Compliance 101 -- The Ellerth/Faragher Defense

In a prior post I noted that an effective compliance and ethics program can prevent vicarious liability for supervisor sexual harassment under federal employment discrimination law.  In the coming week or so, I will devote several posts to updates on sexual harassment cases decided over the last few months, focusing on what these cases say about good and bad compliance practices.  As background for the coming posts, this post offers a brief description of the legal background.

In its 1998 decisions in Burlington Indus., Inc. v. Ellerth  and Faragher v. City of Boca Raton,  the United States Supreme Court held that employers were vicariously liable under federal employment discrimination law  for sexual harassment committed by their supervisory employees.  If the sexual harassment did not result in a tangible employment action, such as firing, demotion, or reduction of pay,  the employer can avoid vicarious liability by pleading and proving a two-element affirmative defense: "(a) that the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise."  Note that "reasonable care to prevent and correct promptly" the harassment-basically, a compliance program-is a necessary but not sufficient condition of the affirmative defense. Even if the employer has a state-of-the-art sexual harassment compliance program, the affirmative defense fails if the victim abided by the organization's program. Ironically, then, vicarious liability attaches despite the compliance program working precisely as intended.

The Court offered two elaborations on the affirmative defense, both of which have guided lower courts. First, "[w]hile proof that an employer had promulgated an anti-harassment policy with complaint procedure is not necessary in every instance as a matter of law, the need for a stated policy suitable to the employment circumstances may appropriately be addressed in any case when litigating the first element of the defense."  As noted above, drafting written compliance policies is one of the basic compliance tasks under the Sentencing Guidelines, so it is not surprising that the Court would expect a reasonable sexual harassment compliance program to have one. The lower courts have followed this logic,  denying the affirmative defense to employers that either had no written policy,  had a written employment discrimination policy that did not specifically address the type of harassment involved,  or did not consistently distribute or train employees on the sexual harassment policy.

Second, the cautious employer should also have a sexual harassment complaint procedure because an employee's unreasonable failure to use the procedure will "normally suffice to satisfy the employer's burden under the second element of the defense."  This is another area where lower courts have heeded the Court's dicta. For example, several courts have highlighted the need for employers to have a compliant procedure that allows employees to bypass an allegedly harassing supervisor.