In a precedential opinion last month, a panel of the U.S. Court of Appeals for the Third Circuit in O'Brien v. Middle East Forum, for the first time endorsed the proxy theory of liability under Title VII of the Civil Rights Act.[1]

In so ruling, the court joins each of the other federal appeals courts to have addressed the issue, including the U.S. Courts of Appeals for the Second, Fifth, Seventh and Ninth Circuits. The Third Circuit's ruling also aligns with the enforcement position of the U.S. Equal Employment Opportunity Commission, which submitted an amicus brief in support of the proxy theory.

The proxy theory of liability underscores the limits of the Faragher-Ellerth defense and the importance of anti-harassment efforts at the highest levels of an organization. Essentially, if the named harasser's power in an organization is so great that the employee is tantamount to the employer itself, the employer is powerless to escape harassment liability through the Faragher-Ellerth defense.

Legally speaking, employers are much more vulnerable if the alleged harasser is not merely a supervisor, but an alter ego of the organization. For employers, the message is clear: Ignore workplace harassment at your peril, especially when the accused is the "face" of your company.

By way of background, in two landmark decisions, the U.S. Supreme Court established a path for employers to escape liability that has come to be known as the Faragher-Ellerth defense in Title VII harassment jurisprudence.[2]

An employer may invoke the defense in a hostile work environment case if the harassment did not result in a tangible employment action adverse to the plaintiff.

Generally, to invoke the defense, an employer must show that: (1) it used reasonable care to prevent and correct promptly any harassing conduct, and (2) the plaintiff unreasonably failed to take advantage of opportunities the employer provided to prevent or correct the harassing conduct.

As the Third Circuit reasoned in O'Brien, the Supreme Court did not intend for the Faragher-Ellerth defense to apply when the status of the employee-harasser is as a proxy of the employer, rather than only a supervisory employee. Whereas a supervisor is an agent of the employer, a proxy is the employer, and the acts of the proxy are deemed to be the acts of the employer itself.

Impact of Failure to Instruct the Jury on the Proxy Theory

In the underlying case, the plaintiff brought a hostile work environment lawsuit under Title VII against her former employer and others.

The plaintiff alleged that while she served as the employer's human resources director, the chief operating officer, who was second in command at the organization, engaged in actionable harassment based on her sex. The plaintiff sought to hold the employer liable automatically for that employee's actions because, as she argued, the employee was a proxy of the employer.

The plaintiff requested the trial court instruct the jury about the proxy theory of liability. The trial court declined to do so, characterizing the theory as a novel interpretation of Title VII.

After the jury issued a verdict for the employer, the plaintiff appealed. The plaintiff requested a new trial, arguing that the trial court's failure to issue a proxy theory instruction tainted the verdict.

The Third Circuit agreed with the plaintiff that the trial court erred in not instructing the jury about the proxy theory, but concluded that the impact of the error did not warrant a new trial.

The jury was asked: Did the plaintiff prove that the second-in-command employee subjected her to sexual harassment? The jury answered no. As the Third Circuit explained, the jury's answer mooted the proxy inquiry. Without a threshold finding that actionable harassment occurred, the employer would not be liable, whether or not the harasser was a proxy employee.

Accordingly, the Third Circuit affirmed the trial court's order denying the plaintiff a new trial.

Defining Proxy

The most significant part of O'Brien is how the Third Circuit articulated the standard to determine who qualifies as an employer's proxy. The court made clear that only employees with exceptional authority and control within an organization meet the standard.

Merely having some amount of control over a subordinate falls far short of the standard. However, as with myriad other Title VII issues, the answer ultimately turns on the facts of the case.

Based on the evidence presented in the trial court, the Third Circuit opined that a reasonable jury could have answered yes if asked whether the second-in-command employee was a proxy of the defendant-employer. In reaching this opinion, the court focused on the following facts:

• The employee was responsible for day-to-day management, communications and financial resource development for the organization
• The employee was the face of the organization, including when representing the organization in media appearances;
• The employee made the policies which governed all employees working in the main office of the organization;
• The employee served multiple positions on the organization's board of directors, including as director and secretary; and
• The employee reported directly to the president of the organization.

Given the precedential status of the O'Brien opinion, the above facts are likely to shape how courts in the Third Circuit evaluate proxy status going forward. 

Takeaways

In examining the scope of the Faragher-Ellerth defense, the Third Circuit's decision in O'Brien is an important reminder of what the defense incentivizes: rooting out workplace harassment.

Employers may want to examine their internal efforts to prevent harassing and other inappropriate conduct and prioritize making improvements where appropriate.

The decision in O'Brien supports making the point in policy language, training and in implementing corrective action, that no one is above an employer's prohibitions on harassment. The more power an employee has within an organization, the greater the potential damage for the employer if the employee engages in harassing conduct.

Given the power that board member status may provide, as O'Brien recognizes, employers may want to extend their anti-harassment training and prohibitions on harassing conduct to members of their board of directors.

In fleshing out a nuanced aspect of employer liability in the harassment context, the Third Circuit's decision cautions employers that, to maintain a harassment-free workplace, the tone starts at the top.

References

[1] O'Brien v. Middle East Forum , 3d Cir., No. 21-2646 (January 5, 2023).

[2] Faragher v. City of Boca Raton , 524 U.S. 775, 806 (1998); Burlington Industries, Inc. v. Ellerth, 524 U.S. 742, 765 (1998).

 

Reprinted with permission of Law360.