A recently decided Ninth Circuit Court of Appeals case, Craig v. M & O Agencies (August 9, 2007) provides an important reminder to employers that sexual harassment is still an issue in the workplace and employers must take care to respond appropriately once a claim has been made. Simply having a policy filed away in a handbook is not enough to avoid a trial on such claims.

The Craig Case

Eileen Craig was a branch manager directly reporting to Leon Byrd, the interim CEO of The Mahoney Group. Over the course of several months Byrd repeatedly made inappropriate comments about Craig's appearance which she simply ignored. However, one day he asked her to meet him for drinks after work (she thought to discuss work related matters) and proceeded to proposition her. She laughingly declined, but he followed her into the restroom, grabbed and kissed her. The incident ended when someone else came into the restroom. Craig quickly left the restaurant, but Byrd called her again at home that night, hanging up only when her husband answered. She did not report the incident at the time, but Byrd continued to pursue her, propositioning her several more times over the next few weeks.

Craig finally reported the conduct pursuant to the company's sexual harassment policy. The company took immediate action, instructing Byrd to stay away from her and assigning Craig to another supervisor. Outside counsel was brought in to perform an investigation after it was pointed out that the senior executive originally chosen to conduct the investigation had himself been previously investigated for sexual harassment. As a result of the investigation, Craig and her husband were offered counseling at the company's expense, Byrd was severely reprimanded and sent to sexual harassment training, and all of the other managers and supervisors likewise received sexual harassment training.

So far, so good. However, shortly thereafter, Craig was asked to report to Byrd again. He ignored her and made her job difficult to perform by withholding information from her. In addition, although the sexual harassment training for managers was conducted, Craig alleged that it was not taken seriously as the company's chairman came in and made an inappropriate joke. She also claimed that the investigator had failed to interview other individuals who she identified as victims of Byrd's inappropriate conduct. Craig claimed that due to the ineffective response of the company and Byrd's repeated comments she became emotionally distressed and had trouble sleeping. Eventually she resigned, and filed suit for sexual harassment under Title VII, as well as for other claims under state law.

The district court entered summary judgment for the employer without explaining its reasoning. The Ninth Circuit Court of Appeals reversed, stating that contrary to the company's position, the conduct Craig complained of was sufficiently severe or pervasive under a hostile environment sexual harassment theory that the case should be decided by a jury. The company also argued that the case should be dismissed based on the affirmative defense for employers articulated in Faragher v. City of Boca Raton. Under Faragher, the defense applies where no tangible adverse employment action is taken (such as firing or demotion) and the employer can show both 1) reasonable care on its part to prevent and correct sexual harassment, and 2) an unreasonable failure on the part of the employee to take advantage of the employer's preventive or corrective opportunities. The Ninth Circuit held that even if the company did act reasonably in its actions, the affirmative defense failed because the company could not show that the relatively short time Craig waited to report the conduct was unreasonable on her part. As a result, the claims were allowed to proceed to trial.

What are the lessons of the Craig case?

First, inappropriate conduct amounting to sexual harassment is unfortunately still occurring in workplaces despite efforts to educate employers and employees that it is a serious offense that can lead to significant liability for the employer and serious consequences for the harasser.

Second, every employer needs to have a sexual harassment policy. But a policy on paper is not enough. The policy and its enforcement need to be taken seriously and applied across the board from the chairman to the CEO to senior executives and on down the line. An investigation conducted after a complaint has been made must be fairly conducted, and whatever corrective steps are taken thereafter must be consistent with the investigation, and most importantly, effective. The employer has a duty to take the situation seriously, and follow up with the complainant to ensure that the conduct has ceased and no retaliation is occurring.

Finally, an employer cannot wait for an incident like this to happen before training its managers. As of December, 2005 California law requires employers with more than 50 employees to provide all supervisors with at least two hours of sexual harassment training every two years in order to be in compliance. For most employers, this means that a second sexual harassment training session should be conducted before the end of 2007.