Employers and the public understandably focus on workplace harassment claims arising from co-workers’ or supervisors’ conduct.  However, an employer also may incur liability for unlawful workplace harassment perpetrated by an outsider, such as a customer or vendor.  Employers must understand their liabilities and rights when it comes to unlawful harassment by a third party.     

The Theory of Liability

The law recognizes that an employer cannot prevent all acts of harassment by a third party.  No business can anticipate what a stranger might do. Therefore, neither California nor federal law holds an employer strictly liable for the acts of a non-employee, such as another organization’s employee, or a customer.  Instead, a negligence standard applies to an employer’s potential liability for third-party harassment. That means an employer may be held liable to the extent it knew or should have known of the third party’s conduct and then failed to take immediate and appropriate action to stop it. 

Responsibilities of the Employer

An employer’s focus should be on preventing harassment and taking prompt corrective action should an employee raise concerns about a customer or vendor’s actions.  Prevention efforts should focus on policies and training.  Regulations adopted to implement California’s Fair Employment and Housing Act specifically require employers to adopt policies designed to address harassment by third parties.  Supervisors should be trained how to implement those policies in a manner that anticipates and addresses identifiable risks of customer harassment.  Employers should consider informing vendors or business partners of their expectations regarding how employees of those third parties must conduct themselves, and address in contracts rights and responsibilities in the event of an incident or claim.

Responding to Employee Concerns

Should a worker raise concerns about a third party’s actions, the employer must take appropriate steps to respond.  If the facts are unclear, the employer should conduct an investigation to determine the facts so the employer may draw a reasonable conclusion. 

If the third party’s actions violated the employer’s anti-harassment policies, the employer should take prompt corrective action to make sure the action does not reoccur. The employer should prepare in advance how it will address a customer or vendor whose employee has engaged in conduct that violates the organization’s policies. Although it may be difficult to confront a customer or key business partner,  management either must address the concern with the third party’s management, or risk a legal claim.

The Appropriate Corrective Action

Employers are required to take immediate and appropriate corrective action, designed to stop harassment and address any injury to the victim. But how far must an employer go to keep employees safe from a harassing customer or other third party?  An employer may discharge an employee co-worker who violates anti-harassment policies. But if a key customer or vendor is involved, the employer must be prepared to address a harassment situation by other means, such as contacting the third party’s management or, if necessary, ending the third-party’s business relationship. The reasonableness of the corrective action depends in part on the severity of the third-party’s acts, and the likelihood of further violations of the employer’s policies.

Two appellate court decisions provide examples of how the reasonableness of the employers’ response is evaluated based on the severity of the customer’s actions.

The federal Ninth Circuit Court of Appeals considered the case of a mime, Folkerson, who performed at the Circus Circus casino in Reno, NV.  In Folkerson v. Circus Circus Enterprises, Folkerson, whose act included holding perfectly still as if she were a statue, was frequently touched by customers who were curious as to whether she was a real person.  The casino fired Folkerson when she struck a customer for touching her on the shoulder.  The court held that the casino had taken reasonable steps to keep her safe from harassment; for example, by arranging for other employees to work in close proximity, posting a sign forbidding customers from touching performers, and instructing her to call security if she felt threatened. 

In contrast, a federal appellate court recently affirmed a $250,000 jury award against Costco for its failure to adequately protect one of its employees from a customer who repeatedly stalked her.  The employee in EEOC v. Costco Wholesale Corp. reported to her supervisor that the customer frequently approached her at work, referred to her as “pretty” and “exotic,” asked questions of a personal nature, videotaped her, and repeatedly asked her out.  The employee became so concerned about the customer’s behavior that she obtained a court-issued restraining order against him.   

The court described Costco’s response as “unreasonably weak.”  Store management initially directed the customer not to interact with the employee, but took no action when he continued to do so.  Management denied the employee’s request to park her car closer to the store entrance.  Costco rescinded the customer’s membership card, but only when he verbally attacked the employee and her father.

Although all harassment cases are fact specific, these cases illustrate the importance of developing thoughtful approaches to prevent customer harassment in light of the severity of the customer’s actions.

Tips for Employers

Employers should implement policies that make clear that harassment from any source – including third parties such as customers and vendors’ employees will not be tolerated.  Also, employers must train employees and supervisors as to the importance of reporting acts of harassment, and how to respond when third parties engage in inappropriate or illegal conduct.  In addition, supervisors must understand their obligation to monitor for and report instances of suspected harassment, and employers should be prepared to fairly, promptly, and thoroughly investigate claims of harassment by a customer or vendor.  Finally, if such claims are factually substantiated, employers must be prepared to take prompt action to prevent any future acts of harassment and correct any harm.  

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