WASHINGTON -- Employer groups hope that the Supreme Court will use a same-sex sexual harassment case to spell out just how far their liability extends under federal sex discrimination laws.

The federal government, however, would like the Supreme Court to use that case, Joseph Oncale vs. Sundowner Offshore Services Inc., to expand the actions prohibited by Title VII of the Civil Rights Act of 1964 to include same-sex sexual harassment.

The Equal Employment Opportunity Commission has long taken the position that Title VII does indeed allow recourse for same-sex sexual harassment.

But the justices didn't seem wholly persuaded by the arguments offered by either side in the matter, as lawyers argued the Oncale case before the high court last week. In fact, every justice accept Justice Clarence Thomas -- whose 1991 confirmation hearings burned with charges that he had sexually harassed a female associate -- had something to ask of the opposing sides and often asked it with apparent sarcasm. At the core of many of the justices' questions was whether same-sex sexual harassment in and of itself constitutes gender discrimination covered by Title VII of the 1964 civil rights law.

Although no major national employer group filed a brief in the case, businesses are following the matter closely.

"It's one we're keeping an eye on. It basically will continue to flesh out the parameters of liability under the sex discrimination laws. Basically, businesses want to know what's covered and what's not so they can advise their management and staff about office behavior," said Quentin Riegel, deputy general counsel of the National Assn. of Manufacturers in Washington.

Stephen Bokat, executive vp of the National Chamber Litigation Center Inc., in Washington, said: "It's an important case because it will establish whether the application of Title VII is either less expansive or more expansive than people thought. We have a problem with the tremendous growth of these cases. Depending on how the court writes its opinion will determine whether there's increased ammunition for plaintiffs lawyers. There's a good chance they'll find coverage."

Mr. Bokat said the center, which files legal briefs on behalf of the U.S. Chamber of Commerce, hopes the justices will take a narrow view of the extent to which Title VII covers same-sex sexual harassment.

The case began in 1991, when Joseph Oncale signed on as a roustabout on an offshore oil drilling rig operated by employees of Houston-based Sundowner Offshore Services Inc. (BI, Sept. 29; June 16). Mr. Oncale alleges that during the next few months after he was hired, he was subjected to repeated sexual assaults and threats of sexual abuse -- including homosexual rape -- by a pair of supervisors and a fellow employee.

Mr. Oncale reported the incidents to company officials, but they took no action. He finally quit and sued Sundowner in U.S. District Court for the District of Eastern Louisiana in 1994, alleging he had been subjected to unlawful discrimination under Title VII of the civil rights act.

Title VII prohibits employers from discriminating on the basis of race, color, religion, sex or national origin. But courts have split over whether same-sex sexual harassment is covered by the title, despite the EEOC's position that it is covered.

The district court disposed of Mr. Oncale's complaint by holding that, as a matter of law, male-on-male sexual harassment does not violate Title VII because Title VII doesn't deal with same-sex sexual harassment. Mr. Oncale appealed to the 5th U.S. Circuit Court of Appeals.

A three-judge panel of the appeals court accepted the district court's interpretation of the law, which led Mr. Oncale to appeal to the U.S. Supreme Court, which the court agreed to hear in June (BI, June 16).

"This case is not about the outer limits" of same-sex harassment, said Mr. Oncale's attorney, Nicholas Canaday III of the Baton Rouge, La., law firm of Gibson, Gruenert & Canaday. Rather, said Mr. Canaday, the question is whether same-sex sexual harassment "exists as a matter of law" under Title VII.

After listening to Mr. Canaday for a few minutes, Chief Justice William Rehnquist noted that "Title VII does not speak of sexual harassment."

But the chief justice later said "I don't see how we could possibly sustain" the court of appeals ruling that the Title VII can never be applied to same-sex sexual harassment.

U.S. Deputy Solicitor General Edwin S. Kneedler joined Mr. Oncale's attorney in arguing for an expansive interpretation of the statute.

As Mr. Kneedler proceeded to explain why the government believes same-sex sexual harassment does indeed fall under the protection of Title VII, an obviously exasperated Justice Sandra O'Connor interjected, "You're leaving out the word 'discrimination.'*"

But if Mr. Kneedler shied away from the word "discrimination," Sundowner's attorney showed no such reticence.

Harry M. Reasoner, managing partner in the Houston law firm Vinson & Elkins, said Title VII is a discrimination statute meant to deal with discrimination by someone of one gender against someone of the other.

That interpretation led Chief Justice Rehnquist to point out that the statute doesn't make mention of "men and women."

After fielding questions from the justices about, for example, how Title VII would apply to situations where a male boss treated women under his supervision well but men poorly, Mr. Reasoner said the question was whether Congress intended the statute to apply to "the entire gambit of sexuality" rather than only cases of discrimination involving men and women. He made clear that he took a very narrow view of congressional intent in this case.

Several of the justices' comments indicated that was too narrow an interpretation for their liking. Justice Antonin Scalia said Mr. Reasoner argued that same-sex sexual harassment was always beyond the pale of Title VII even while acknowledging that same-sex sexual discrimination can indeed exist.

After Mr. Canaday offered a brief rebuttal, Justice Scalia observed, "You say sexual harassment always constitutes discrimination; your opponent says it never does."