Fourth Circuit Court of Appeals: Employer May be Liable for Harassment by Customer
In an unpublished decision, the Fourth Circuit Court Appeals recently held that an employer may be liable for third-party harassment by a customer if the employer knew or should have known of the harassment and failed to take appropriate actions to halt it. The evidence of repeated complaints to supervisors and managers by the employee created a triable issue as to whether the employer had notice of the harassment, and thus, the Appeals Court allowed this claim to go forward to trial.
In EEOC v. Cromer Food Services, Incorporated, a route driver for a southeastern vending machine company alleged he suffered daily sexual harassment at the hands of two housekeeper employees of one of the company’s largest customers – a hospital. According to the driver, the harassment began after a co-worker left a note in the hospital cafeteria calling him gay. Following this incident, the two male hospital employees allegedly began harassing him with unwanted sexual comments.
The driver claims he complained to numerous people at CFS, including his supervisor, his direct supervisor, another supervisor, a manager of the company, and the chairman of the Board. As the harassment continued, he took more drastic measures by reporting the harassment directly to a human resources professional at the hospital and to the supervisor of the two hospital employees. But, the hospital employees were unrelenting.
In response to this lawsuit, the company asserted that it did not have actual or constructive knowledge of the harassment because the complaints by the driver were vague and insufficiently detailed for action to be taken. In addition, the company pointed out that the employee failed to report the harassment to its President in accordance with the company’s written sexual harassment protocol.
The Fourth Circuit reversed the trial court’s dismissal of the claim. In doing so, it noted that the District Court focused on only one snippet of the driver’s deposition testimony which stated that he did not provide details of the harassment to the company. The Appeals Court acknowledged that although anti-harassment law requires notice to the employer – it should not require it to be pellucid.
The Fourth Circuit also pointed out the flaws in the employer’s approach in this matter. The Court stated that harassment claims could not be avoided by utilizing a “see no evil, hear no evil” strategy, and it criticized the protocol requiring reports to be made to the President by recognizing that such requirement may likely intimate an employee. Moreover, the Court drew attention to the fact that management failed to report the harassment up the chain of command as required by company policy.
This case illustrates to employers within the Fourth Circuit (which includes Virginia, Maryland, North Carolina, West Virginia and South Carolina) that a company’s written policy for reporting harassment may not provide insulation from liability under Title VII. Virginia businesses must ensure that they have a reasonable process in place to address allegations of harassment by its employees and third parties.
Fourth Circuit: A Court Cannot Overturn an Arbitrator's Construction of Business Contract
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Based on a recent decision by the Fourth Circuit Court of Appeals, business owners may want to think twice before including an arbitration clause in a contract. In the case of PPG Industries, Inc. v. Int’l Chemical Workers Union Council, the Fourth Circuit considered whether a reviewing court must defer to an arbitrator’s construction of a contract even when the court believes that the arbitrator construed the contract incorrectly. In a decision that may be of some surprise to business owners, the Fourth Circuit held that even if a court is convinced that the arbitrator committed serious error, a court cannot overturn the arbitrator’s decision.
In its reversal of the district court, the Fourth Circuit held that, except in “very limited” instances, a court has no right to determine the correctness of an arbitrator’s award when the parties to a contract have agreed that disputes should be submitted to arbitration. Once the arbitrator has ruled, then the court’s only function, with respect to that decision, is to determine “whether the arbitrator did his job – not whether he did it well, correctly, or reasonably, but simply whether he did it.” Unless the arbitrator ignores “the plain language of the contract,” a court cannot overturn a clearly erroneous award.
Although the PPG Industries, Inc. decision isn’t new law, business owners should pay it special attention. Over the past couple of years, I have had many clients request an arbitration clause in a business contract because they believe that it is a quicker and cheaper alternative to court litigation. While arbitration does have some advantages over litigation, those advantages come at a heavy price: the substantial risk of having no recourse for a bad or incorrect arbitration award.
In Virginia, where courts are renowned for their “rocket dockets”, business owners may want to think twice before inserting an arbitration clause into a contract. Without the advantage of a quicker resolution, it may be best to forego an arbitration clause in favor of permitting court litigation. Although courts and juries aren’t always perfect, at least you will have the option to appeal an erroneous decision.
New TRO Standard for Business Non-Competes
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epresenting a corporate client have gotten the late afternoon call that a former employee is now working for a competitor in violation of the employee’s non-compete, and likely using confidential corporate information. A double-whammy which your client wants stopped immediately!
Well, for years us lawyers practicing in the Eastern District of Virginia would get out our tried and true Complaint asking for a PI, along with the papers requesting a Temporary Restraining Order (TRO) to immediately stop the wayward former employee from wrecking our client’s business one second longer (assuming diversity of citizenship for access to federal court).
We used what had become well-known as the Blackwelder standard, named after the case of Blackwelder Furniture Co. of Statesville v. Selig Manufacturing Co., 550 F.2d 189 (4th Cir. 1977), which was later reaffirmed in Rum Creek Coal Sales, Inc. v. Caperton. The injunction standard adopted by these cases used “the balance-of-hardship test”.
However, a few months ago, the Fourth Circuit changed the tried and true tune of the Blackwelder standard. Citing a Supreme Court case from 2008, the Fourth Circuit ruled in The Real Truth About Obama, Inc. v. FEC (PDF), that it had been misapplying the preliminary injunction standard. Last year, in Winter v. Natural Resources Defense Council, Inc. (PDF), the Supreme Court held that in order to obtain a preliminary injunction, a plaintiff has to establish that:
- he is likely to succeed on the merits
- he is likely to suffer irreparable harm in the absence of preliminary relief
- the balance of equities tips in his favor
- an injunction is in the public interest
For some reason, the prior cases form the Fourth Circuit heavily emphasized prongs two and three. The practical effect of the Real Truth decision (apart from a new catchy sounding injunction standard) is yet to be determined, because despite its proclamations in Real Truth, the Fourth Circuit and the district courts in this Circuit will likely find it difficult to move from a legal standard that had been adopted by jurists and practitioners alike for more than thirty years. However, it may be the case that employers and their counsel will have to really go the extra mile to get a TRO, and actually meet all four prongs of the injunction standard. We will have to wait and see.
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