The New Jersey Supreme Court refines "Toys 'R' Us" standard and adopts the Ellerth/Faragher test for supervisory sexual harassment

In Ilda Aguas v. State of New Jersey,1  the New Jersey Supreme Court tackled two issues that were not "expressly decided" in Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587 (1993), a seminal decision interpreting the New Jersey Law Against Discrimination, N.J.S.A. §§ 10:5-1 et seq. (NJLAD).  Confronted with claims of sexual harassment by a corrections officer against her supervisors, the Court ruled on: (1) the effect of an employer's policy against harassment on claims for negligence, recklessness and vicarious liability; and (2) what factors make someone a "supervisor" in connection with a hostile work environment claim.  In doing so, the majority of the Court reversed the trial court's grant of summary judgment, and its affirmance by the Appellate Division, and rendered a decision that should cause all employers to revisit their anti-harassment policies and supervisor structure.

Five years after she began working in the Department of Corrections in 2004, plaintiff Ilda Aguas (Aguas), a Senior Corrections Officer, claimed that she was verbally and physically sexually harassed by her supervisors on several occasions at Edna Mahan Correctional Facility (EMCF).  Aguas verbally reported the incidents of harassment to different, higher ranking supervisors, including her Captain and Acting Chief.  But Aguas never filed a written complaint, as required by DOC policy.  Ultimately, the Department of Corrections' Equal Employment Division (EED) investigated Aguas' verbal complaints, and, after a six week investigation, advised Aguas in writing that her claims were "unsubstantiated."

Even before the results of the EED investigation were in, Aguas filed a civil lawsuit asserting claims against the State of New Jersey under the NJLAD for subjecting her to a hostile work environment and retaliating against her for reporting the harassment.  In response to these claims, the State interposed affirmative defenses including its existing policy against discrimination, the "prompt and remedial action it took" and the "thorough investigation" it made into Aguas' claims.  Aguas, p. 11.  The trial and appellate courts held that: (1) Aguas' negligence and recklessness claims under Restatement § 219(2)(b) were properly dismissed; (2) the DOC had "exercised due care" in its investigation of the claims; (3) the State prevailed on the affirmative defense that it had implemented anti-harassment policies; (4) Aguas' supervisor did not use his position to control her daily work activities to harass her and, as such, there was no vicarious liability under Restatement § 219(2)(d) and (5) Aguas' punitive damage claims should be dismissed. Aguas, p. 13.

The effect of the Supreme Court's reversal has at least three-fold implications for employers.  First, as to the negligence and recklessness claims, the Court determined that summary judgment should be vacated after considering five factors about the employer's practices as set forth in Gaines v. Bellino, 173N.J. 301, 312-14 (2002):

(1) formal policies prohibiting harassment in the workplace; (2) complaint structures for employees' use, both formal and informal in the nature; (3) anti-harassment training, which must be mandatory for supervisors and managers, and must be available to all employees of the organization; (4) … effective sensing or monitoring mechanisms to check trustworthiness of the policies and complaint structures; and (5) an unequivocal commitment from the highest levels of the employer that harassment would not be tolerated, and demonstration of that policy commitment by consistent practice.

Gaines, 173 N.J. at 313.  The Aguas Court directed that on remand "evidence of the State's anti-harassment policy" should be evaluated under the Gaines test. Aguas, p. 25.

Second, in connection with the vicarious liability claims, the Aguas Court addressed "the analytical framework under which an employer's anti-harassment policy may be considered in a hostile work environment involving a supervisor."  Aguas, p. 26.  The Court reviewed prior case law as to the viability of grounding an affirmative defense to vicarious liability on an employer having an "effective policy against sexual harassment" in place.  Aguas, p. 29.

In this analysis, the Aguas Court considered the United States Supreme Court's Ellerth/Faragherframework for dealing with agency principles in the context of claims for vicarious liability. Ellerth/Faragher stand for the proposition that an employer can be found vicariously liable under a hostile work environment theory when that hostile environment is caused by the complaining employee's immediate (or higher) supervisor.  However, when "no tangible employment action is taken," the employer has a valid affirmative defense to a vicarious liability claim if it "exercised reasonable care" to stop and/or remedy sexual harassment and the employee did not avail herself of opportunities provided by the employer to avoid the alleged harm. Faragher 524 U.S. at 807.

Based on these principles, the Aguas Court adopted Ellerth/Faragher for cases of hostile work environment under the LAD as a result of sexual harassment by supervisors. The Court concluded that, because such an affirmative defense is not available to employers if there was "tangible" employment action taken against the employee or if the employer's anti-harassment policies are not "meaningful and effective," the potential availability of the affirmative defense is "powerful incentive for an employer" to enforce its policies renouncing any sexual harassment and provide anti-harassment training.  Aguas, p. 39.

Third, the Aguas Court fleshed out the meaning of "supervisor" in the context of Restatement § 219(2)(d) more precisely than in Toys 'R' Us.  In Toys 'R' Us, the Court considered a supervisor to include a wide range of managers, higher executives or both—beyond just those particular "supervisors" who set policy.  Drawing from EEOC guidance on harassment, the Aguas Court concluded that, for the purposes of vicarious liability claims under an agency theory, a "supervisor" is an employee both "granted authority to make tangible employment decisions" and "placed in charge of complainant's daily work activities."  Aguas, p. 47.  This standard is grounded in the notion that the "supervisor" designation for the purpose of harassment claims depends on the function, not the title, of the employee and the employee's ability, by virtue of his superior position, to impact the harassment. Aguas, p. 43.

Some twenty years after Toys 'R' Us, the Aguas Court has brightened the lines for New Jersey employers concerned with proactively preventing  harassment, remediating harassment that has occurred and avoiding liability for the misconduct by supervisory employees.  Aguas further underscores the need for employers to put clear, delineated anti-harassment policies in place, promulgate and enforce them and complement them with training for all employees, especially supervisors.