On Monday, the U.S. Supreme Court announced that it will not review a Sixth Circuit Court of Appeals decision that determined the legal standard for employers' liability for sexual harassment by third parties such as customers and vendors. The Supreme Court has articulated the liability rules for harassment by a supervisor or coworker, but has never directly addressed when employers are liable for acts of a non-employee.

The Equal Employment Opportunity Commission and most federal appellate circuits have long adopted a liability standard that requires proof of negligence by the employer. According to those precedents, the employer is liable for the third-party harassment when it knew or should have known of the conduct and failed to take prompt remedial action.

The Sixth Circuit took an original position on this question, requiring proof that the employer intended for the harassment to occur. In the absence of such intent, employers would not be liable for the harassment unless their response once they became aware of the behavior meets this intent standard. By declining review, the Supreme Court allows the split among the appellate courts to continue.  

Employers in the Sixth Circuit have substantial defenses against third-party harassment claims not available to employers in other parts of the U.S. For those other employers, knowledge of the harassment triggers a legal obligation to investigate and, if necessary, intervene to stop the harassment from continuing. In some situations, this can include ending business relationships with customers or vendors, or at least notifying those entities of the situation and excluding the harasser from further contact with their employees.

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