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SEXUAL HARASSMENT IN THE WORKPLACE: RETAILERS & PROPERTY MANAGERS BEWARE

By David M. Griffith, Esq.

Q. I own a small retail chain with five stores and about $2 million in annual sales. We do not have a human resources manager and rely on our store managers to handle our labor relations issues. Recently, I have heard rumors that one of the store managers was flirting with a newly hired cashier, and that she was threatening to quit if the unwanted attention continued. I have been told by our company attorney that I should look into this matter, but I am extremely busy with our new fall line about to come out. Should I be concerned about this?

A. Yes. The recent $50 million dollar jury verdict against Wal-Mart and one of its supervisors for sexual harassment of a female employee indicates that even the largest and best known of American retailers is not immune to sexual harassment complaints. Despite the heightened publicity given to the issue the problem seems to persist and even to have grown. Other high profile cases in the news in the past few months include sexual harassment verdicts against the largest computer company (IBM) and the largest law firm (Baker & McKenzie) in the United States. The lesson to be learned from this wave of court decisions is that sexual harassment has now become a major human resources issue that retailers, restaurant chains and small businesses must aggressively deal with or potentially suffer severe financial consequences that may fatally cripple their operations.

What is Sexual Harassment?

The legal definition of sexual harassment is very general: the unwelcome sexual conduct or conduct linked to sex which deprives an employee of any benefit of employment, or the right to work in a harassment-free work environment. The examples of conduct given to demonstrate unlawful sexual harassment
generally include verbal comments, visual objects displayed in the workplace, or unwelcome physical contact.

How Severe Must the Conduct
or “Hostile Environment” Be?

The standards for actionable behavior seem to be declining. In the Baker & McKenzie law firm case the plaintiff had a brief nine week tenure with her employer and an even shorter three week assignment with the offending supervisor. The plaintiff claimed harassment on three separate occasions, involving physical contact and certain sexual innuendos. Apparently certain partners at the firm warned the supervisor to stop the harassment, but other than these infrequent verbal reprimands the firm did nothing to punish the offending partner. The jury found the firm’s failure to take action particularly troubling and awarded $6.9 million in punitive damages.
Employers should know that even seemingly innocent behavior such as the giving of flowers or notes or repeatedly asking for dates can constitute sexual harassment. Certain signs of affection or obsessive behavior such as following the employee home or following the employee around, or the harasser parking his or her car near the employee’s home can constitute sexual harassment under certain circumstances.
The United States Supreme Court provided substantial guidance in its late 1993 decision in the Teresa Harris case. Ms. Harris had sued her employer, Charles Hardy, for sexual taunting and demeaning comments, but no physical contact. She had spoken with her boss and requested that he stop, but the conduct continued, and she finally quit in frustration and filed suit. The lower federal courts ruled against her, finding that her employer’s comments were not “so severe as to be expected to seriously affect her psychological wellbeing.” But Justice Sandra Day O’Connor, writing for the Supreme Court, rejected the “psychological injury” standard. Federal law, she said, “comes into play before the harassing conduct leads to a nervous breakdown.” While “merely offensive” conduct is not necessarily prohibited, an employer has broken the law if a “reasonable person” would find the workplace so filled with sexual improprieties that it had become a hostile and abusive environment.

What Should My Company Do?

In California the employer has a legal duty to prevent sexual harassment. These responsibilities include following certain procedures mandated by State law and the adoption and implementation of in-house anti-harassment policies. The State of Calfornia requires the distribution of detailed information on sexual harassment to all employees. The information consists of two distinct steps: (i) distribution of the state approved brochure on sexual harassment, and (ii) posting of the state approved poster on discrimination in the workplace.
Even if you have only one employee, an employer’s in-house program to combat sexual harassment should include the following: (i) have a clear written policy, which may be embodied in the company employment manual or other appropriate document; (ii) disseminate that policy to all employees and keep a record of how well you have communicated the policy to employees on all levels; (iii) implement a system to deal with complaints, which should provide for the option of bypassing the immediate supervisor; (iv) take all complaints seriously; (v) thoroughly investigate all complaints, and listen to both sides, the accuser and the accused. Keep the investigation confidential to minimize the risk of a defamation lawsuit by the accused harasser; and (vi) take corrective action immediately. Once an investigation is completed follow-up steps must be promptly forthcoming. If dismissal is required based upon a clear pattern of harassment, then the harasser must be terminated. When an investigation proves inconclusive then the employer must make it clear to both the complainant and the alledged harasser that: (i) the company takes a firm stand against sexual harassment; (ii) future actions between the two parties will be closely monitored; and (iii) if possible, the two will be separated from each other in the workplace so that they will have no or minimal contact.

