- Second Circuit Clarifies Liability Standards for Retaliation and Sexual Harassment under Title VII
- May 18, 2012 | Authors: Lori D. Bauer; Ravindra Kumar Shaw
- Law Firm: Jackson Lewis LLP - New York Office
An employee conducting an internal investigation into harassment complaints may not be protected by the “participation clause” of the anti-retaliation provision of Title VII of the Civil Rights Act, the U.S. Court of Appeals for the Second Circuit has ruled in a question of first impression for the circuit. Townsend v. Benjamin Enters. Inc., No. 09-197-cv (2d Cir. May 9, 2012). The Court also determined that an employer is strictly liable under Title VII for sexual harassment committed by a senior executive who is a proxy or alter ego for the employer. This also was a question of first impression in the circuit. Accordingly, the Court affirmed summary judgment for the employer and its principals on a human resources director’s Title VII retaliation claim and upheld a jury verdict against the employer for sexual harassment committed by the employer’s Vice President. The Second Circuit has jurisdiction over Connecticut, New York, and Vermont.
Karlean Grey-Allen was the Human Resources Director for Benjamin Enterprises, Inc. (BEI). When Martha Townsend, a BEI employee, complained about sexually harassing conduct she experienced by BEI’s Vice President, Hugh Benjamin, Grey-Allen began an internal investigation of the allegations. However, before Grey-Allen could complete the investigation, she was fired by BEI’s president (and Hugh Benjamin’s wife), Michelle Benjamin, because she felt Grey-Allen’s discussion with an outside consultant about Townsend’s sexual harassment allegations was inappropriate.
Townsend eventually left BEI and asserted claims for sexual harassment and constructive discharge under Title VII and the New York State Human Rights Law against BEI, Michelle Benjamin and Hugh Benjamin, as well as a claim for battery under New York common law against Hugh Benjamin. Grey-Allen asserted a claim for retaliatory discharge under Title VII and the NYSHRL against BEI and the Benjamins.
The district court granted summary judgment dismissing Grey-Allen’s retaliation claims under Title VII and the NYSHRL, but it allowed Townsend’s claims to proceed to a jury trial. The jury found that Hugh Benjamin had subjected Townsend to a hostile work environment; that he was the alter ego of BEI and his actions were therefore imputed to BEI; and that Hugh Benjamin was liable for civil battery. The jury did not find BEI liable under Title VII for constructive discharge. It awarded Townsend $5,200 in damages against BEI and the Benjamins under Title VII and the NYSHRL and $25,200 against Hugh Benjamin on the battery claim. The district court also awarded her $141,308.80 in attorney’s fees and costs.
Pre-Charge “Participation” in Internal Investigation Unprotected under Title VII
On appeal, Grey-Allen challenged the district court’s pre-trial dismissal of her Title VII retaliation claim (she did not pursue the NYSHRL claim on appeal), arguing that because participation in internal investigations is integral to Title VII’s goals, it should be deemed protected activity. The appellate court rejected this argument based on a reading of the plain language of the statute and affirmed the district court’s dismissal of Grey-Allen’s retaliation claim.
Title VII’s prohibition against retaliation contains an “opposition” clause and a “participation” clause. Section 704(a) makes it unlawful for an employer to retaliate against an individual “because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.” 42 U.S.C. § 2000e-3(a) (emphasis added). The subchapter referenced in the statute describes the Equal Employment Opportunity Commission’s powers and procedures. The Court held that participation in an internal employer investigation unconnected with a formal EEOC proceeding does not qualify as protected activity under the participation clause.
The Court cautioned, however, that it was not deciding whether participation in an internal investigation after the filing of a formal charge with the EEOC would be protected under the participation clause. It also noted that Grey-Allen conceded that she did not know whether Townsend’s allegations of harassment were true and, thus, lacked a good-faith belief that discriminatory action had occurred. Absent a good-faith belief, she could not claim she engaged in protected activity under the opposition clause of Title VII. The U.S. Supreme Court adopted an expansive interpretation of the opposition clause in Crawford v. Metropolitan Government of Nashville & Davidson Cty, 555 U.S. 271 (2009), holding that it is broad enough to protect an employee who speaks out about discrimination when answering questions during an employer’s internal investigation, even if the employee did not initiate the complaint.
Automatic Liability for Conduct of Employer’s Proxy or Alter Ego
The defendants appealed the district court’s decision to reject BEI’s reliance on the Faragher/Ellerth affirmative defense, which allows an employer to avoid vicarious liability for a hostile work environment created by a supervisor. To raise that defense successfully, an employer must not take a tangible employment action against the plaintiff and must demonstrate that:
(i) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and
(ii) the plaintiff-employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.
The Second Circuit affirmed the district court’s rejection of the defendants’ argument. The Court held the Faragher/Ellerth affirmative defense is unavailable when the supervisor in question is the employer's proxy or alter ego. In that case, liability for the harasser’s conduct is automatically imputed to the employer, regardless of whether the employer approved of the conduct. An individual's mere status as a supervisor with the power to hire or fire is not sufficient to qualify that individual as an alter ego of an employer. A supervisor is of sufficiently high rank to qualify as an employer's proxy or alter ego when the supervisor is a president, owner, proprietor, partner, corporate officer, or otherwise highly positioned in the management hierarchy.
Applying the law to the facts, the Court found that a reasonable jury could have concluded that Hugh Benjamin was BEI’s alter ego. He was BEI’s only corporate Vice President, operating as second-in-command, with a position immediately below Michelle Benjamin in the corporate hierarchy. He also was a corporate shareholder with a financial stake in BEI. Moreover, he exercised a significant degree of control over corporate affairs, as demonstrated by his collaboration with Michelle Benjamin on corporate decisions, including hiring, and by the fact that supervisors and managers in the field reported to him directly.