LIMIT TO EMPLOYERS' LIABILITY

Employers should be watching closely three sexual harassment cases currently in the spotlight for clues on how to minimize their own exposure to such claims.

The most visible of the three, all of which were reported in last week's issue, may be Smith Barney Inc.'s proposed multimillion-dollar settlement of sexual harassment and discrimination claims brought by a class that ultimately could include 20,000 present and former employees. However, while perhaps overshadowed by those numbers, the other two cases could have a far greater impact on employers, as their outcome will be determined by the court system and could set precedent for other employers.

In particular, a case involving the city of Boca Raton, Fla., that the U.S. Supreme Court has agreed to hear could provide employers with some much-needed limits on their liability for actions beyond their control -- or could leave them more exposed.

In the case, Faragher vs. the City of Boca Raton, a former lifeguard is seeking to hold the city vicariously liable for the actions of supervisors who subjected her to unwanted sexual advances, comments and gestures.

The majority appellate opinion found that the city was neither directly nor indirectly liable for the actions of its supervisors, observing that the city had not been made aware of the harassment by the claimant and that the harassment did not fall within the scope of the supervisors' employment.

In a dissenting opinion, however, one appellate judge noted that "generally, the ultimate head of governing board does not have actual knowledge of the action. The very point of ascribing knowledge on a constructive basis is to recognize that liability can be imputed even when the employer has not been 'told. . . . "

We would hope that the Supreme Court will agree that an employer should not be held liable for actions beyond the scope of its knowledge.

That said, it is incumbent upon employers to assure that a clear channel exists for employees to report claims to upper management, with alternate routes of communication in the event upper managers themselves are guilty of harassment. If employers have made good-faith and effective efforts to assure they are aware of problems in the workplace, then they should be immune from claims that are not brought to their attention, as was the case in Faragher.

But even employers that take extra steps to protect workers from harassment are not immune from lawsuits, as a claim brought against brewer Adolph Coors Co. shows.

In that case, a female employee sued Coors, alleging the company was negligent for allowing sexual harassment in the workplace and for failing to move quickly enough to eradicate it.

The suit was filed, however, after Coors had fired workers for alleged misconduct, installed security devices and personnel at the claimant's home and provided her with paid disability leave and other benefits because she feared for her safety in the workplace.

Coors contends it responded in a quick and decisive manner to her complaints and therefore should not be liable for her claims of negligence.

The question of how timely an employer's response is to sexual harassment threats in the workplace will be for the court to decide, and perhaps this will vary on a case-by-case basis.

Ultimately, we think the most an employer can do is have a clear sexual harassment policy, with easily available channels for reporting violations. Once it is made aware of a problem, an employer should act swiftly to protect the claimant and identify and discipline the violators in accordance with its policy.

Beyond that, should an employer be liable for the unauthorized actions of its employees? We think not, and we hope the courts will agree.