Sexual Harassment: You Can Be Liable When A Client Harasses Your Employee; 4-Point Protection Plan

Many employers don’t know that they can be hit with a lawsuit if a customer or vendor sexually harasses their employee and they don’t adequately remedy the problem. A new decision from the Ninth Circuit Court of Appeals, which covers California, demonstrates the serious liability you can face if you mishandle these tricky situations.

Potential Client Allegedly Sexually Assaults Employee

Maureen Little worked for Windermere Relocation Services Inc. in the Seattle area, developing relationships with corporate clients regarding relocation services for their employees. Windermere president Gayle Glew told Little to “do whatever it takes” to get the Starbucks Corp. account.

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Little then accepted Starbucks HR director Dan Guerrero’s invitation to discuss the account at a restaurant. After dinner and drinks, Little became ill and passed out. She claimed she awoke to find Guerrero raping her in his car. She tried to fight him off but became ill again, and Guerrero allegedly drove her to his apartment and raped her a second time.

Employee Fired After Reporting Rape

Little reported the alleged rape to Windermere director of relocation services Chris Delay, who allegedly advised Little not to tell company management because it could hurt her career. Nevertheless, Little reported the rape to Peggy Scott, vice president of operations, who was designated in Windermere’s harassment policy to receive complaints. Scott reportedly advised her to seek therapy and said she wouldn’t notify company president Glew unless Little took legal action against Guerrero. Scott didn’t investigate the matter and later testified that she believed the rape fell outside the company’s harassment policy.

Eventually, under pressure from Glew about the status of the Starbucks account, Little informed Glew of the rape. Glew allegedly responded that he didn’t want to hear anything about it and immediately cut her pay. When Little objected, Glew told her to clear out her desk.

Employee Sues Employer

Little sued Windermere. She charged that the rape created a hostile work environment and that Windermere was liable for the harassment because it didn’t take corrective action and retaliated against her when she complained.

Windermere contended that it wasn’t liable because the rape occurred outside work. The trial court ruled that liability for the rape couldn’t be imputed to Windermere and dismissed the case. Little appealed.

Employer Can Be Liable When A Client Harasses

The Ninth Circuit ruled that Little’s case could go forward. The court explained that under federal anti-harassment law, being raped by a business associate while on the job—in this case a work-related meeting—can support a hostile-environment harassment claim.

What’s more, the court said, an employer can be liable for harassing conduct by nonemployees if the employer acquiesces in the harassment by not taking immediate and effective corrective action. The court has returned the case to the jury to determine whether Windermere’s failure to investigate amounted to acquiescence. The jury will also consider whether Windermere had a legitimate nondiscriminatory reason to cut Little’s pay.

Handling NonEmployee Harassment Charges

Here’s how to avoid potential harassment complaints involving your customers, vendors or other nonemployee business associates:

 

1. Take preventive steps. You can’t always prevent customers from harassing your employees. But it may be possible to head off some problems before they start. For example, you could distribute a brief statement to clients and vendors outlining the ethical practices you expect to govern your business relationship, including a statement prohibiting sexual, racial or other harassment. This may be more practical at the start of new business relationships than during ongoing relationships.

    

2. Investigate immediately. Encourage employees to report harassment by clients or vendors. If you get a complaint that a customer has harassed your employee, take prompt action to stop the harassment and protect your employee. Don’t ignore the problem no matter how important the client. When appropriate, also urge the employee to contact police.

    

3. Train employees. Although not applicable to Little’s case, it’s a good idea to look for professional, diplomatic ways employees can respond to offensive behavior—ideally without hurting the business relationship. But if the customer or vendor doesn’t stop the misconduct, you may have to sacrifice the relationship—or face a harassment lawsuit.

    

4. Be careful if you complain to a customer about an employee. To protect yourself against possible defamation charges if you complain to a client or vendor about their employee, carefully document and verify the allegations and avoid discussing unsubstantiated suspicions.