Sexual Harassment
The California Supreme Court Holds that Damages Cannot Include "Avoidable Consequences" of a Victim's Failure to Properly Complain

On November 24, the California Supreme Court issued a long-awaited decision in an important sexual harassment case. The case, State Department of Health Services v. Superior Court of Sacramento County, struck a compromise between employers and sexual harassment victims.

The victory for victims was that the Court upheld strict liability -- that is, liability regardless of fault or lack thereof -- for employers whose supervisors sexually harass their subordinates.

The victory for employers, however, was that the Court also stated that the common law doctrine of avoidable consequences applies in this context. Thus, if a victim -- by complaining earlier -- could have prevented some (or even all) of the harassment she suffered, then employers may argue that the damages awarded to the victim should be diminished, or even zeroed out.

The case before the California Supreme Court began when Theresa McGinnis sue her employer, the California Department of Health Services (DHS). She alleged that her supervisor, Cary Hall, had verbally and physically harassed her throughout a nearly two-year period.

According to McGinnis's complaint and her deposition testimony, Hall made inappropriate comments, groped her, and told her during a meeting in his office that he would overlook her attendance problems if she let him grab her crotch--which he then allegedly proceeded to do.

The harassment allegedly began early in 1996. However, it was not until November 1997 that McGinnis complained to management. (She had told a coworker of the incidents earlier.) When she did complain, her employer investigated, and ultimately initiated disciplinary action against Hall.

To understand the complex legal proceedings that followed, it's important first to understand the difference between Title VII -- the main federal antidiscrimination statute -- and California's Fair Employment and Housing Act (FEHA).

Title VII and FEHA both broadly prohibit employers from discriminating against employees on the basis of protected characteristics like race and sex. But in other respects, they are somewhat different from each other.

First, Title VII, does not explicitly mention sexual harassment. The Supreme Court made clear, however, in its landmark 1986 decision in Meritor Savings Bank v. Vinson that Title VII prohibits sexual harassment, for it is a form of illegal sex discrimination.

In contrast, FEHA specifically defines an "unlawful employment practice" to include sexual harassment of an employee. It also imposes an affirmative duty on employers to take "all reasonable steps necessary to prevent discrimination and harassment from occurring." In addition, it mandates that the employer must distribute informational materials to employees about sexual harassment law and company procedures.

FEHA also addresses the proper standard of liability for harassment, which turns on the identity of the harasser. First, suppose the harasser is not an "agent or supervisor" -- for instance, he is a coworker or third party. Then, under FEHA, an employer is liable only if it was negligent -- that is, it knew or should have known about the harassment but failed to take immediate and appropriate corrective action.

Alternatively, suppose the harasser is a supervisor: Precedents of the California Supreme Court and intermediate appellate courts make clear that liability is strict -- that is, automatic.

In the McGinnis case, the California Supreme Court explained one way in which the contrast between the two statutes is significant: An affirmative defense that employers can use against a Title VII claim of sexual harassment, won't work against a similar FEHA claim.

In 1998, in Faragher v. City of Boca Raton and Burlington Industries v. Ellerth, the U.S. Supreme Court explained how the Title VII affirmative defense works. Suppose a supervisor is the harasser. And suppose the type of harassment is "hostile environment" harassment. Then the employer can avoid paying damages (and perhaps avoid a finding of liability, depending on how the defense is interpreted) if it makes two showings. First, it must show that it took reasonable care to prevent and correct harassment. Second, it must show that the victim unreasonably failed to take advantage of corrective opportunities -- such as internal company harassment complaint procedures.

But according to the California Supreme Court, FEHA doesn't work that way. It made clear that under FEHA, liability is truly automatic. Once actionable harassment of a supervisor by a subordinate is shown, that's it: The employer is liable.

But liable for how much? The Court also made clear that, under FEHA, a "plaintiff's recoverable damages do not include those damages that the plaintiff could have avoided with reasonable effort and without undue risk, expense, or humiliation."

The "undue risk, expense, or humiliation" language is especially important. In using these words, the California Supreme Court displays sensitivity to the experience of sexual harassment victims. Filing a formal complaint against one's supervisor is not an unencumbered, mechanical act. It is emotional, complicated, and, very often, the precipitating cause of further harassment or retaliation.

The upshot of the Court's decision, then, is that if the employer can show that some -- or all -- of the damages the plaintiff seeks were "avoidable consequences" of her own behavior, it can limit -- or even zero out -- the damages it must pay. But on the other hand, a plaintiff need not undergo "undue risk, expense or humiliation" to avoid those harms.

The "avoidable consequences" doctrine is familiar to tort and contract lawyers. A car accident victim may not be able to recover for medical complications that could have been avoided had he sought prompt medical care. A buyer who fails to make reasonable efforts to resell an item he's stuck with, as a result of a breached contract, cannot recover the full contract price from the breaching buyer.

But the California Supreme Court had to consider whether this doctrine also applied in the context of a FEHA suit where the victim doesn't complain -- or doesn't complain promptly enough -- and thus suffers harassment that intervention by her employer, had she complained, would have prevented. After a careful examination of FEHA, it said yes.

As a result, it held that an employer may invoke the "avoidable consequences" defense. But it also spelled out some important limitations on the defense.

To prevail in invoking the FEHA defense, the employer must make three showings.

First, it must show that it took reasonable steps to prevent and correct workplace harassment. Second, it must show that the employee unreasonably failed to use the preventive and corrective measures that the employer provided.

