By Julie Saker Schlegel

In a 5-4 decision the dissent termed “decidedly employer-friendly,” the Supreme Court held on June 24, 2013 that only employees who have been empowered by the employer to take tangible employment actions against a harassment victim constitute “supervisors” for the purpose of vicarious liability under Title VII.  Per the holding in Vance v. Ball State University, employees who merely direct the work activities of others, but who lack the authority to take tangible employment actions, will no longer be considered supervisors under Title VII. 

Under long-standing precedent (Faragher and Ellerth), whether an employer can be found vicariously liable for harassment perpetrated by its employees is dependent on whether the harasser is a supervisor or merely a co-worker of the victim:

  • For co-worker harassment, the employer will only be found liable if it was negligent—that is, if it knew or should have known of the harassment and failed to take corrective action;
  • For supervisor harassment where the supervisor takes a tangible employment action against the victim (such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits), the employer will be considered strictly liable; and
  • For supervisor harassment where the supervisor does not take a tangible employment action against the victim, the employer may establish an affirmative defense to liability if it can prove that: (1) it exercised reasonable care to prevent and correct any harassing behavior; and (2) the victim unreasonably failed to take advantage of the preventive or corrective opportunities offered by the employer.

Despite this framework that is highly dependent on the status of the harasser, however, the Court had never definitively ruled on who constitutes a supervisor, until now.

As a consequence of the Court’s truncated conception of supervisory authority, the Faragher and Ellerth framework has shifted in a decidedly employer-friendly direction.”
—Justice Ginsburg, dissenting

In reaching this decision, the Court emphatically rejected the EEOC’s definition of supervisor, which had included both those who have the authority to take or recommend tangible employment actions and those who direct the daily work activities of others.  The Court noted that a significant advantage of its new definition is that supervisory status can now be readily determined early in the case, and will generally be capable of resolution on summary judgment.  Alternatively, if the issue should reach trial, the new definition will be easier for juries to apply.

While the new definition of supervisor should benefit employers, by leading to more cases being decided under the more lenient “negligence” standard, the Court’s opinion contained a few caveats.  While employees who merely direct the daily work activities of others will no longer be considered supervisors, the Court noted that the nature and degree of authority wielded by the harasser is an important factor to be considered in determining whether the employer was negligent in controlling workplace harassment.  Further, an employer who attempts to evade liability by concentrating all decision-making authority in a few individuals, who in turn rely upon the recommendations of others who actually work directly with the affected employees, may be found to have effectively delegated the power to take tangible employment actions to those employees on whose recommendations it relies.  Accordingly, while the new definition of supervisor has been distinctly narrowed, the Court has allowed some room for it to be expanded in particular cases, should the situation warrant.

In accordance with this decision, employers should ensure that their job descriptions clearly define which employees have the authority to take tangible employment actions against others, keeping in mind that employees who make recommendations regarding such employment actions may also be deemed supervisors in certain situations.

By Amy Messigian

On October 11, 2012, the California Supreme Court granted review of Patterson v. Domino’s Pizza to address the circumstances in which a defendant franchisor may be held vicariously liable for tortious conduct by a supervising employee of a franchisee.

Like many fast food chains, Domino’s Pizza (“Domino’s”) is a franchising operation in which individual franchisees operate storefronts under the Domino’s name.

In Patterson, the plaintiff, a sixteen-year-old employee of a Sui Juris, a Domino’s Pizza franchisee (“Sui Juris”), alleged that she was sexually harassed and assaulted at work by an assistant manager of the store.  She filed a lawsuit against various Domino’s-related entities, including Sui Juris and Domino’s, as well as the assistant manager, alleging causes of action under the California Fair Employment and Housing Act, along with assault, battery and intentional infliction of emotional distress.  She claimed that Domino’s was vicariously liable for the supervisor’s actions.

Although Sui Juris’ owner testified that he received employment direction from Domino’s and that his operation was monitored by Domino’s inspectors, the trial court granted summary judgment for Domino’s on the grounds that Sui Juris was an independent contract and was not an agent of Domino’s. Particularly, it noted that the franchise agreement between Domino’s and Sui Juris provided that the latter was responsible for supervising and paying store employees. On this basis, the trial court concluded that Domino’s had no role in Sui Juris’ employment decisions.

The plaintiff appealed and the California Court of Appeal reversed the trial court. The appellate court stated that the nature of the franchise relationship will determine whether a franchisor is vicariously liable for injuries to a franchisee’s employee and that while a franchise agreement is relevant, it is not the exclusive evidence of the relationship between a franchisor and a franchisee.

[T]he franchisor may be subject to vicarious liability where it assumes substantial control over the franchisee’s local operation, its management-employee relations or employee discipline.

Here, the court determined that Domino’s exercised significant control over Sui Juris’ employees through the franchise agreement, which allows Domino’s to set employee qualifications and standards for their demeanor and appearance. The court also determined that Domino’s asserted control over other areas of the business, such as store hours, pricing, advertising, equipment usage, recordkeeping and Sui Juris’ insurance policies, which required naming Domino’s as an additional insured. Most importantly, the court concluded the Domino’s had instructed Sui Juris to terminate the assistant manager as well as another employee of the store for violating company policy, and that Sui Juris had acted based on these instructions. Accordingly, the court reversed the order of summary judgment.

Domino’s has appealed to the California Supreme Court, which will determine whether a franchisee’s employee may bring an action against the franchisor for harassment or other wrongful acts alleged to have been committed by another employee of the franchisee. The line drawn by the Court will be of interest to any retail establishments operating under franchise agreements. If the appellate court’s decision is affirmed, franchisors that establish employment standards or communicate opinions regarding hiring or firing decisions to their franchisees may risk vicarious liability in actions brought by the franchisee’s employees, even if they do not facilitate operations of the franchisee on a daily or continual basis.