You probably know that employers can be liable for harassment by their employees. But, did you know that they could be responsible for harassment by nonemployees and customers, too? This case shows just how expensive that liability can be.

A lot has been written and said about an employer’s liability for sexual harassment by its own employees. However, employers also can be liable when a nonemployee harasses one of their employees. A recent decision by the Tenth Circuit Court of Appeals demonstrates that an employer must prevent and respond to a hostile work environment caused by nonemployees, such as customers, or face legal liability for it. In Lockard v. Pizza Hut, Inc., et al., No. 97-7078 (12/14/98), the Tenth Circuit upheld a jury verdict of $200,000 in compensatory damages against an Oklahoma Pizza Hut franchisee for allowing a hostile work environment created by two customers who harassed a waitress.

Situation Clearly Abusive
Prior to the incident that lead to the legal action, a waitress claimed that two male customers had made sexually offensive comments to her on several occasions. She told her supervisor she did not like waiting on them, but did not mention the nature of their comments. When the men returned to the restaurant, she asked permission not to wait on them. Her supervisor refused, despite her previous complaint. The men again made offensive comments, and one grabbed her by the hair. She reported the incident to her supervisor and asked to be relieved from waiting on the men, but was required to continue serving them. When she returned to their table, one of the customers again pulled her hair, then grabbed her breast and placed his mouth on it. In response, the waitress refused to continue working, left the premises, and quit. She filed the harassment suit and claimed that her emotional condition deteriorated to the point that she feared going out in public and could not continue to work.

In her harassment suit, the waitress made a number of claims under both state and federal law. Some of the claims were either thrown out at the district court level or overturned by the Tenth Circuit (i.e., a finding of liability against the parent company). However, the Tenth Circuit upheld the most important claim against the Pizza Hut franchisee. It affirmed the jury’s determination that the franchisee was liable for the hostile work environment, the abusive and sexually harassing actions of the customers, and the $200,000 award.

Employer "Knew" About Harassment, Should Have Taken Action
In upholding the decision for the employee, the Tenth Circuit first addressed whether the incidents complained of created a hostile work environment. The court relied on prior Supreme Court decisions that provide guidance on the factors to be considered in determining the existence of an illegal hostile work environment, including: the conduct’s frequency, the conduct’s severity, any physical threat or humiliation (as opposed to merely offensive remarks), and the conduct’s unreasonable interference with the employee’s work performance. The Tenth Circuit found that the physical contact by the customer was clearly threatening and humiliating and, while limited to one incident, was severe enough to create an illegal hostile work environment.

Next, the court addressed whether an employer should be liable for the actions of nonemployees. The court looked first to regulations issued by the Equal Employment Opportunity Commission (EEOC) which state that employers are responsible for the harassing conduct of nonemployees and have a duty to prevent and remedy it when they know or should have known about the harassment. The Tenth Circuit adopted the EEOC’s position and agreed with three other Circuit Courts of Appeals (the First, Eighth, and Ninth) when it ruled that an employer is liable for a hostile environment regardless of whether it "was created by a co-employee or a nonemployee." The court found that the waitress’s supervisor clearly knew about the problems and had the means and authority to avoid what was an abusive and potentially dangerous situation. According to the employer’s policy, he could have directed a male waiter to serve the men, served them himself, or asked them to leave the restaurant. When the supervisor did not take any remedial action, the employer was then liable for the harassing conduct by the customers because a management-level employee knew about the harassment and did nothing about it.

Supervisors Must Act or the Employer Pays
The Tenth Circuit’s decision in this case demonstrates the judicial trend towards finding employers liable for hostile work environment misconduct by nonemployees, such as customers. Dealing with harassing customers can be difficult, though, especially when you feel as if you must choose between your employee and the source of your business in-come. It is clear from this case, however, that you have an obligation to protect your employees from harassment, even if it is not convenient or good for business.

