Identifying Employers' 'Proxies' in Sexual-Harassment Litigation

Identifying Employers’ “Proxies” in Sexual-Harassment Litigation Curtis J. Bankers  ABSTRACT: The Supreme Court’s companion decisions of Burlington Industries, Inc. v. Ellerth and Faragher v. City of Boca Raton represent the modern framework governing employer liability in sexual-harassment suits. The opinions organize the basic rules for employer liability, its affirmative defense, and unique situations where the affirmative defense is unavailable. An employer’s affirmative defense is unavailable when the harasser is a “proxy” of the employer. But who constitutes a proxy? The Supreme Court has provided little guidance on who constitutes a proxy, and the federal circuit courts have struggled to apply the existing doctrine with much consistency. This Note proposes that the courts utilize a suggestion from Ellerth that has gone ignored: the courts should use the concept of corporate intent as a yardstick for identifying proxies. Specifically, the courts should find that proxies are those who have the capability to impute intent to an employer by making policy for the employer. The courts should empirically locate those policy-making capabilities by looking to employers’ “Corporate Internal Decision Structures.” This approach shows fidelity to the Court’s jurisprudence, provides for a more objective and flexible standard for identifying proxies, and does not suffer from the problems that plague some alternative methods. I. INTRODUCTION .................................................................................... 1786 II. THE DEVELOPMENT OF THE SUPREME COURT’S EMPLOYER-LIABILITY JURISPRUDENCE AND THE RISE OF PROXY LIABILITY ............................ 1788 A. T ITLE VII AND MERITOR SAVINGS BANK V. VINSON ...................... 1788 B. B ASELINE E MPLOYER L IABILITY U NDER ELLERTH AND FARAGHER .. 1790 C. E MPLOYERS ’ A FFIRMATIVE D EFENSE U NDER ELLERTH AND FARAGHER .................................................................................... 1791  J.D. Candidate, The University of Iowa College of Law, 2014; B.A., Creighton University, 2010. I have many people to thank: the members of the Iowa Law Review for their friendship and editorial assistance; Jean Bender for helping me discover this topic; and Laura and my family for their unending support. All errors are my own. 1786 IOWA LAW REVIEW [Vol. 99:1785 D. I NDEFENSIBLE H ARASSMENT U NDER ELLERTH AND FARAGHER: P ROXY L IABILITY ........................................................................... 1792 III. SEARCHING FOR A PROXY-LIABILITY STANDARD ................................... 1794 A. FARAGHER ’ S C ASE L AW F OUNDATION ............................................. 1794 B. C IRCUIT C ONFUSION : T HE P ROLIFERATION OF F ACTORS FOR I DENTIFYING P ROXIES ..................................................................... 1796 1. The Tenth Circuit ................................................................ 1796 2. Consistently Inconsistent: Other Circuits Apply Other Factors ................................................................................... 1800 IV. E LLERTH ’S HIDDEN INSTRUCTIONS: USING CORPORATE INTENT TO IDENTIFY PROXIES ................................................................................ 1801 A. ELLERTH P OINTS THE W AY : T HE RESTATEMENT (SECOND) OF AGENCY § 219(2)( A ) AND C ORPORATE I NTENT ............................... 1801 B. T HE P OLICYMAKER S TANDARD ....................................................... 1804 C. A TTRIBUTES OF THE P OLICYMAKER S TANDARD ................................ 1807 1. Fidelity to Ellerth , Faragher , and Subsequent Case Law ...... 1807 2. Flexibility & Objectivity ........................................................ 1810 3. Inferior Alternative Theories .............................................. 1811 a. The Status Quo Alternative .......................................... 1811 b. Target Alternatives ........................................................ 1811 c. Corporate Intent Alternatives ..................................... 1812 V. CONCLUSION ....................................................................................... 1815 I. INTRODUCTION The Supreme Court’s companion decisions of Burlington Industries, Inc. v. Ellerth 1 and Faragher v. City of Boca Raton 2 (collectively “ Ellerth / Faragher ”) represent the modern framework governing employer liability in sexual-harassment suits. 3 These opinions establish the rule that “[a]n employer is subject to vicarious liability to a victimized employee for an actionable hostile environment created by a supervisor with immediate (or successively higher) authority over the employee.” 4 To emphasize, employer liability is 1. Burlington Indus., Inc. v. Ellerth, 524 U.S. 742 (1998). 2. Faragher v. City of Boca Raton, 524 U.S. 775 (1998). 