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April 29 -- A black female former employee for a North Carolina firm has triable sexual and racial harassment claims under Title VII of the 1964 Civil Rights Act based on evidence her employer did not adequately respond to persistent offensive remarks and conduct by a customer, a divided U.S. Court of Appeals for the Fourth Circuit ruled April 29.
In a 2-1 decision, the court revived the Title VII third-party harassment claims of Lori Freeman, who formerly worked for Dal-Tile Corp., a tile and natural stone product manufacturer in Raleigh, N.C.
For the first time, the Fourth Circuit held in a published opinion that a negligence standard applies to third-party harassment claims under Title VII, joining several other federal circuits in embracing that rule. The U.S. Supreme Court has yet to decide whether Title VII renders an employer liable for alleged harassment of its employees by contractors, customers or other third parties.
The Fourth Circuit said based on Freeman's complaints to her supervisor about the repeated use of racial and sexual epithets and other offensive conduct by Timothy Koester, a sales representative for a Dal-Tile customer who had daily contact with Freeman, Dal-Tile knew or should have known about the alleged harassment but failed to act.
A federal district court had granted summary judgment to Dal-Tile, saying no reasonable jury could find the company negligent because it temporarily banned Koester from the premises and subsequently barred any contact by Koester with Freeman after she complained to Dal-Tile's human resources department in 2009 ( 930 F. Supp. 2d 611, 2013 BL 67920 (E.D.N.C. 2013)).
But the Fourth Circuit said Freeman's earlier complaints to her immediate supervisor, and that supervisor's firsthand knowledge of Koester's conduct, mean a jury could find the employer knew or should have known about the alleged harassment as early as 2006.
“Although the harassment eventually stopped after the communication ban was put into place, the harassment had continued unabated for three years prior to that,” Judge Dennis W. Shedd wrote. “While a communication ban may have been an adequate response had it been put into place sooner, Dal-Tile's failure was in not responding promptly to the harassment.”
Judge William B. Traxler joined in the majority opinion.
In dissent, Judge Paul V. Niemeyer said by ruling an employer can be liable in cases in which a third party engaged in the alleged harassment, “the majority extends the scope of Title VII beyond what the Supreme Court has so far recognized.”
“I have grave concerns about such an extension when hostile work environment claims were themselves an extension of Title VII, which was designed to regulate the employer-employee relationship,” Niemeyer wrote.
The dissent said even if employers may be liable under Title VII for third-party harassment under a negligence test, Freeman has no Title VII claim because Koester's conduct didn't create a hostile or abusive work environment for her until 2009 and Dal-Tile responded immediately and effectively to stop the harassment once Freeman complained to HR.
The Fourth Circuit majority “got it right” and the decision doesn't “go beyond” Supreme Court precedent, said Anne Warren King of Georgetown University Law Center in Washington, who represented Freeman on appeal.
The Fourth Circuit followed other federal appeals courts that have adopted a negligence standard for employer liability for third-party harassment, King said, adding that she knows of no court that uses a different rule.
Harassment by non-employee third parties “is a real problem in the workplace,” King told Bloomberg BNA April 30. But she couldn't say whether third-party harassment claims have increased or if the problem has become more prevalent in recent years.
King is with Georgetown's Institute for Public Representation.
An attorney representing Dal-Tile declined April 30 to comment on the decision.
In 2006, Freeman began working as a receptionist for Marble Point Inc., a Raleigh stone yard that Dal-Tile later acquired in June 2008.
While working for Marble Point, Freeman in August 2006 first encountered Koester, a sales representative for VoStone Inc., a kitchen and bath remodeling center that did substantial business with Marble Point and subsequently with Dal-Tile.
Freeman overheard Koester asking Sara Wrenn, her supervisor, “who are these black bitches,” referring to a photo in Wrenn's office. The following day, Freeman told Koester how “uncomfortable and demeaning” his comments had made her feel, and she asked him not to use that language again.
But Freeman's admonition was to no avail, the court said. In addition to repeatedly using derogatory racial terms in Freeman's presence, including the “n word,” Koester also engaged in sexually inappropriate remarks and conduct.
For example, he showed Freeman a photo of a nude woman on his cell phone and said: “This is what I left in my bed to come here today.” Another time, Freeman overheard Koester telling a female co-worker who had photos of her daughters on her desk: “I'm going to hook up with one of your daughters.”
On another occasion, when supervisor Wrenn also was present, Koester used Freeman's telephone and before hanging up, Koester held the receiver to his buttocks and passed gas. Freeman immediately began crying and had to leave the room, so Wrenn was aware of Freeman's objections to Koester, the court said.
Freeman eventually worked as a Dal-Tile sales consultant and customer service representative, so she had even more contact with Koester, the court said.
In June 2009, Koester called Freeman about covering a customer appointment for him because he had been partying the previous night. Koester told Freeman he couldn't make it. “I'm just too fucked up, don't take offense, but I'm as fucked up as a nigger's checkbook,” he said.
Freeman immediately complained to Wrenn, but Freeman said the supervisor just “scoffed and shook her head and put her head back down and continued on trying to pick the nail polish off her nails,” the court said.
In July 2009, Koester called Dal-Tile's general office line and when Freeman picked up, Koester said his six-year-old daughter was with him. Freeman, who had met the daughter, asked Koester to say hello for her. Instead, Koester put Freeman on speaker phone and Freeman heard the daughter ask who was on the phone. Koester replied: “That's the black bitch over at Marble Point.” Freeman immediately told Koester: “Don't you ever call me a black bitch as long as you live.”
