On June 24, 2013, the U.S. Supreme Court handed down two decisions with significant implications for employers facing liability arising from supervisor conduct and alleged retaliation. This client alert addresses the court’s rulings in Vance v. Ball State University and University of Texas Southwestern Medical Center v. Nassar and their impact on employer liability under Title VII.

Vance Narrows Definition of "Supervisor"

In Vance, the Supreme Court substantially narrowed the definition of supervisor for purposes of establishing vicarious liability under Title VII by holding that supervisor status is limited to those empowered to take tangible employment actions (such as hiring, firing and disciplining) against the employee.

The plaintiff, an African-American woman employed in the catering department at Ball State University, alleged that a fellow employee created a racially hostile work environment. Although the parties disputed the precise duties of the alleged harasser, they agreed that the alleged harasser did not have the power to hire, fire, demote, promote, transfer or discipline the plaintiff. The sole question before the Supreme Court was whether the alleged harasser was a "supervisor." If a supervisor harasses an employee, the employer is strictly liable when the harassment includes a tangible employment action (such as hiring, firing, failing to promote, or reassignment) with significantly different responsibilities so as to cause a significant change in benefits. Even where the supervisor does not take tangible employment action against the victim, an employer will be liable for the supervisor’s harassment unless the employer can establish (1) that the employer exercised reasonable care to prevent and correct any harassing behavior, and (2) that the plaintiff unreasonably failed to take advantage of the preventive or corrective opportunities that the employer provided. Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998). If, on the other hand, the harasser is a co-worker and not a supervisor, the employer is liable only if it was negligent in controlling working conditions.

In rejecting the "nebulous" definition advanced by the Equal Employment Opportunity Commission (EEOC) and the Second and Fourth Circuits that a supervisor is one who has "the ability to exercise significant direction over another’s daily work," the Supreme Court adopted the First, Seventh, and Eighth Circuits’ interpretation that a supervisor is an individual who has the authority to hire and fire the employee or take other tangible employment action. The court left open the possibility that a significant reassignment of job duties could constitute a tangible employment action if the reassignment had economic consequences.

As the Supreme Court previously explained in Ellerth, "When a supervisor makes a tangible employment decision, there is assurance the injury could not have been inflicted absent the agency relation...A tangible employment decision requires an official act of the enterprise, a company act." Therefore, a heightened level of liability is appropriate when the harasser has the ability to make tangible employment actions concerning the plaintiff, but not for the conduct of other co-workers whose actions are not official acts of the company.

Unlike the "highly case-specific evaluation of numerous factors" required by the EEOC’s loose definition, the tangible employment action distinction is "easily workable," and allows supervisory status to be readily determined, often by written documentation. The Supreme Court noted that litigants will be able to determine whether the alleged harasser was a supervisor or co-worker early in the litigation process, and this straightforward definition provides a bright-line rule to clarify the plaintiff’s prima facie case. For employers seeking to avoid vicarious liability for the actions of their supervisors, Vance provides an opportunity for employers to review supervisor job descriptions and ensure that only those with an authority to take tangible employment action are supervisors.

Nassar Requires "But-For" Causation in Title VII Retaliation Claims

In University of Texas Southwestern Medical Center v. Nassar, the Supreme Court held that in order to prove retaliation under Title VII, a plaintiff must establish "but-for" causation and cannot rely on the more lenient "motivating factor" standard. The 5-4 decision draws a distinction between Title VII claims regarding status-based discrimination and claims that an employer retaliated against an employee for opposing or making a claim against status-based discrimination.

In Nassar, the plaintiff complained that his superior discriminated against him because of his Middle Eastern ethnicity. He also alleged that his employer rescinded his offer of employment in another capacity in retaliation for his complaints about the discrimination.

In support of the "but-for" causation standard, the Supreme Court noted that Sec. 2000e-2(a) of Title VII prohibits discrimination against a person "because of such individual’s race, color, religion, sex, or national origin." It further observed that Sec. 2000e-3(a) of Title VII makes it unlawful for an employer to discriminate against an employee "because he has opposed any practice made an unlawful employment practice by [Title VII], or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter."

In Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), the Supreme Court held that a plaintiff could prevail on a claim of status-based discrimination (Sec. 2000e-2(a)) if the plaintiff could show that one of the five prohibited traits was a "motivating" or "substantial" factor in the employer’s allegedly discriminatory action. The Supreme Court also held that an employer could avoid liability entirely if it could prove that it would have taken the same action in the absence of any discriminatory motive (i.e., discrimination was not the but-for cause of the adverse employment action). Two years later, Congress amended Title VII in light of the Price Waterhouse decision by adding Sec. 2000e-2(m) to the end of the section prohibiting status-based discrimination, which adopted Price Waterhouse’s motivating factor causation, but did not modify the anti-retaliation subsection. Because Congress had the opportunity to add "motivating factor" causation to the anti-retaliation provision in 1991, the Supreme Court refused to find that Congress intended any causation other than "but-for" causation in cases of retaliation under Title VII. Like the ADEA, which prohibits discrimination "because of" a person’s age, Title VII’s anti-retaliation provision prohibits adverse employment actions "because" a person complained of discrimination. Therefore, the Supreme Court concluded that an employee asserting a Title VII retaliation claim must show that the retaliatory adverse employment action would not have occurred but for the employee’s protected charge or complaint.

The Supreme Court also noted a concern for a "fair and responsible allocation of resources in the judicial and litigation systems," reporting that the number of retaliation claims filed with EEOC has nearly doubled in the past 15 years. There are now more Title VII retaliation claims filed with the EEOC than any other type of status-based discrimination claim, except for racial discrimination. Lowering the causation standard could increase the number of frivolous claims and "siphon resources from efforts by employer[s], administrative agencies, and courts to combat workplace harassment." One potential impact of the court’s decision in Nassar may be the increase number of retaliation claims dismissed on summary judgment for failing to satisfy the clarified "but for" causation standard.