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Employer Liable for Hostile Work Environment Created by Its Customers

You should be aware that if your employer creates a hostile work environment by engaging in acts of racial discrimination or sexual harassment, he is liable for damages under Title VII of the 1964 Civil Rights Act. But what if it isn't the employer who is engaging in the prohibited behavior, but rather one of his customers with whom you have daily contact? Can your employer be held liable for his customers' bad acts?

The U.S. Court of Appeals for the Fourth Circuit has ruled yes. Lori Freeman, acted as a customer service representative at Dal-Tile Corp. She interacted daily with Timothy Koester, an independent sales representative for VoStone, one of her employer's customers. For a period of three years, Koester frequently made inappropriate racial and sexual comments. He made derogatory comments about African-Americans to Freeman and her co-workers on a daily basis, and even stating that he would hook up with one of their daughters whose pictures were displayed on a desk.

Freeman reported Koester's remarks to in human resources after her supervisor ignored her complaint. HR initially promised Koester would be permanently banned from the facility. However, the company lifted the ban and instead prohibited Koester from communicating with Freeman. He was allowed on the premises but had to coordinate all on-site meetings through her supervisor.

Freeman was so upset about the prospect of being forced to interact with Koester that she took a medical leave of absence beginning September 2, 2009. During this time she received treatment for depression and anxiety. Freeman returned to work around November 19, 2009. On December 7, 2009, Freeman notified Dal–Tile that she was resigning from her position effective December 11, 2009. Freeman testified that she resigned because the depression and anxiety became too much for her; she was constantly worried she would encounter Koester at work. She then sued asserting claims for racial and sexual hostile work environment under Title VII.

The lower court ruled for the employer, stating that an employer cannot be held liable for the actions taken by an individual not in the control of the employer, i.e. a customer. The U.S. Court of Appeals overruled the lower court, stating that "an employer is liable under Title VII for third parties creating a hostile work environment if the employer knew or should have known of the harassment and failed to take prompt remedial action reasonably calculated to end the harassment."

The takeaway? If you deal with customers who create a hostile work environment by making inappropriate racial or sexual comments to you, and your employer is aware of the problem and does not take reasonable steps to remedy the situation, you have legal remedies available to you. For more information, contact the attorneys at Schwartz and Perry.

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