Freeman again complained to Wrenn about Koester's language, but she said the supervisor “appeared disinterested.” Wrenn never reported Freeman's complaints to anyone else at Dal-Tile.
After the July 2009 incident, Freeman contacted Dal-Tile's human resources department, reporting the “black bitch” comment.
An HR employee promised that Dal-Tile would permanently bar Koester from the Raleigh facility. But the company later lifted the ban and instead prohibited Koester from communicating with Freeman. Dal-Tile thereafter allowed Koester on the premises, but he had to coordinate all on-site meetings through Wrenn.
Upset about the possibility of encountering Koester, Freeman took medical leave for depression and anxiety beginning in September 2009. Freeman returned Nov. 19 but informed Dal-Tile on Dec. 7 she was resigning. Freeman testified that she quit because her anxiety about possibly encountering Koester was too much for her.
Freeman sued under Title VII, the Civil Rights Act of 1866 (42 U.S.C. § 1981) and North Carolina law alleging sexual harassment, constructive discharge and obstruction of justice. The U.S. District Court for the Eastern District of North Carolina granted Dal-Tile summary judgment.
The Fourth Circuit previously has ruled in unpublished decisions that third-party harassment claims are cognizable under Title VII, using the same negligence standard that applies to claims of co-worker harassment (EEOC v. Cromer Food Servs., 414 F. App'x 602, 111 FEP Cases 1194 (4th Cir. 2011); 44 DLR A-3, 3/7/11).
The court this time formally held that Title VII third-party claims are analyzed under the negligence standard also applied to employer liability for co-worker harassment.
“Similar to the reasoning we set forth for employer liability for co-worker harassment, 'an employer cannot avoid Title VII liability for [third-party] harassment by adopting a 'see no evil, hear no evil' strategy,' ” Shedd wrote. “Therefore, 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.' ”
The district court said a jury couldn't reasonably construe any of Freeman's complaints about Koester to supervisor Wrenn to be sexual or racial harassment complaints. Instead, the district court said as a matter of law, Dal-Tile didn't know about any alleged harassment until Freeman contacted HR and Dal-Tile can't be liable because following that complaint, the company took prompt and effective remedial action.
But the Fourth Circuit said a reasonable jury could find the employer knew or should have known about the alleged harassment as early as 2006. Marble Point, and subsequently Dal-Tile, had actual notice when Freeman complained to Wrenn about Koester's initial use of “black bitches,” particularly when Wrenn herself was present for Koester's offensive conduct, the court said.
During discovery, Koester acknowledged his use of racially and sexually offensive terms, and Freeman's former co-workers, including Wrenn, testified Koester was a “pig,” the court said. But Wrenn said Koester meant “no malice,” the court said.
Given that evidence, a jury could find the employer knew or should have known about the alleged harassment as early as 2006, the court said.
The district court said that although Koester's conduct was subjectively offensive to Freeman, no reasonable jury could find it was “objectively severe or pervasive” so as to support a Title VII harassment claim.
But the Fourth Circuit said Koester's acknowledged use of racial and sexual epithets and the uniform testimony of Freeman's co-workers that Koester repeatedly engaged in the alleged conduct support a finding of objective harassment.
“[W]e find the use of the word 'n****r,' coupled with the ongoing offensive racial talk, use of the term 'black b****,' on more than one occasion (once directed at a black employee), and sexual talk regarding black women, is sufficient evidence for a reasonable jury to find the race-based harassment was objectively severe or pervasive,” the court said.
Wrenn was aware of the alleged harassment not only through Freeman's complaints, but from her personal knowledge about Koester's conduct, the court said.
“However, even if Wrenn did not have actual knowledge that Freeman was offended by Koester's conduct, at the very least, she should have known it,” the court said. “Therefore, we conclude a reasonable jury could find that Dal-Tile knew, or at the very least, should have known, of Koester's harassment.”
Freeman also raised a triable issue of whether Dal-Tile's response to halt the harassment was adequate, the court said. Although she acknowledged that no harassment occurred after Dal-Tile imposed the communication ban in 2009, the court said a jury could find the employer didn't take prompt remedial action, since Freeman had been complaining since 2006.
“Not only did Dal-Tile fail to take any serious action for three years in spite of the long list of ongoing harassment by Koester, but particularly shocking to us is the fact Dal-Tile took absolutely no action when Koester passed gas on Freeman's phone and made Freeman cry in Wrenn's presence, nor when Freeman complained to Wrenn that Koester had used the word 'n****r' on the phone with her,” the court said.
“[A] reasonable fact-finder could find there was an objectively hostile work environment based on both race and sex and that Dal-Tile knew or should have known of the harassment and failed to adequately respond,” the court said.
But the Fourth Circuit affirmed Freeman lacks a constructive discharge claim because she didn't raise triable factual issues that Dal-Tile “deliberately attempted to induce her to quit” or that her working conditions were “objectively intolerable” when she resigned.
Rather, within weeks of returning from a two-month medical leave, Freeman voluntarily resigned in December 2009 even though she had no contact with Koester for months, the court said.
“Freeman presented no evidence that Koester's harassment was still creating an objectively hostile work environment at the time she resigned, nor that Dal-Tile was allowing him to harass her in a deliberate attempt to get her to quit,” the court said.
King and Brian Wolfman of Georgetown University Law Center's Institute for Public Representation in Washington represented Freeman. Kristine M. Sims and William J. McMahon IV of Constangy Brooks & Smith in Winston-Salem, N.C., represented Dal-Tile.
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Text of the opinion is available at http://www.bloomberglaw.com/public/document/FREEMAN_v_DALTILE_CORPORATION_No_131481_2014_BL_119739_4th_Cir_Ap.
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