Sexual Harassment Ruling – An Employee & A Customer

We usually think of sexual harassment claims involving employees who are harassed by other employees but recently the 7th Circuit Court of Appeals upheld an EEOC verdict against a retailer which involved an employee allegedly sexually harassed by a customer.   This ruling should put all retail, restaurant and hospitality companies on notice – and this may be a good time to re-evaluate those sexual harassment policies.

Case Facts:

The facts presented at trial were very conflicting between the worker and the employer, but on appeal the Court generally relied on those facts presented by the employee since she was successful at trial.

The employee was a stocker so she was often walking around the entire store.  The customer approached the employee and asked her personal questions on multiple occasions.  After two months she reported it to her manager, who told her to notify him if the customer was seen again. The next time the customer was seen he was questioned by the manager and LP officer and told not to speak with the employee.

Upon her next interaction with the customer, the employee filed a report with the police and in response the customer agreed to avoid the employee and the store.  Despite this agreement, over the next 13 months the employee claimed there were many more encounters and she claimed the customer tried to talk to her and give her his phone number.  The employee claimed the customer’s questions were said to her “in a sexual way.”  The customer also told the employee she was “pretty,” “beautiful” and “exotic.”  In addition to the verbal confrontations, the customer bumped his cart into the employee several times, he touched her twice (her face and wrist) and attempted to hug her twice.

Once the employee obtained a no-contact court order against the customer, the store ordered the customer to shop at a different store location.  At around the same time, the employee went on medical leave.   At some point the employee then went to that same location to shop with her father and encountered the customer – who screamed profanities at the employee.  The customer’s membership was then revoked and the customer was forbidden to shop at any of the store locations.  The employee never returned to work so she was terminated from her position.

Allegations & Procedural History:

The EEOC filed suit on behalf of the employee claiming she was discriminated against because of her sex “by creating and tolerating a sexually hostile work environment of offensive comments of a sexual nature, unwelcome touching, unwelcome advances, and stalking by a customer.”  It also accused the employer of constructively discharging the employee.

The district court granted summary judgment on the constructive discharge claim but allowed the hostile work environment claim to go to trial.  At the end of the EEOC’s case at trial, the employer moved for judgment as a matter of law but it was denied.  The jury ruled in favor of the employee and awarded her $250,000 in compensatory damages.

The employer appealed the denial of the motion for judgment as a matter of law and the EEOC cross-appealed the denial of back pay.

Seventh Circuit Ruling:

Title VII of the Civil Rights Act of 1964 prohibits an employer from discriminating against an employee on the basis of sex. 42 U.S.C. § 2000e-2(a)(1). An employer violates this provision when “discrimination based on sex … create[s] a hostile or abusive work environment.” Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 66 (1986).

An employer can be liable for a hostile work environment that results from the acts of non-employees, including customers.  Dunn v. Washington Cty. Hosp., 429 F.3d 689, 691 (7th Cir. 2005); see also Lockard v. Pizza Hut, Inc., 162 F.3d 1062, 1074 (10th Cir. 1998) (“[T]he same standard of liability applies to both co-worker and customer harassment.”).

To establish a hostile work environment claim, a plaintiff must show that she was “(1) subjected to unwelcome sexual conduct, advances, or requests; (2) because of her sex; (3) that were severe or pervasive enough to create a hostile work environment; and (4) that there is a basis for employer liability.” Lapka v. Chertoff, 517 F.3d 974, 982 (7th Cir. 2008).

The issue in this case was the third factor, whether conduct was severe or pervasive enough to create a hostile work environment.  The employer conceded the worker subjectively believed the conduct was severe or pervasive but argued it was not objectively severe to a reasonable person.

To be severe or pervasive enough to create a hostile work environment, conduct must be “extreme.”  What is severe depends on “all the circumstances,” including “the frequency of the discriminatory con-duct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee’s work performance.” Harris v. Forklift Sys., Inc., 510 U.S. 17, 22 (1993).

A brief summary of how the Court summarized the law, and the basis for its ruling, is as follows:

  • The alleged sexual harassment must occur because of the plaintiff’s sex, but it need not consist of pressure for sex, intimate touching, or a barrage of deeply offensive sexual comments.
  • Actionable discrimination can take other forms, such as demeaning, ostracizing, or even terrorizing the victim because of her sex.
  • The court determines whether a workplace was hostile based on “all the circumstances” of the case and in the circumstances of this case, the customer’s talking and touching took place in the context of his stalking.
  • A reasonable juror could conclude that being hounded for over a year by a customer despite intervention by management, involvement of the police, and knowledge that he was scaring her would be pervasively intimidating or frightening to a person “of average steadfastness.”
  • It was also relevant that a no-contact order was entered by a court and then violated by the customer.
  • An employer is not vicariously liable for the sexual harassment of its employee by a customer. There must be “a basis for employer liability,” and an employer is responsible for its own negligence if it is “reckless in permitting, or failing to prevent, negligent or other tortious conduct by persons, whether or not his servants or agents, upon premises … under his control.”
  • For these reasons, the employer’s argument that the employee was not severely and pervasively harassed fails.
  • The employer did not challenge the jury’s decision that its response to the harassment was unreasonably weak so that issue was not addressed by the court.

As for the issue of back pay, the Court agreed the employee was not owed back pay after she was terminated because she was terminated for failing to return to work.  The only back pay the employee may be owed was during her medical leave.

For a complete review of the court’s ruling, a copy of the opinion is attached.

EEOC v. Costco, 17-2432

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