Employee allegations of sexual harassment by supervisors and co-workers continue to be a complex human resource management problem for employers. While recent Supreme Court decisions in Burlington Industries, Inc. v. Ellerth and Faragher v. City of Boca Raton provided employers with guidance in dealing with harassment in the workplace, allegations of harassment involving customers, clients, vendors, and suppliers is emerging as an area of liability that many employers may have overlooked and continue to struggle with. Equal Employment Opportunity Commission regulations have long held that employers may also be responsible for the acts of nonemployees with respect to sexual harassment of employees in the workplace, and in recent years more U.S. courts have relied on these regulations in recognizing the existence of a cause of action for harassment by third parties. This paper examines recent court decisions dealing with allegations of sexual harassment involving third parties, the potential legal and employee relations consequences associated with sexual harassment of employees by third parties, and what organizations can do to minimize the negative consequences and employer liability associated with third party sexual harassment
Since the United States Supreme Court first recognized sexual harassment as a violation of federal law in 1986 in Meritor Savings Bank v. Vinson, employers have struggled in their efforts to create workplaces where employees can work free of unlawful behavior that interferes with their ability to successfully perform their jobs. What was once viewed as "an accepted occupational hazard for many working women" (Ream, 2000), sexual harassment has over time been subject to continued adjudication on numerous occasions resulting in widespread awareness and effort by employers to create work environments free of sexual harassment. While employers have become more sensitized to the harassment issue, expansion of the concept of sexual harassment continues to present new challenges to employers (Aron, 2002). In workplaces where management is unable to effectively prevent or respond to allegations of harassment, negative economic consequences for both employees and employers are the likely result. Legal costs associated with harassment litigation continue to run high in terms of damage awards and attorney fees. Additional and more difficult to measure costs incurred when harassment allegations surface include the diversion of management attention, unfavorable publicity, lower employee morale, and turnover.
Doing "whatever it takes" to satisfy a customer or client is often deemed critical to business survival. While the often repeated phrase "the customer is always right" may be valid in many situations, when a complaint alleging hostile or harassing behavior on the part of a customer is voiced by an employee it is critical for managers to remember the customer is never right.
There is a great deal of literature and case law dealing with co-worker and supervisor harassment. With respect to third-party sexual harassment, there have been relatively few court cases, and academic and practitioner publications have been limited. What has been published in recent years seems to indicate that the problem of sexual harassment by third parties is real and much more pervasive than previously thought. In addition, as the composition of the workforce continues to evolve and as more judicial attention is given to the issue, the potential that third-party sexual harassment "might be the next tide of sexual harassment litigation" is a distinct possibility (Vaughn, 2002).
Early litigation involving third-party harassment was associated with employer policies requiring female employees to wear sexually provocative uniforms (Ream, 2000). Subsequently, a number of cases involving casinos, restaurants and strip clubs have addressed third-party harassment (Folkerson v. …