to take appropriate actions to halt it.

As in this case, most employers have harassment policies that clearly apply to their own workforce. In light of this decision, employers should review their current harassment policy and make sure that it covers any harassing behavior ' not just by their own employees, but by any other third parties, such as clients and customers.

In fact, when employers conduct employee training concerning their harassment policies, they should remind the employees that the policies apply to customers and clients, as well as the employees; and that if any employees are subject to any unwelcome or allegedly harassing behavior at the hands of a customer or client, they should follow the employer's policy and report it as soon as possible.

Kevin McCormick, a member of this newsletter's Board of Editors, is a Partner in the Baltimore, MD, office of Whiteford Taylor Preston, LLP. He provides advice and counsel to public and private employers on all phases of the employment relationship.