Equal Employment Opportunity Commission v. Management Hospitality of Racine, Inc.
666 F.3d 422 (2012)
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Rule of Law:
An employer is not entitled to the Faragher/Ellerth affirmative defense to a supervisor's sexual harassment if its anti-harassment policy is ineffective in practice. A policy is considered ineffective when managers consistently fail to act on complaints and the complaint mechanism does not provide a clear, accessible path for employees to report misconduct.
Facts:
- Teenage servers Katrina Shisler and Michelle Powell worked at an IHOP franchise owned by Salauddin Janmohammed and operated by Management Hospitality of Racine, Inc. (MHR).
- A related company, Flipmeastack, created and implemented a sexual harassment policy for MHR.
- Shisler and Powell were required to watch a training video and sign the policy, which was then locked in a file cabinet and did not specify a contact person for complaints.
- An assistant manager, Rosalio Gutierrez, subjected both Shisler and Powell to severe and pervasive sexual harassment, including sexually explicit propositions, unwanted physical contact, and constant offensive comments.
- Shisler reported Gutierrez's conduct to another assistant manager, Nadia Del Rio, who dismissed her concerns, calling her and other complaining servers 'silly girls'.
- Shisler subsequently reported the harassment to the general manager, Michelle Dahl, who told her it was 'none of [her] concern'.
- Powell also complained to Dahl on multiple occasions. Dahl first promised to 'take care of it' but did nothing, and later cut Powell off, stating she 'didn't need to hear it'.
- Following her complaints, Dahl terminated Shisler, citing a violation of the restaurant's coupon policy.
Procedural Posture:
- The Equal Employment Opportunity Commission (EEOC) sued Management Hospitality of Racine, Inc. (MHR), Flipmeastack, Inc., and Salauddin Janmohammed in federal district court on behalf of servers Katrina Shisler and Michelle Powell.
- The case proceeded to a jury trial on claims of hostile work environment and retaliation.
- The jury found for Shisler and Powell on the hostile work environment claim, awarding them compensatory damages and awarding Powell punitive damages.
- Defendants filed a post-trial motion for judgment as a matter of law or, alternatively, for a new trial or remittitur.
- The EEOC filed post-trial motions seeking to hold all defendants jointly liable and to obtain an injunction.
- The district court denied the defendants' motions, granted the EEOC's motions, and entered judgment against all defendants.
- The defendants (appellants) appealed the district court's judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does an employer establish the Faragher/Ellerth affirmative defense to a supervisor's sexual harassment when its anti-harassment policy, though formally in place, is rendered ineffective in practice by managers who fail to act on complaints and by a complaint procedure that is unclear and inaccessible to employees?
Opinions:
Majority - Young, District Judge
No. An employer fails to establish the Faragher/Ellerth affirmative defense when its sexual harassment policy, while existing on paper, is illusory and ineffective in practice. The court affirmed the jury's finding that the defendants were liable for the hostile work environment. A rational jury could conclude that the harassment was severe and pervasive. More importantly, the jury could reasonably reject the defendants' Faragher/Ellerth affirmative defense. The first prong of the defense—that the employer exercised reasonable care to prevent and correct harassment—was not met because the policy was ineffective in practice. Multiple managers, including Dahl and Del Rio, were aware of the harassment but failed to take any action, demonstrating that the policy's protections were 'illusory.' The training was inadequate, and the investigation by district manager Steve Smith was not prompt, occurring only after a private investigator became involved. The second prong—that the employees unreasonably failed to use the complaint procedure—was also not met. Shisler and Powell followed the policy by reporting the harassment to their managers, who were designated 'company representatives,' and their failure to go over their managers' heads to Smith was not unreasonable given the circumstances.
Analysis:
This case clarifies the practical requirements of the Faragher/Ellerth affirmative defense, establishing that a mere 'paper policy' against harassment is insufficient. The ruling emphasizes that the effectiveness of a policy is judged by its implementation, not just its existence. For the defense to succeed, employers must ensure that managers are properly trained to take all complaints seriously and act on them promptly, and that the complaint procedures are clear and accessible to all employees, including vulnerable workers like teenagers. This decision signals to lower courts that juries have significant leeway to find a policy ineffective when faced with evidence of managerial indifference, thereby preventing employers from using a dysfunctional policy as a shield against liability.
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