You’re being sued for a non-employee’s actions—How is this possible?

Imagine a situation where you just learned that one of your best customers is making sexually and racially offensive comments towards one of your employees.  If your business does not act quickly and proactively to address the situation, the conduct of your customer could be imputed to your company.

In a recent case issued by the US Court of Appeals for the Fourth Circuit, Freeman v. Dal-Tile Corporation, the Court ruled that a business can be held liable when it allows one of its customers to create a hostile work environment for one of its employees.   Ms. Freeman alleged that a customer made repeated derogatory and offensive comments in her presence.  Ms. Freeman reported the behavior to her superiors on several occasions, but appropriate action was not taken.  Ms. Freeman eventually went to Human Resources to complain of the incident, and HR took action, however the Court ultimately deemed the actions inadequate. The Court ruled that the employer could be held liable for its customer’s conduct when the employer knew or should have known that the offensive conduct was occurring.  This ruling exposes employers to liability for hostile work environment claims created by customers or other third-parties.  An employer cannot avoid Title VII liability for harassment by adopting a “see no evil, hear no evil” strategy.

In an effort to minimize exposure to these types of claims, a prudent employer should (1) adopt and implement a written anti-harassment policy that includes clear reporting procedures; (2) adopt and implement a written policy describing the specific steps that a supervisor should take if he or she becomes aware of harassment in the workplace; and (3) react promptly and effectively to harassment claims even if the alleged harasser is someone outside of your company.

If you would like more information on this topic, please contact Scott A. Mirsky.