Employers Can Face Liability for Employee-to-Employee or Third-Party Racial Harassment

July 29, 2022

Although employers may be automatically liable for supervisors or administrative personnel harassing subordinate employees under certain federal laws, they may also be held liable if another employee (even one subordinate to the harassed employee) or a third-party such as a customer or vendor harasses an employee based on their race.

What Will Courts Consider When Reviewing Claims?

Current federal law prohibits race-based harassment in the workplace under Title VII of the Civil Rights Act of 1964 and 42 U.S.C. § 1981. Claims under both statutes are analyzed using the same framework. Specifically, an employee has to establish four elements under either statute:

  • The work environment must have been both objectively and subjectively offensive;
  • The cause of the harassment must be race;
  • The conduct at issue must have been severe or pervasive; and
  • There must be a basis for employer liability.

To determine whether the work environment was objectively hostile, courts consider four factors:

  • The frequency of the conduct at issue;
  • The severity of the conduct at issue;
  • Whether the conduct was physically threatening or humiliating, or whether it was simply an offensive utterance; and
  • Whether the conduct unreasonably interfered with the employee’s ability to complete their assigned duties.

Some courts have concluded a single instance of harassment, including the use of a racial slur, cannot give rise to an objectively hostile environment as a matter of law. More and more courts have held to the contrary, however, and concluded a single instance of an employee using racial epithets or racial slurs directed at another employee can, as a matter of law, create an objectively hostile work environment and support a claim. In those cases, the claim typically proceeds to trial for a jury to decide whether the facts of the case did demonstrate an objectively hostile environment.

Assuming an employee can establish objective and subjective hostility (subjective typically being established by asserting they felt their environment was hostile because of the conduct), race-based harassment (typically racial or derogatory language used towards the employee), and severe or pervasive conduct (can be established either by repeated inappropriate conduct or, as noted above, could be a single instance of a racial slur directed at the employee), they still need to establish a basis for employer liability to succeed.

There are two ways in which an employer can be held liable for an employee’s or third-party’s actions in these cases. As noted above, an employer will automatically be liable for the harassment (assuming the underlying four elements are established) if the harassing party is the supervisor.

In addition, an employer can be liable if it was negligent in discovering or remedying the harassment. Although cases are sparse on the issue, this second form of employer liability isn’t limited to employee-to-employee harassment. Courts have extended the liability under § 1981 to any third party who may come into contact with an employee, so you should be aware you could be liable for harassment of your employees by customers or vendors.

What Can Employers Do?

With the legal background in mind, how can you avoid liability in situations involving racial harassment by coworkers or other third parties? As always, reporting structures, documentation, and follow-through are key.

First, you should have antidiscrimination and antiharassment policies in place and easily accessible to all employees. You may consider having employees sign documentation confirming they have reviewed and understand the policies when they are hired (or, on an annual basis during annual reviews).

The policies should clearly identify how complaints or reports of inappropriate behavior should be made. They should also encourage employees to report all behavior they feel may violate the policy. Additionally, they should identify the individual (or individuals) within the company who accept complaints. The individuals should be trained on the policy and also trained to conduct any and all investigations necessary.

Second, you should clearly document every complaint received (or behavior observed by supervisors). Reports should be thorough and timely, and the individual who receives a complaint should consider interviewing any third-party witnesses and documenting the interviews. Having the complainant document their complaint in writing may also assist in both the current investigation and in future litigation.

Third, you should take harassment seriously. You may consider progressive discipline in response to complaints, but repeated or escalating behavior should be addressed in kind. The key to an employer’s liability for a nonsupervisory employee’s or a third-party’s harassment is the reasonableness of the employer’s response.

Although you might not be able to prevent all future harassment, the steps you take must be reasonable under the circumstances. For example, if an employee uses a derogatory term in front of another employee, a verbal warning may be appropriate for a first offense. If that same employee physically threatens another employee and uses a racial slur, however, or hangs derogatory flyers in the workplace, more substantial discipline may be required.

Bottom Line

Best practices for employers to attempt to avoid liability under federal law for employee or third-party race-based harassment include having clear policies prohibiting discrimination, open lines of communication to report all complaints (big or small), thorough documentation, and immediate responses with actual consequences. Single instances of harassment can form the basis for a claim, and an employer may be liable for failing to respond appropriately to harassment by a customer, client, or other third-party. As such, all complaints should be treated seriously, even if they are based on the actions of a non-employee.

This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.