Formerly Quid pro quo harassment by a supervisor meant employer was strictly liable; but courts differed about when employers were liable for supervisors who merely created a "hostile environment" and don't directly condition job benefits on sexual favors.

Now, the Supreme Court has effectively abolished the concepts of "quid pro quo" and "hostile environment" in cases involving supervisors, saying they were "of limited utility" and has adopted a standard based upon "vicarious liability" for such claims caused by a supervisor, as follows:

• An employer is strictly liable for sexual harassment by a supervisor that results in a tangible job detriment. [even if the employer did not know about it]
  (A tangible employment action would be such as a loss of promotion or discharge. It requires a significant change in employment status, in most cases
  one that inflicts direct economic harm, hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits or characteristics, such as the resources for an employee to do his or her job.)

Burlington Industries v. Ellerth, U.S. Supreme Court, No. 97-569, June 26, 1998. Saleswoman claimed supervisor repeatedly made (boorish and offensive) remarks about her breasts, (and gestures). On three occasions he allegedly made remarks that could be construed as threats to deny her tangible job benefits. (i.e. He told her he could make her life "very easy or very hard," and said she might not get a promotion because she wasn't "loose enough".) However, she was never fired or demoted and, in fact, she got the promotion. She never informed anyone in authority, refused all of the advances and suffered no tangible retaliation - in fact she was promoted. {this would have been a hostile environment case} The Supreme Court has returned the case to the trial court and the employer will have the opportunity to avoid liability by proving that it exercised reasonable care and employee unreasonably failed to take advantage of any preventive or corrective opportunities.

• If the harassment does not result in a tangible job detriment, the employer is still strictly liable but it can raise a 2-part affirmative defense in which it must show that:

            -It used "reasonable care" to prevent and correct any harassment, AND

            -The employee "unreasonably" failed to complain.

Since these two reasonableness issues are so fact-specific, an employer will rarely be able to get a case thrown out (i.e. on Summary Judgment), without a trial.

Faragher v. City of Boca Raton, U.S. Supreme Court No. 97-2892, June 26, 1998. A lifeguard claimed her supervisor touched her on the buttocks, pantomimed oral sex and told female lifeguards he wanted to have sex with them. She argued that the city was liable for the harassment even though it did not know about it. [She claimed she and other female lifeguards had been subjected to lewd remarks and uninvited and offensive touching by 2 male supervisors. She did not complain to City Officials but did speak informally with another supervisors, who failed to report the misconduct to his supervisors.

            -The City's sexual harassment policy had not been distributed to all supervisors/employees;

            -City made no attempt to track conduct of supervisors; and policy did not include clause that harassing supervisors could be bypassed in registering a
             sexual harassment complaint.

2. Sexual Harassment Investigations and the Fair Credit Reporting Act

Consumer Reporting Agency (CRA) is any person which, for monetary fees, "assembles or evaluates" credit information or other information on consumers for the purpose of regularly furnishing 'consumer reports' to third parties using any means or facility of interstate commerce. Section 603(f) FCRA

A "consumer report" is a report containing information bearing on an individual's "character, general reputation, personal characteristics, or mode of living" that is used or expected to be used for the purpose of serving as a factor in establishing the consumer's eligibility for, among other things, employment. Section 6703(d)(1) FCRA

FTC letter determines that "...the outside organizations utilized by employers to assist in their investigations of harassment claims 'assemble or evaluate' information." "Thus, once an employer turns to an outside organization for assistance in investigation of harassment claims...""...the assisting entity is a CRA because it furnishes 'consumer reports' to a 'third party' (the employer). The FCRA does not distinguish whether the information on consumers is obtained from 'internal' records or from outside the employer's workplace. The source and scope of information does enter into a determination of whether the information is a 'consumer report' or an 'investigative consumer report."

An "investigative consumer report" is "a consumer report...in which information on a consumer's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with other with who he is acquainted or who may have knowledge concerning any such items of information." Section 603(e) FCRA

FTC letter states that it appears that the reports prepared by outside organizations performing harassment investigations for employers are most likely "investigative consumer reports" within the meaning of the FCRA. This triggers certain obligations to notify employees and/or supply a copy of the report to the employee.

FTC letter states that "Information cannot be redacted in those instances in which the FCRA requires that the consumer be provided a copy of a consumer report (Section 604(b)(3)(A)). (Even witnesses names must remain included. However, you may be able to have the writer of the report use a code instead of names) An employer who uses investigative consumer reports must comply fully with the provision of the FCRA that apply generally to "consumer reports" (such as Sections 604(b) and 615(1), as well as the provisions that apply specifically to investigative consumer reports (Section 606).

You may want to consider doing the investigation yourself, just using outside lawyers as counsel on how to do it properly. Also, since the Act only covers a CRA that "regularly" procedures consumer reports for a third party, a consultant who does not "regularly" do investigations may not be covered; and a law firm that "once in a blue moon" does an investigation for a client may not be covered because that's not a regular business.

You may try to avoid the definition of "consumer report" by instructing the outside investigator not to report on any employees' character, general reputation or mode of living. (But, is an investigation limited to determining whether harassing conduct or statements took place in the workplace really different from investigating a person's "character"?

You could avoid the "investigative consumer report" requirements and have only a "consumer report" by avoiding interviews with friends, neighbors or associates of the consumer. But, would that be an effective and fair sexual harassment investigation?

Notes: -This may open door to claims such as defamation, invasion of privacy and wrongful
                 termination by anyone implicated by the report, since the investigation will no longer be confidential.

                -get permission from an accused harasser it you hire an outside investigator;

                -you can get the permission at time of hire but consent must be in writing and in a document separate from the employment application and employee
                 handbook;

                -give the employee a copy of the report AND notice of his rights under the Act if an adverse action is taken as a result of the investigation; (in other words,
                 you may have to give copies of the report to the harasser and possibly to the target of   harassment and other employees who may be involved in the
                 investigation);

*you may want to rely on an oral report from your outside investigator and request only a pared-down written report - but even that oral report could be covered under the Act because "consumer report" includes "oral communications." 

*make sure your arrangement with an outside investigator provides for indemnification if all the requirements of the Act, i.e. making a copy available to the employee, are
not met. (responsible party should indemnify the other party)

                -most importantly, give the employee an opportunity to dispute the accuracy of the report.

                -if your investigation includes interviews with the employee's colleagues, friends or acquaintances, so that it falls under the definition of "investigative consumer
                report,", employer must ALSO notify employee by mail that the report is being generated and that he/she has a right to get a copy of it. (This is required to be
                accomplished no later than 3 days after the investigative report is requested).

                -Notice may be provided in the hiring process but it must be separate from the consumer report disclosure.

                -your investigation may expand to include other employees if information revealed in the investigation bears on their character or general reputation. (So, it is
                possible to violate the Act if they have not consented to an investigative consumer report)

                -you may want NOT to rely on the FTC's letter because it is so risky. Mandatory disclosure could also interfere with an employer's duty to respond promptly

                -if the report must be disclosed, it cannot be protected by the attorney-client privilege