In its 1998 opinions in Faragher v. Boca Raton and Burlington Industries v. Ellerth, the Supreme Court held that harassment by a supervisor can result in liability against an employer, but that an employer would only be liable for harassment by a non-supervisory employee if it knew or should have known of the harassment and was negligent in failing to correct it. It has remained unclear, however, exactly who is a supervisor for purposes of vicarious harassment liability under Title VII. The First, Seventh and Eighth Circuits have held that an individual is a supervisor for purposes of harassment liability only if he/she has been given the authority to take tangible employment actions – to hire, fire, demote, transfer or discipline – against the victim of harassment. The Second, Fourth and Ninth Circuits have adopted the definition set forth by the EEOC in its Enforcement Guidance where it defines supervisory status by the ability to exercise significant direction of an employee’s work activities irrespective of the power to take substantial or tangible employment actions. The Supreme Court’s opinion this week in Vance v. Ball State University resolves that split by making clear that Title VII imposes vicarious liability on the employer only for the harassment by a member of management who has been given the power by the employer to significantly impact the employment of a subordinate victim.

In Vance, Plaintiff Maetta Vance complained on a number of occasions to the University that she had been subjected to racial harassment by Saundra Davis, who she claimed was her supervisor, as well as by a number of co-workers and other supervisors. The University investigated each complaint and imposed discipline when it found the complaint had merit. Nevertheless, Vance filed charges with the EEOC and ultimately initiated a Title VII action for race harassment and hostile environment discrimination in the United States District Court for the Southern District of Indiana. The district court granted the employer’s motion for summary judgment based on its finding that the University was not strictly liable for the alleged harassment by Davis because Davis was not Vance’s supervisor, and that the University was not liable under a negligence theory because it acted promptly to investigate and resolve the complaints filed by Vance.

The Seventh Circuit Court of Appeals affirmed. The Appeals Court determined that summary judgment was warranted in part because Vance had failed to establish a basis to impose liability against the employer. In this respect, the court found that Davis was not a supervisor under Title VII because she did not have the power to take tangible employment actions, i.e., Davis had no authority to hire, fire, promote, demote or discipline Vance. The court rejected the argument by Vance that Davis was a supervisor merely because she told Vance what to do and refused to adopt the definition of supervisor advanced by the EEOC that it was sufficient under Title VII if the supervisor directed the day-to-day activities of an employee even without authority to take significant or tangible employment actions.

In a 5-4 decision written by Justice Samuel Alito, the Supreme Court affirmed. The Court resolved the split among the circuits by refusing to defer to the expertise of the EEOC, and by rejecting the Agency’s vague and “nebulous” definition of supervisor in favor of a bright line standard which could easily be applied by the parties and courts to establish the status of an alleged harasser. The majority determined that it was appropriate to focus on the framework established in Faragher and Ellerth – that employers will be vicariously and strictly liable for harassment by a supervisor which results in a tangible adverse action such as a significant change in the victim’s employment status – in order to understand and determine the proper definition of a supervisor in the context of a claim for harassment under Title VII. Applying the Faragher and Ellerth analysis, the Court found that the defining characteristic of a supervisor in such a case is the power to cause “direct economic harm” by virtue of “the authority to effect a tangible change in a victim’s terms and conditions of employment.” Accordingly, the Court held that to be a supervisor for purposes of imposing vicarious liability in a Title VII harassment case, a person must have the power to make a “significant change” in the working status of the alleged victim, such as the ability to hire, fire, promote, demote, discipline or impose “significantly different responsibilities” on the employee.

The dissent, written by Justice Ruth Bader Ginsburg, argued that the majority opinion ignores the workplace reality where the power to control work assignments – no less than the power to fire or discipline – is used as an intimidating factor to aid in the harassment of a subordinate. Justice Ginsburg would have deferred to the informed expertise of the EEOC, and suggested that the majority opinion will allow employers to escape liability for the harassment of their employees and undermine the effort “to stamp out discrimination in the workplace.”

The Vance opinion will not only have a significant impact on how harassment cases are approached in litigation, but will also promote the use of internal complaint procedures by forcing employees to report incidents of harassment by co-workers, and by encouraging employers to investigate and resolve such complaints in order to avoid liability in court. Not surprisingly, the opinion has been lauded by defense counsel for bringing clarity to a significant issue of importance and as a victory for employers. The General Counsel of the EEOC, however, has expressed his disappointment in the ruling and in the Court’s failure to defer to the Agency’s long standing interpretation of the law, and employee organizations have parroted the concern expressed in the dissenting opinion that the standard adopted by the Court will make it harder for victims to hold their employers accountable for harassment in the workplace. However, as noted by Justice Alito, there has been no indication from any of the 14 states which comprise the First, Seventh and Eighth Circuits – which have long applied the test adopted by the Court – to support that fear.