Q. I own a retail property management and leasing company. Occasionally one of my leasing agents will become romantically involved with a new tenant in one of the centers that we manage. I have not given this much thought until recently. We do not presently have a policy regarding sexual harassment against tenants, because they are not employees of our company. Should I be concerned about this form of interaction between my agents and our tenants?

A. Yes. The laws regarding sexual harassment are continually expanding. Recently the State Legislature amended the Unruh Civil Rights Act, Civil Code Section 51.9 to create a civil cause of action for sexual harassment of clients by providers of professional services. While this new section covers typical “professionas” such as attornies, doctors, accountants and dentists it also covers “real estate agents” and “property managers.” The expansive definition of “clients” now includes tenants of apartment complexes, office buildings and shopping centers.
Section 51.9(a) provides that a person may be found liable for sexual harassment when the complaining party proves the following: (1) there is a business, service or professional relationship between the plaintiff and defendant; (2) the defendant has made sexual advances, solicitations, sexual requests, or demands for sexual compliance by the plaintiff that were unwelcome and persistent or severe, continuing after a request by the plaintiffs to stop; (3) there is an inability by the plaintiff to easily terminate the relationship without tangible hardship; and (4) the plaintiff has suffered or will suffer economic loss or disadvantage or personal injury as a result of the conduct described in paragraph (2). Under the doctrine of vicarious liability a property management company and its owners may be held liable for tortious acts committed by their employees within the scope of their employment. Because civil rights statutes are typically broadly interpreted to serve a stated social purpose owners of property management companies face the possibility of “strict liability” for sexual harassment of a tenant committed by an agent.
Until the courts have an opportunity to develop case law in this area they will turn to the California Fair Employment and Housing Act (FEHA) and Title VII of the Federal Civil Rights Act of 1964. The type of sexual harassment that property managers are prohibited from engaging in, with respect to tenants, constitutes a mixture of the two forms of sexual harassment recognized in the employment context: “quid pro quo” and “hostile environment.” In the property management context hostile environment sexual harassment is the most likely form of harassment to occur. This would consist of offensive conduct of a sexual nature, such as sexually oriented jokes, off-color remarks, unwanted touching or sexual propositions which is sufficiently pervasive such as to create an abusive working environment.
Although there have not yet been any decisions regarding property managers and tenants in a commercial setting a Federal district court in California ruled recently in Beliveau v. Caras, 873 Fed. Supp. 1393, that a landlord may be held liable for the tortious sexual harassment by a resident manager of a tenant. In this case the resident manager, over the course of several weeks, made off-color and sexual remarks to a female tenant, and while visiting the tenant’s apartment to make repairs continued his offensive verbal comments and proceeded further to make unwelcome advances, putting his arm around the tenant and grabbing various parts of her body. The Federal court ruled that the tenant adequately stated a cause of action under the Unruh Civil Rights Act, Civil Code Section 51 and the Ralph Civil Rights Act, Civil Code Section 51.7 in that defendant landlord had allowed an offensive environment to persist. The court explained that
“even conduct that violates an employee’s official duties or disregards the employer’s express orders may nonetheless be within the scope of employment and actionable.”
The clear message of the Beliveau decision for property managers, like other businesses, is to have a policy against sexual harassment and actively enforce it. Such employers should also be aware of situations that may lead to false allegations that may be used by a tenant in any counter-suit against a valid lawsuit for unlawful detainer.

David M. Griffith is a real estate and business attorney with offices in Long Beach. He serves as legal counsel to California Centers Magazine. For more information please contact 310/983-8017.