Be Careful Who You Let Lurk Around the Workplace

In a 2-1 decision, the US Court of Appeals for the Fourth Circuit held that a negligence standard applies to third-party harassment claims, consistent with other federal appeal courts. Freeman v. Dal–Tile Corp., 13-1481, 2014 WL 1678422 (4th Cir. Apr. 29, 2014). The US Supreme Court has yet to address the issue.

Background Facts

The harassment claims at issue were based on the behavior of Timothy Koester, an independent sales representative for VoStone, a distributor to Dal–Tile Corporation. Lori Freeman usually interacted with Koester more than once a day while he was conducting business with Dal–Tile on behalf of VoStone.

The Complaint and record testimony in the case contained numerous allegations of harassment and poor behavior by Koester. Some highlights include that Koester used the word “b**** ” in the office, such as “You should have seen these hot b****es I met last night.” Jodi Scott, one of Freeman’s co-workers, testified that Koester used the word “b**** ” “[u]sually about every time that he came in.” Sara Wrenn, the assistant manager, even referred to Koester as a “pig.” Koester himself also admitted he made sexual comments in the office. Freeman and other co-workers also testified generally about Koester’s inappropriate racial remarks. For instance, Koester used racial “slang” such as “Yo, b**** ” and “How’s my b****es?” when talking to the female employees and in 2008, following the election of Barack Obama, Koester said to Freeman, “[Y]ou guys won.” He even allegedly used the “n” word. Koester himself admitted that he made comments that were “[m]aybe racially inappropriate.”

Following the most recent “black b****” incident in July 2009, Freeman reported Koester’s remarks to Cathy Diksa in human resources after Wrenn ignored her complaint. Diksa initially promised Koester would be permanently banned from the facility. However, the company lifted the ban and instead prohibited Koester from communicating with Freeman. He was allowed on the premises but had to coordinate all on-site meetings through Wrenn.

Freeman alleged that she was so upset about the prospect of being forced to interact with Koester that she took a medical leave of absence beginning September 2, 2009. During this time, she received treatment for depression and anxiety. Freeman returned to work around November 19, 2009. Wrenn informed Freeman that Koester no longer worked for VoStone but for another kitchen and bath fabricator. Wrenn told Freeman that Koester would continue to call Wrenn’s cell phone and not the general office line if he needed to conduct business with Dal–Tile.

On December 7, 2009, Freeman notified Dal–Tile that she was resigning from her position effective December 11, 2009. Freeman testified that she resigned because the depression and anxiety became too much for her; she was constantly worried she would encounter Koester at work.

The District Court Action

In October 2009, while on medical leave, Freeman filed a charge with the Equal Employment Opportunity Commission (EEOC), asserting that Dal–Tile had subjected her to discrimination based on her sex and race. After receiving a right to sue letter, Freeman brought an action in the Eastern District of North Carolina, asserting claims for racial hostile work environment under 42 U.S.C. § 1981; racial and sexual hostile work environment under Title VII of the Civil Rights Act of 1964; discriminatory discharge under 42 U.S.C. § 1981; and obstruction of justice under North Carolina common law. Following discovery, Dal–Tile filed a motion for summary judgment. The District Court granted this motion. Freeman v. Dal–Tile Corp., 930 F. Supp. 2d 611 (E.D.N.C.2013). Freeman appealed.

The Fourth Circuit Analysis

The Fourth Circuit reversed the District Court’s grant of summary judgment. The Court explained the applicable standard:

For this Court to reverse the District Court’s grant of summary judgment to Dal–Tile on her hostile work environment claims, Freeman must establish that the evidence, viewed in her favor, would allow a reasonable jury to conclude that the harassment was (1) unwelcome, (2) based on [Freeman’s] gender or race, (3) sufficiently severe or pervasive to alter the conditions of her employment and create an abusive atmosphere, and (4) imputable to [Dal–Tile].

As to the first element, the Court observed Freeman complained of her harassment to Wrenn, human resources, and Koester himself. She told Koester repeatedly to stop making such crude and demeaning comments. She cried in both Wrenn’s and Koester’s presence over the harassment. She eventually was treated for depression and anxiety because of it. Based on this evidence, the Court concluded that a reasonable jury could find that both the sex- and race-based harassment were unwelcome.

As to the second element, the Court held that the evidence overwhelmingly favored the conclusion that the harassment was based on Freeman’s race and sex, referring to the multiple sexually and racially charged comments Koester made to Freeman (by using the term “black b****h, the n-word, etc.).

Third, the Court concluded that Freeman had demonstrated that the harassment was so severe or pervasive as to alter the conditions of her employment and create an abusive atmosphere. As the Court observed, this element has both an objective and subjective element. The Court concluded that the record was “replete with evidence of frequent abusive behavior by Koester during Freeman’s tenure” that created a triable issue of fact as to both the subjective and objective conclusion that the terms of her employment had been altered and that an abusive atmosphere existed.

Last, the Court reversed the District Court’s conclusion that liability could not be imputed to Dal–Tile. The Court first set forth the standard for liability under Title VII for third parties creating a hostile work environment: “if the employer knew or should have known of the harassment and failed to take prompt remedial action reasonably calculated to end the harassment.” The Court concluded that Freeman made the harassment known to her supervisors, that the supervisors essentially agreed that Koester’s behavior was unacceptable, and yet failed to take prompt action. The Court wrote:

Not only did Dal–Tile fail to take any serious action for three years in spite of the long list of ongoing harassment by Koester, but particularly shocking to us is the fact Dal–Tile took absolutely no action when Koester passed gas on Freeman’s phone and made Freeman cry in Wrenn’s presence, nor when Freeman promptly complained to Wrenn that Koester had used the word “n****r” on the phone with her. Although the harassment eventually stopped after the communication ban was put into place, the harassment had continued unabated for three years prior to that. While a communication ban may have been an adequate response had it been put into place sooner, Dal–Tile’s failure was in not responding promptly to the harassment. Based on this evidence, we believe a reasonable jury could conclude that Dal–Tile failed to take “prompt remedial action reasonably calculated to end the harassment.”

For these reasons, the Fourth Circuit reversed the District Court’s dismissal of the hostile work environment claim and remanded the case for further proceedings.

Conclusion

The Dal–Tile case demonstrates that an employer can be held liable for a third-party’s actions in the workplace, and if an employer has actual or constructive knowledge of such inappropriate conduct, it must take prompt action to stop it and remedy the situation. If you have any questions about the case, please contact the authors of this post or any member of the Labor & Employment Group, or the Arent Fox professional who regularly handles your matters.