Title VII of the Civil Rights Act of 1964 protects employees from workplace harassment. As most employers know, these protections apply not only to behavior by co-workers and supervisors but also to harassment by customers, vendors, and other third parties. Earlier this month, the Seventh Circuit Court of Appeals affirmed a $250,000 jury verdict against Costco based on claims by an employee that the company did not appropriately react to a customer who was stalking her.

In EEOC v. Costco Wholesale Corp., the employee alleged that over the course of a year, she was continuously approached by a customer who would compliment her, ask about her personal life, and attempt to obtain her telephone number. She claimed that she reported the incidents and her discomfort with the situation to her supervisors, who responded by telling her to be friendly but to try to avoid the customer. She eventually obtained a civil no-contact order against the customer and took unpaid leave as a result of the stalking. Costco finally banned the customer from the store, but the EEOC sued on the employee’s behalf, alleging hostile environment sexual harassment.

After the jury verdict, Costco appealed to the Seventh Circuit on the basis that the customer’s conduct was not severe and pervasive enough to make the employee’s work environment hostile. The employer argued that the approaches, while unwelcomed, were not vulgar or directly sexual in nature. The court disagreed, noting that a hostile work environment can include behavior that demeans or terrifies the victim based on her sex, even in the absence of overtly sexual conduct. In this case, the fact that a state court deemed the customer’s behavior sufficient to issue a no-contact order demonstrated the severe and pervasive nature of the conduct.

Employers should treat complaints about customer or vendor conduct in the same manner as allegations made against another employee. The company should investigate, and if necessary, take steps to make certain that the employee is not subjected to future conduct from that third party. Many employers find it difficult to raise these issues with customers, but failure to take prompt action can result in an expensive legal claim.