These, of course, are the same two showings that a Title VII employer must make to avoid liability or damages -- according to Faragher and Ellerth, the two Supreme Court decisions cited above.

But don't be misled: There are crucial differences between the Title VII defense, and the FEHA defense. And that's not just because FEHA, unlike Title VII, requires the employer to make a third showing -- the showing that reasonable use of the employer's procedures would have prevented at least some of the harm that the employee suffered.

This third showing properly reminds courts to focus on whether the internal procedures would have worked--rather than just blindly rewarding employers who have them in existence. In deciding if an employer has made this third showing, the trial court may ask, for example, "Does the employer have a policy against retaliation for complaints, and is it strong enough?" "Does the employer keep employee complaints confidential?" and "Has the employer 'consistently and firmly' enforced the policy in the past?"

Any "no" answers to these questions may mean the defense won't work. Thus, under FEHA, employers that have policies that work better on paper than in the real world will remain vulnerable. In contrast, under Title VII, employers may find it easier to hide behind paper tiger policies that, in reality, have neither teeth nor claws.

How are the FEHA and Title VII defenses different?

One difference may sound technical, but is actually very significant. Under FEHA, the employer cannot avoid liability; it can only reduce damages. But under Title VII, the employer can, depending on the jurisdiction, avoid liability entirely.

Why does that matter? For several reasons.

First, suppose an employee is severely harassed -- even raped -- at the outset, but does not promptly complain. Subsequently, she is harassed again. Under FEHA, she can recover damages for the rape from her employer. Under Title VII, she may not be able to -- due to a set of lower federal court decisions I discussed in a prior column on sudden, severe harassment. (Under both statutes, she may have trouble recovering for the subsequent harassment.)

Second, a finding of liability is significant even when it is accompanied by small, or even no, damages. A FEHA plaintiff could receive such a finding under circumstances when a Title VII plaintiff might not. And such a finding can, under other applicable rules, make the plaintiff a "prevailing party" entitled to attorney's fees and costs. And that's important -- since such fees-and-costs awards encourage plaintiffs sue to enforce antidiscrimination laws, encourage lawyers to take these cases, and could encourage employers to address a hostile environment that might affect other victims in the future.

Finally, and somewhat more subtly, it's important to note that while the first two prongs of the FEHA showing are phrased very similarly to the (only) two prongs of the Title VII showing, they are likely to be interpreted differently.

Again, the two showings are these: First, the employer must show that it took reasonable steps to prevent and correct workplace harassment. Second, it must show that the employee unreasonably failed to use the preventive and corrective measures that the employer provided. But the California Supreme Court's explanation of how these prongs are to be applied is different from the way the federal affirmative defense has played out.

The California explicitly recognized that FEHA has two goals: to prevent harm and to compensate victims. The federal Supreme Court, in contrast, has overemphasized prevention in recent cases, and failed to consider the effects of its rules on the ability of victims to obtain adequate compensation.

In federal court, in Title VII cases, employers can avoid liability when the victim delays briefly -- even for a single week -- before she complains. And if the victim never complains, the employer will almost always prevail -- no matter how good the victim's reason for not complaining might be, such as fear of retaliation or trauma from the harassment itself.

In reality, scads of social science research shows victims rarely complain about harassment and, when they do, it is only after attempting less confrontational methods first. So if non-complaining victims can never win, that may mean that the majority -- perhaps even the overwhelming majority -- of victims can never obtain compensation despite having suffered actionable harassment.

One would think that wasn't what Congress intended when it passed Title VII. Yet that is the consequence of a spate of federal court decisions interpreting the statute.

Fortunately, the McGinnis court interpreting FEHA, in contrast, suggests a greater willingness to allow compensation for reasonable delay by victims in complaining. It made clear that the reasonableness of the victim's behavior cannot be determined in a vacuum.

And that means, in turn, that most California sex harassment victims may be able to raise the kind of fact issues that will allow them to avoid summary judgment, and go to trial. Indeed, the court indicated that the "unreasonable delay" prong will "in many and perhaps most instances present disputed factual issues." That's a signal to trial courts to send a case that turns on the delay issue to trial, rather than to resolve it on summary judgment. And that's only right: "Reasonableness" is a classic jury issue.

The California Supreme Court clearly contemplates that some reasonable employees may delay complaining for some period of time -- a truth that, again, reflects real life experience. Thus, the Court directed lower California courts to consider when a reasonable employee would have reported the harassment or not. And it also cautioned that if a victim delays because she is trying to resolve the harassment in some other way than availing herself of the complaint procedure, then that delay "will have to be carefully evaluated."

The sensitivity and subtlety of the California Supreme Court's approach to FEHA puts to shame the lower federal courts who, in interpreting Title VII, have shut the door on victims, often for bad reasons. The California Court's approach, as noted above, reasonably allows compensation for victims of sudden, severe harassment, and victims who reasonably delay in complaining. The federal courts' approach often is unnecessarily and improperly harsh.

Some of these lower federal court decisions misinterpret U.S. Supreme Court precedent. There is evidence that, in the key precedents of Faragher and Ellerth, the Court intended a very different approach. That approach would have compensated sudden, severe harassment and other harassment that neither employer nor victim could realistically have prevented.

One could still argue that employers should be absolutely liable--subject to no defenses--for supervisory harassment, since they are in the position to screen, train, and monitor the individuals in whom they vest great power. But short of that, the California approach is a better road than that taken under Title VII.