Labor: No liability for pre-EEOC investigations

2nd Circuit ruling also finds Ellerth-Faragher defense inapplicable to proxy-level supervisors

Employers generally investigate an employee’s discrimination or harassment claim internally, before a charge of discrimination is filed with the Equal Employment Opportunity Commission (EEOC) or the state’s administrative agency equivalent. Investigating discrimination and harassment claims early on not only helps minimize the effects of discrimination or harassment on the complaining employees, but also helps resolve such claims prior to the institution of administrative proceedings and/or costly litigation.

On May 9, in Townsend v. Benjamin Enterprises, Inc., the 2nd Circuit ruled that employees cannot sue under Title VII of the Civil Rights Act of 1964 for retaliation based on participation in an internal investigation of a complaint that had not yet been filed with the EEOC. Further, the 2nd Circuit ruled that sufficiently high-level supervisors within an organization that can be considered to be the organization’s “proxy” or “alter ego” cannot avail themselves of the Ellerth-Faragher defense to a harassment complaint.

Although both rulings are consistent with the positions taken by other circuit courts, they serve to remind employers of the importance of carefully conducting internal investigations, as well as the value of educating all management-level employees (including those at the very top) on discrimination and harassment prevention.

Employees cannot sue under Title VII for retaliation based on internal investigations

In Townsend, the company’s former human resources director complained that she was fired in retaliation for investigating an employee’s harassment complaint, prior to the filing of an EEOC charge of discrimination. The U.S. District Court for the Southern District of New York dismissed the director’s retaliation complaint.

The 2nd Circuit affirmed the dismissal, holding that Title VII’s prohibition against retaliation is limited to retaliation for participation in a discrimination or harassment investigation following formal EEOC involvement. The court reasoned that, because Title VII’s prohibition against retaliation is provided in reference to a subchapter of Title VII dealing with the EEOC’s enforcement powers, formal EEOC involvement is required for a retaliation claim to be covered by Title VII. In so ruling, the court joined the 5th, 6th, 7th, 9th and 11th Circuits in limiting retaliation protection to participation in investigations following formal EEOC involvement (e.g., following the filing of an EEOC charge of discrimination).

The Townsend decision might discourage employees from participating in an employer’s internal investigation of a discrimination or harassment claim prior to the EEOC’s involvement. Employers are, however, encouraged to continue to conduct such pre-EEOC internal investigations because many claims can be resolved through such an investigation.

Proxy-level managers are not protected from harassment claims by the Ellerth Faragher defense

In Townsend, an employee complained that she was being sexually harassed by the company’s vice president and shareholder (who was also the husband of the company’s president). The district court held a jury trial, which resulted in a verdict in favor of the complaining employee. The 2nd Circuit affirmed the jury verdict after considering the applicability of the Ellerth-Faragher defense.

The Ellerth-Faragher defense protects employers from liability for sexual harassment committed by a supervisor where:

  • There is no tangible employment action (i.e., no impact on the employees’ terms and conditions of employment)
  • The employer can show it exercised reasonable care to prevent the harassment
  • The employer can show the employee unreasonably failed to take advantage of any preventative opportunities

The 2nd Circuit held that the Ellerth-Faragher defense does not protect an employer from liability for sexual harassment committed by a sufficiently high-level supervisor within an organization that can be considered to be the organization’s “proxy” or “alter ego” (such as the company’s vice-president).

Accordingly, even if the company had satisfied the three elements of the Ellerth-Faragher defense, it could not shield itself from liability for the vice president’s sexual harassment of the complaining employee. The court’s ruling is consistent with rulings of the 5th, 7th and 9th Circuits, which have held that the Ellerth-Faragher defense does not apply to harassment by a proxy-level supervisor.

The Townsend decision makes clear to employers that high-level supervisors are not outside of the law’s reach. Indeed, such high-level supervisors pose even a greater threat of harassment-related litigation, particularly since the regular preventative and corrective action taken by an employer will not serve as a defense to liability for harassment complaints.

Important guidance for employers

Employers should take away two key lessons from the Townsend decision.

  1. Employers should continue to conduct pre-EEOC internal investigations.
  2. Employers should provide anti-harassment and anti-discrimination training to all management-level employees, especially those at the very top whose actions can result in liability for the company without the benefit of the Ellerth-Faragher defense.

Following these lessons may help employers stay out of hot water in the future.

Contributing Author

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David Ritter

David B. Ritter is partner and chair of the Labor & Employment practice at Neal, Gerber & Eisenberg LLP, representing management in all areas of...

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