Fourth Circuit Rules that Employers Can be Liable for Third Party Harassment of Their Employees

In Freeman v. Dal-Tile Corp., 2014 WL 1678422 (4th Cir. April 29, 2014), the United States Court of Appeals for the Fourth Circuit ruled that an employer can be liable for third party harassment of its employees. The court adopted a negligence standard akin to the standard applied in co-worker harassment cases.

The plaintiff, Lori Freeman, alleged that a customer's independent sales representative, Timothy Koester, subjected her to an on-going pattern of racial and sexual harassment. Among other things, Freeman claimed that Koester would often discuss his own sexual exploits, stated that he would have sex with Freeman’s daughters, repeatedly referred to Freeman as a “black bitch” and used the “n word” on at least on occasion.

Freeman complained about Koester’s conduct to her supervisor and the Human Resources Department several times. In an effort to address Freeman's concerns, the company initially said it would ban Koester from its premises; however, it ultimately chose instead to attempt to prevent Koester from dealing directly with Freeman. Nonetheless, Koester continued calling Freeman’s cell phone, rather than the main number, when he wanted to contact the company. Eventually, Freeman resigned and filed an EEOC charge alleging constructive discharge and hostile work environment.

The district court granted summary judgment in favor of the company, ruling that, even if Koester’s comments had been sufficiently severe and pervasive to constitute an otherwise actionable hostile work environment, Freeman could not impute liability to the company for its customer’s actions. Although the court used a negligence standard, the court found that the company was not negligent as a matter of law.

On appeal, the Fourth Circuit reversed. In so doing, the court held that “an employer is liable under Title VII for third parties creating a hostile work environment if the employer knew or should have known of the harassment and failed ‘to take prompt remedial action reasonably calculated to end the harassment.’” Applying this standard, the court determined that there were disputed questions of material fact regarding whether the company knew or should have known of the harassment and whether it took prompt remedial action that was reasonably calculated to end the harassment.

In light of the Freeman case, employers faced with employee complaints regarding customer harassment should proceed with caution. Where an employer knows or should know about customer harassment of an employee, the employer must take corrective action that is reasonably likely to prevent future harassment; simply attempting to separate the harassing customer from the employee may not be sufficient, especially if the two continue to come into contact with one another.