Sixth Circuit Redefines Employer Liability for Client-Based Harassment

In an explicit departure from EEOC guidance and other federal court caselaw, the United States Court of Appeals for the Sixth Circuit recently held that an employer can only be liable for a client/customer’s harassment of its employee if the employer intended for the harassment to occur. In Bivens v. Zep, Inc., No. 2:23-cv-11398, 6th Cir., a sales representative sued her former employer under Title VII and Michigan law, alleging a hostile work environment based on the actions of a customer. The trial court granted the employer’s Motion for Summary Judgment and the Sixth Circuit affirmed.

The sales representative alleged that while she was in a meeting with a client, the client locked the door and asked her, at least twice, if they could date. The sales representative declined the client’s advances and cut the meeting short. She reported the events to her supervisor, who reassigned the client to another sales team. The sales representative never had to interact with the client ever again.

Around the same time, the employer engaged in reduction of work force, laying off 23 sales representatives whose territories were projected to generate less than $240,000 in annual revenue. The plaintiff’s sales territory was one of those identified and she was terminated. Following her termination, the sales representative sued her former employer, alleging that the company was liable under Title VII and Michigan law for the hostile work environment that she experienced due to the client’s romantic advances. The sales representative also alleged that the employer retaliated against her when it terminated her after she complained to her supervisor about the client’s behavior.

The Sixth Circuit affirmed summary judgment for the employer on all counts. Importantly, the Sixth Circuit redefined the legal analysis for when an employer can be found liable for a client or customer’s harassment of an employee. The Court emphasized that under Title VII, the definition of employer includes “any agent of the company.” 42 U.S.C. § 2000e(b). The Court reasoned that because clients or customers are not agents of a company, a company cannot be vicariously liable for the allegedly discriminatory actions of a client or customer. Instead, to be liable for the harassment of an employee by a non-employee, the employer must be found directly liable for the non-employee’s actions.

According to the Sixth Circuit, an employer can only be directly liable for the actions of individuals who are not high level officers when the employer

• intends for the unlawful consequence to occur or
• is substantially certain that the unlawful consequence would occur from its actions.

In the case of the sales representative, the Sixth Circuit held that no jury could find that the company violated Title VII by intentionally treating the sales representative worse based on sex. Specifically, the Court found that the employer did not intend to put the female sales representative in a position where she could experience sexual harassment, and the employer was also not substantially certain that the sales representative would experience sexual harassment if she met with the specific client.

The Sixth Circuit distinguished the facts of the sales representative’s case from other cases where an employer was aware of a non-employee’s past harassing behaviors and still assigned female employees to engage with the harassing non-employee.

The Court acknowledged that requiring the employer to intend or be substantially certain that the unlawful consequences could occur is a departure from EEOC guidance and case law in other circuits which allow employers to be liable for the actions of non-employees under theories of negligence. Nevertheless, the Court emphasized that its opinion, which requires intent on behalf of the employer according to agency principals, is based on its own independent interpretation of Title VII.

The Sixth Circuit’s decision in Bivens v. Zep, Inc. could influence other courts’ interpretations of Title VII regarding employer liability for the harassment of an employee by a non-employee. Employers and legal practitioners should be prepared for evolving standards in this area.

Please contact Caroline Perlis or any member of the Phelps Labor and Employment team if you have questions or need advice or guidance.