U.S. Supreme Court decisions clearly place liability on employers for sexual harassment of an employee by a supervisor or co-worker. Is the employer also liable when the alleged harassing conduct originates from a client or customer? Last week in an unpublished decision, the Fourth Circuit Court of Appeals (which includes North and South Carolina) joined other federal courts in concluding that employers can be held liable for third-party harassment in some situations.

In EEOC v. Cromer Food Services, Inc. the plaintiff was a route driver for a South Carolina vending machine company. He alleged that while servicing vending machines at a local hospital, several maintenance workers employed by the hospital would follow him around, making crude comments and gestures questioning his sexuality. The plaintiff claimed that he repeatedly complained to his supervisor about the harassment, but was told that there was nothing that the company could do to control the behavior of a customer's employees.

Prior to this decision, the Fourth Circuit had never directly addressed the question of employer liability for third-party harassment. The court adopted the standard used in other federal circuits and under EEOC rules, concluding that employers are liable for sexual harassment of their employees by a third party under a negligence standard already used for instances of harassment by a co-worker. The employer is liable if it knew or should have known of the harassment and did not act to prevent it.

In this case, the court concluded that although the plaintiff's complaints to the employer were somewhat vague, they contained enough detail for the employer to know that it had a problem, and should have intervened. This intervention could have included either approaches to the hospital on behalf of its employee, or removal of the employee from the offensive situation.

The Fourth Circuit also concluded that the employee's claim did not fail because he did not report the harassment to the company's President as directed under its harassment policy. Employers cannot hide behind procedural requirements in a policy when, as in this case, the employee made multiple complaints to various levels of management. Finally, the court concluded that a belated decision by the company to move the employee to a different shift to avoid the problems at the hospital was retaliatory because it involved a lower level of pay.

This decision makes clear that once an employer is placed on notice of harassment of its employees arising from any source, it is under a legal obligation to promptly stop the harassment, even if this means threatening a customer relationship. The solution implemented by the employer cannot place the employee in a disadvantageous situation as a result of the complaint.