When What You Don't Know Can Hurt You: Recent New Jersey Appellate Court Decision Extends Employer Liability to Unknown, Unreported Co-Worker Harassment

Monday, December 1, 2008 - 01:00

So, you have a written policy against harassment, and you distribute it to all employees. A male employee (not a supervisor) engages in repeated sexually harassing behavior against a female employee. The victim fails to report the behavior for more than two years, but is ultimately urged to do so by a vigilant supervisor who happens to witness inappropriate photographs sent to her by the male employee. The victim indeed reports the behavior. You, the employer, take prompt remedial action, first suspending the harasser, and then, two days later, firing him. You also allow the victim to take as much paid leave as she needs. Surely, you've done all that the law requires in regard to your obligation to remedy harassment in the workplace, right? As it turns out, the Appellate Division of the Superior Court of New Jersey, in a recent ground-breaking case of first impression, said not so fast.

In Cerdeira v. Martindale-Hubbell , 955 A.2d 317, A-585506T1, slip op. (App. Div. Sept. 18, 2008), the Appellate Court held that an employer may be held directly liable for sexual harassment of an employee committed by a non-supervisory co-worker, even where the employer has no knowledge of the harassing behavior. Specifically, the Court concluded that an employer may be held directly liable for non-supervisory, co-worker harassment based upon the negligent failure to have in place an effective policy against sexual harassment. As discussed in more detail below, this decision increases employers' exposure for harassment claims. More important, however, it further highlights the critical importance that courts have placed not just on having a policy against harassment in place, but on ensuring that such policy is effective - by providing regular anti-harassment training, making available the appropriate complaint and reporting structures, and implementing sensing or monitoring mechanisms.

Facts Of The Case

In Cerdeira , the plaintiff, Robin Cerdeira, a senior analyst for the co-defendant Martindale-Hubbell, was the subject of harassing conduct directed toward her by co-defendant Melvin Bowers. Bowers did not hold a supervisory position with Martindale, worked in a separate department from Cerdeira, and was merely her co-worker. The harassing conduct continued for more than two years, and during that time Cerdeira never reported Bowers' conduct. Ultimately, another supervisor compelled Cerdeira to report the incident after spotting an inappropriate photograph from Bowers on her desk. Martindale took prompt, remedial action: meeting with Cerdeira and supervisory employees to discuss Bowers' conduct; suspending, and after two days, firing Bowers; and granting Cerdeira unlimited paid leave with full benefits.

Subsequently, Cerdeira sued both Martindale and Bowers in New Jersey state court. Plaintiff's claim against Martindale was premised on the theory that it should be directly liable for the sexual harassment of Bowers because Martindale created a hostile work environment by negligently failing to have an effective sexual harassment policy in place. The trial court granted summary judgment and dismissed Cerdeira's claims against Martindale, holding that Martindale was not liable for the conduct of a non-supervisory co-worker. New Jersey's Appellate Division reversed that decision.

The New Jersey Appellate Court Decision

Fostering a hostile work environment constitutes sexual harassment in violation of New Jersey Law Against Discrimination. N.J.S.A . 10:5-1 to -49. At the outset of the Cerdeira opinion, the Appellate Division acknowledged that liability for sexual harassment by a supervisor may be imputed to the employer.

In its analysis of whether an employer should be liable for non-supervisory co-worker harassment, the Appellate Division interpreted the New Jersey Supreme Court's holding in Lehman v. Toys 'R' US , 132 N.J. 587 (1993) in a manner that tips the scales in favor of employees.In Lehman , a case that involved supervisor harassment, the Supreme Court established that plaintiffs can advance hostile work environment claims against employers under a negligence theory. Under this theory, an employer may be held liable for its failure to implement effective and well-publicized sexual harassment policies, if such failure was the proximate cause of the plaintiff's harm. The Appellate Division correctly noted, however, that in Lehman , the harassing conduct of a "supervisor," not a "co-worker," was imputed to the employer. Before Cerdeira, whether the negligence theory advanced in Lehman applied to claims against employers for co-worker harassment had not been addressed in any published New Jersey decision. The Appellate Division therefore looked to federal courts for guidance, and relied heavily on a Fourth Circuit decision, which held that an employer may be liable for co-worker sexual harassment. In that case, the liability of the employer turned on whether it was negligent in failing to implement effective sexual harassment policies, and notably did not consider what position the harassing party held within the company. The Appellate Division concluded that, under a negligence theory, plaintiffs can advance hostile work environment claims against employers for the harassing conduct of both supervisors and non-supervisory co-workers. The Cerdeira decision makes it crystal clear that the position the harassing party held within the company is irrelevant to the analysis. Instead, the focus is now squarely on the employer, and particularly, on whether it was negligent in failing to have an effective and well-publicized sexual harassment policy in place.

What Will This Decision Mean For Employers?

The Cerdeira decision will have a great impact on employers - especially those that fail to heed the Appellate Division's warning - increasing their exposure to liability for sexual harassment claims. To avoid imputed liability for unknown conduct of non-supervisory co-workers, an employer should have in place an effective and well-publicized sexual harassment policy. The Appellate Division acknowledged that the mere existence of a grievance procedure and/or policy does not insulate employers from liability. Although the Appellate Division failed to offer an exact formula for what constitutes an "effective and well-publicized sexual harassment policy," it did offer the following suggestions: (1) implement policies; (2) develop formal and informal complaint structures; (3) conduct mandatory anti-harassment training for all employees; (4) set up mechanisms to monitor whether the policies and complaint structures are effective; and (5) remain committed to consistently applying your policies and complaint structure.

From a practical standpoint, as an employer, what can you do to limit your exposure to liability for co-worker sexual harassment? In line with the suggestions offered in the Cerdeira opinion, consider taking the following steps to achieve this objective:

• If you have not developed and distributed written policies reflecting management's lack of tolerance for sexual harassment, this is the time to do so. If you already have written policies in place, review their content. If your policies are not "effective" in their current form, make amendments. In either case, contact your employment law counsel to discuss the best approach.

• Provide regular training for your employees to educate them on how to prevent, recognize, and remedy sexual harassment. Consider having separate training sessions for management/supervisors and employees. Be sure to keep a record of the training sessions. Contact your employment law counsel for additional best practices.

• Make certain that your policy against harassment includes an effective process for reporting complaints. Ensure both that the process provides that an employee can bypass his or her supervisor if the supervisor is the alleged harasser, and that the employer will not retaliate against an employee for a good faith report of sexual harassment. Be sure to educate all employees about the reporting process.

• When sexual harassment is reported, promptly launch a thorough investigation that is appropriate under the circumstances. Take appropriate remedial action when necessary. Be consistent in following your sexual harassment policy.

• With guidance from your employment law counsel, implement mechanisms to monitor whether the policies and complaint structures are effective.

David M. Wissert , Member of the firm, is Chair of Lowenstein Sandler's Employment Litigation Group and a member of the Litigation Department. Vincent A. Antoniello is Counsel to the firm's Employment Law Practice Group and Heather C. Bishop is a Litigation Associate.

Please email the authors at dwissert@lowenstein.com, vantoniello@lowenstein.com or hbishop@lowenstein.comwith questions about this article.