Employers who are located in New York – and even those who merely transact business there and have employees spread around the country – should be aware of recent court decisions that substantially broaden their potential liability under New York State and City discrimination laws. Abiding by federal discrimination laws is not enough. Zakrzewska v. The New School.
Recently the highest court in New York – the New York Court of Appeals – held that in cases brought under the New York City Human Rights Law (NYCHRL), employers sued for unlawful harassment cannot invoke the affirmative defenses set out in the United States Supreme Court decisions of Faragher v. City of Boca Raton and Burlington Industries, Inc. v. Ellerth.
What's At Issue
Since 1998, employers have been using the "Faragher-Ellerth" affirmative defense in sexual discrimination and retaliation cases. This defense states that an employer will not be held vicariously liable for harassment by a supervisory employee if 1) the employer did not take a tangible employment action against the employee, such as discharge or demotion; 2) the employer took reasonable care to prevent and promptly correct any harassing behavior; and, 3) the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer that might have prevented or avoided harm.
Practically speaking, this defense is applicable to claims of a hostile work environment where the employer has implemented an anti-harassment policy with an appropriate complaint procedure, and the employee unreasonably fails to use that procedure.
Earlier this year, the federal district court that sits in Manhattan handed down decisions – including Padmore v. LC Play, Inc. and Guzman v. Macy's Retail Holdings, Inc – which confirmed that employees who work outside New York City may still sue their employer under the NYCHRL, and those who work outside the state may still sue under the New York State Human Rights Law (NYSHRL), if the employment decisions being challenged were made in New York – even if the employer is headquartered elsewhere.
After these recent decisions, both the NYCHRL and the NYSHRL will reach beyond New York City and state borders to potentially subject employers who do not maintain offices or headquarters in New York to liability under statutes that make it much easier for employees to prevail on claims that would clearly fail under federal law.
How We Got To This Point
In Padmore and Guzman, the federal court for the southern district of New York held that employers may be liable for discriminatory conduct even if they do not regularly conduct business there, and even if only one act of discrimination occurred within New York. In particular, the Padmore decision stated that both "the NYSHRL and NYCHRL apply when a discriminatory act is committed in New York, even if the impact of that act is felt outside of New York."
In Guzman, the court confirmed that the NYCHRL and NYSHRL prohibit discriminatory conduct occurring within New York, but reiterated that the state statute imposes liability on New York corporations that discriminate against employees outside of New York. Although both decisions have far-reaching and potentially costly implications for employers, their effect has been magnified in light of the recent Zakrzewska decision.
The facts of the Zakrzewska case were relatively straightforward: Dominika Zakrzewska worked part-time at the Print Output Center at her university employer, where her supervisor allegedly subjected her to sexually harassing emails and other retaliatory conduct. The university asked the court to throw the suit out, claiming that under the Faragher-Ellerth defense, it should not be held vicariously liable for the supervisor's purported sexual harassment since Ms. Zakrzewska had not availed herself of the university's complaint procedure. The district court found that the elements of the Faragher-Ellerth defense were satisfied, but the plain language of the NYCHRL was inconsistent with the affirmative defense and therefore it was simply not available to employers in cases alleging violation of the NYCHRL.
Recognizing that several state and federal lower courts had reached conflicting conclusions on the issue, the district court denied the applicability of the Faragher-Ellerth defense, but simultaneously certified an interlocutory appeal to the U.S. Court of Appeals for the 2nd Circuit on the applicability of the defense under the NYCHRL. The Second Circuit, in turn, certified the question to the highest state court in New York – New York Court of Appeals. Ultimately, the Court of Appeals examined the legislative history as well as the text of the NYCHRL and concurred with the district court that the Faragher-Ellerth defense isn't available under the NYCHRL, and employers are strictly liable for any sexual harassment committed by their managers and supervisors under the City's law.
States Can Be Tougher Than The Feds
In its opinion, the New York Court of Appeals emphasized that local laws may (and often do) provide for greater penalties than analogous state laws. It also affirmed the district court's holding that the plain language of the statute mandates strict liability for a supervisor's harassment, even if the employer has exercised reasonable care to prevent discrimination and the employee unreasonably failed to utilize employer-offered avenues to complain.
The Court of Appeals acknowledged that, from a policy perspective, its holding may discourage employers from implementing safeguards against discrimination, since they will be unwilling to incur the expense if they cannot use the affirmative defense. But this did not deter the Court from its ruling, as it held that such policy determinations are for the legislature and not the courts. And, it noted that even though liability for harassment will not be deflected, an employer may still mitigate its damages under the NYCHRL by demonstrating the existence of policies, programs, and procedures for the detection and prevention of unlawful discrimination.
Finally, the holding in Zakrzewska only discussed whether the Faragher-Ellerth defense is available under the New York City law, not state law. So employers should still be able to point to their anti-discrimination policies – and employees' failure to use them – to invoke the Faragher-Ellerth defense under Title VII and the NYSHRL.
What This Means To You
All employers, both those within New York City and those out-of-state employers, should be mindful that they can be held liable for acts of harassment perpetrated by their supervisors or managerial employees, even if they have comprehensive discrimination policies in place that include an appropriate complaint mechanism. In litigation brought against New York City-based employers, employees have been combining claims under the City law with causes of action under Title VII and the NYSHRL for sometime.
If anything, the trend will likely intensify, since employees claiming harassment will now have a strong incentive to invoke the City law if the employer maintained an anti-discrimination policy and the plaintiff did not use it. Since the Farragher/Ellerth defense will still apply under state and federal law to negate liability, and its elements will be deemed relevant under City law to mitigate damages, employers should continue to maintain their anti-discrimination policies and carefully monitor their supervisory employees since such steps will yield the maximum possible protection against liability.
Moreover, employers should be prepared for an increase in litigation, now that an employee: 1) need not overcome a Faragher-Ellerth defense to potentially receive the uncapped punitive and compensatory damages available under the NYCHRL; and 2) may sue any employer that made a personnel decision in New York City or state that is attacked as discriminatory, regardless of whether the employee performed any work in New York. Taken together, the scope of an employer's liability under New York discrimination laws has dramatically increased, while an employer's "outs" and defenses have substantially decreased. Plaintiff's lawyers will almost certainly seek to capitalize on this unsettling combination.
The bottom line: following federal law is not enough – no matter in which state an employer is located. You need to be familiar with the discrimination laws of states and localities where managers and supervisors make personnel decisions, even if your company is not headquartered or incorporated there – particularly including New York.