3. See BARBARA T. LINDEMANN & DAVID D. KADUE, WORKPLACE HARASSMENT LAW 1-21 (2012) (“ Ellerth and Faragher , though factually dissimilar, gave the Court an opportunity to articulate a unified jurisprudence of employer liability for harassment.” (footnote omitted)). Since Ellerth / Faragher , the Supreme Court has examined other aspects of Title VII cases, such as punitive damages, retaliation claims, and constructive discharge claims, but has not altered the fundamental framework of Ellerth and Faragher . See id. at 1-29 to -47. 4. Faragher , 524 U.S. at 777; Ellerth , 524 U.S. at 765. 2014] IDENTIFYING EMPLOYERS’ “PROXIES” 1787 limited to situations of supervisor harassment. 5 Ellerth and Faragher also created an affirmative defense that employers may use to protect themselves from such liability. 6 But the affirmative defense does not provide protection to employers in certain circumstances. 7 This Note is about one of those situations. This Note is concerned with harassment cases where the harassing supervisor is the employer’s “proxy” or “alter ego.” 8 When a proxy or alter ego harasses a subordinate, the employer is liable for the harassment and may not use the Faragher / Ellerth affirmative defense. This Note adopts the phrase “proxy liability” to refer to situations in which this fact pattern occurs. 9 This is a particularly unclear area of employer liability because the definition of proxy is quite nebulous. To paraphrase the current state of proxy-liability jurisprudence, a proxy is someone very high up in the employer’s organization. But how senior must an employee be to count as a proxy? Unfortunately, the federal circuits have struggled to apply a consistent proxy-liability standard, 10 and the Supreme Court has not provided clear guidance to resolve the circuits’ troubles. 11 Likewise, 5. Ellerth , 524 U.S. at 764. There could be rare cases of peer-on-peer (co-worker) harassment, leading to employer liability. Id. at 759 (“If, in the unusual case, it is alleged there is a false impression that the [harasser] was a supervisor, when he in fact was not , the victim’s mistaken conclusion must be a reasonable one.” (emphasis added)). 6. Faragher , 524 U.S. at 807; Ellerth , 524 U.S. at 765. 7. Faragher , 524 U.S. at 808 (“No affirmative defense is available, however, when the supervisor’s harassment culminates in a tangible employment action, such as discharge, demotion, or undesirable reassignment.”); Ellerth , 524 U.S. at 765; see also infra note 36 (discussing tangible employment actions). 8. This Note uses the terms “proxy” and “alter ego” as synonyms. See LINDEMANN & KADUE, supra note 3, at 22-2 n.6 (“The two terms seem for all practical purposes to be synonymous.”). 9. This Note adopts the phrase “proxy liability” in the face of terminological uncertainty. This uncertainty is due to the fact that commentators and courts do not present a consensus as to whether or not proxy harassment constitutes an exception to the affirmative defense or if it entails automatic liability for which the affirmative defense is unavailable. Compare Townsend v. Benjamin Enters., Inc., 679 F.3d 41, 52 (2d Cir. 2012) (“Every Court of Appeals to have considered this issue has held that the . . . affirmative defense is unavailable when the supervisor in question is the employer’s proxy or alter ego.” (emphasis added)), with Johnson v. West, 218 F.3d 725, 730 (7th Cir. 2000) (“ Vicarious liability automatically applies when the harassing supervisor is [the organization’s proxy].” (emphasis added) (citing Faragher , 524 U.S. at 789)). Notwithstanding the fine conceptual distinction, the practical effect of proxy harassment is liability for the employer. This Note does not attempt to resolve this definitional confusion. 10. See infra Part III.B. Also, this Note uses the phrase “proxy-liability standard” as shorthand for “identifying proxies;” thus, the phrase “lack of a standard for proxy liability” is equivalent to the phrase “lack of a standard for identifying proxies.” 11. See Mallinson-Montague v. Pocrnick, 224 F.3d 1224, 1232 (10th Cir. 2000) (noting “the absolute scarcity of case law development of this alternate avenue of employer liability”). 1788 IOWA LAW REVIEW [Vol. 99:1785 academics 12 and the Equal Employment Opportunity Commission (“EEOC”) 13 have yet to provide a solution. This Note proposes that all courts adopt the following test for identifying employers’ proxies: a proxy, for purposes of Title VII sexual-harassment suits, is an individual capable of creating “corporate intent” for the employer, where corporate intent is shown by the actions and statements of the firm’s directors and employees who are in positions of authority to make policy for the corporation (the “policymaker standard”). Part II provides a brief overview of the development of the Supreme Court’s Title VII employer-liability jurisprudence, including the emergence of proxy liability. Part III examines Faragher ’s sparse proxy-liability guidance and the federal circuits’ subsequent struggles to apply a consistent, coherent proxy-liability standard. Part IV explains that Ellerth provides...