Two points in the case drive home how easy it is to be liable for nonemployee harassment. First, the employer was liable after only one incident, because the supervisor did not take the appropriate action to stop the misconduct. Second, it was liable even though it had a policy directing supervisors to either reassign an employee in this situation or ask the abusive customers to leave. Where the employer failed, it appears, is in making sure its supervisory employees followed its policy. Thus, employers should train supervisors in their sexual harassment policies and reinforce the policies through periodic reviews to ensure that supervisors understand their obligation to prevent all forms of harassment.

This article is not intended as legal advice. Readers are encouraged to seek appropriate legal or other professional advice.

Try a Free No-Risk 30-Day Trial Review Now Personnel Policy Manual Service Your HR policy solution for writing, revision, and legal compliance Try a Free, No-Risk 30-Day Trial Review Now (No Credit Card Required) See why so many call it their “HR Policy Bible” Available in Print (917 page binder) and/or Online   Unprecedented changes impacting HR Today’s economic, political, and employment environment is more unsettled for human resources professionals than any time we’ve seen in our 37 years of advising employers. As a result, you need much more than news and raw information – you need clear advice and guidance on what to do … and when. A complete support system And, that’s where the Personnel Policy Manual System fits in. It’s like having an extra HR expert and employment law specialist on your staff – for less than the cost of a cup of coffee per day. You get in one place the total policy and compliance support you need and want. Look at the new compliance challenges you already have for 2009: -- Changes to COBRA -- The new Ledbetter Fair Pay Act -- Amendments to the Americans with Disabilities Act (ADA) -- New Family and Medical Leave Act (FMLA) regulations -- Labor Secretary promising to step up FLSA & FMLA enforcement And there’s even more that should be on your radar screen: -- Regulations for the new ADA Amendments -- The Employee Free Choice Act -- The Paycheck Fairness Act -- The Healthy Families Act -- The Employment Non-Discrimination Act -- FMLA Amendments expanding coverage to smaller employers -- New minimum wage increases beyond what’s scheduled You can still stay ahead with a complete policy and compliance system: Take a test drive of the Personnel Policy Manual System and see for yourself why so many of our subscribers refer to it as their “HR Policy Bible.” In one turnkey package, you’ll find: Updated and ready-to-go sample policies, complete with supporting HR background and best practices – plus compliance analysis and over 1500 legal citations Continuous updating and supplementation to stay on top of needed changes Monthly HR Matters newsletter for professional insights and recommended action steps Weekly HR Matters E-Tips for practical tips to solve daily problems Risk-free – try before you buy (no advance credit card required) Don’t take our word for it. Check out the Personnel Policy Manual System for 30 days and see for yourself. You pay nothing unless totally satisfied. At the end of 30 days, either pay the invoice to continue your annual subscription, or simply return the Manual (or cancel the Online) and owe nothing. Annual Subscription Price: $477 – after the trial At the end of your risk-free trial, you make the decision whether to continue for the annual subscription of $477. Even then, you still take no risk because we have an iron-clad satisfaction guarantee: if change your mind at any time in the first 12 months after you’ve paid, just return the materials and we will refund 100% of your payment. It’s that safe. To request your 30-day, risk-free trial, just fill in the form below and click “Start Free Trial.” Or, call our friendly customer service at 1-800-437-3735 (9:00-5:00 Eastern Time). We’ll be happy to process your request, answer questions, or schedule a quick 10-minute Online Demonstration. Fill out this form and submit: * indicates required fields Here's What's Included: * 900-page HR Reference System    (print/CD) * Monthly updates * Monthly HR Matters newsletter * Weekly HR Matters E-Tips   View Sample HR Policy   100% Money Back Guarantee of Satisfaction Good for a FULL YEAR!   Less than 15 employees? OR Outside US? Click here Format: Print Online Both Print and Online First: Last: Title: Business or Organization: Street Address: Street Address 2: City: State: AK AL AR AZ CA CO CT DC DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA PR RI SC SD TN TX UT VT VA WA WV WI WY Zip Code: Business Phone: Business Fax: Email: Number of Employees: