We all know that employers have a legal obligation under federal law, as well as under various state and local laws, to provide their employees with a safe work environment free from sexual harassment, and that under certain circumstances, an employer can be held legally responsible for harassment directed at its employees. However, do companies have a legal obligation to protect their customers against sexual harassment perpetrated by their employees and supervisors? This was the issue recently considered by the United States Court of Appeals for the Third Circuit in Yucis v. Sears Outlet Stores, LLC.

In Yucis, a female customer, Elisabeth Yucis, visited a Sears Outlet store to shop for a refrigerator. While at the store, she was allegedly subjected to harassing and inappropriate comments by one of the store’s male sales manager. For example, the manager allegedly asked her “What is a pretty girl like you doing in a place like this?, and when she tried to show him a photo of the type of refrigerator she wanted, he suggestively asked “Are there photos on there that I’m not supposed to see?” When she indicated she was uncomfortable with his comments, the manager allegedly said, “I am married and so are you, I am just having fun,” and as she tried to end the encounter, the male supervisor gave her his business card and said, “Text me later if you feel lonely.” Unsurprisingly, Ms. Yucis found these comments unwelcome, and that they made her feel degraded.

After the incident, Ms. Yucis complained to Sears’ corporate relations about the situation, but she was dissatisfied with the company’s response.  Accordingly, she sued Sears Outlet Stores LLC under the public accommodation provisions of New Jersey’s Law Against Discrimination (“LAD”), claiming she was subject to unlawful sexual harassment while shopping at their store, and that Sears Outlet, as the perpetrator’s employer, was liable for its employee’s harassing behavior of customers. (She did not sue the sales manager directly.) The trial court dismissed the action for failure to state a claim, finding that Ms. Yucis had not alleged facts that would support Sears Outlet’s vicarious liability for the harassment. She appealed, seeking both monetary and equitable relief. In its June 1, 2020 opinion, the Third Circuit affirmed, holding that Sears Outlet was not liable for the manager’s sexual harassment because Yucis was unable to show that the harasser acted within the scope of his employment when he engaged in the complained-of behavior.

Employers are not always strictly liable for harassment committed by their employees. Rather, the issue of liability is often dependent on the type of relief sought by the plaintiff. If the plaintiff seeks equitable relief—such as reinstatement or discipline of the harasser—then the employer is strictly liable because the employer is the party that has the power to provide such relief. However, for cases involving compensatory damages, the analysis of whether an employer is strictly liable for the harassment committed by its employees is governed by agency principles. Ms. Yucis argued that these principles do not apply in the context of public accommodations, and an employer is always strictly liable for an employee’s harassment of customers. The court however rejected this proposition and after analyzing New Jersey state case law, determined that agency principles should apply in public accommodations harassment cases under the LAD.

Even still, Ms. Yucis argued that her case satisfied the vicarious liability standard. To establish vicarious liability in a sexual harassment case under agency principles, the plaintiff must satisfy any of the following five tests:

• the employee was “acting in the scope of [his] employment;”

• the employer “intended the conduct or the consequences;”

• the employer “was negligent or reckless;”

• the employee’s “conduct violated a non-delegable duty of the [employer];” or

• the employee “purported to act or to speak on behalf of the [employer] and there was reliance upon apparent authority, or he was aided in accomplishing the [illegal act] by the existence of the [employment] relation.”

Here, the Third Circuit held that Ms. Yucis’ allegations did not satisfy any of these tests. First, the court found that the sales manager was not acting within the scope of his employments when he was harassing Ms. Yucis. Notably, the dissenting judge believed that a jury could find the manager’s sexual advances were part of his “sales strategy to flirt with or flatter Yucis in order to make a sale” and therefore were carried out within the scope of his employment. However, the majority did not subscribe to this theory and found that the manager was not in fact acting within the scope of his employment when he perpetrated the harassment, pointing in part to his statement that he was “just having fun” which, to the court, implied personal motives.  The court also determined that the second, third, and fourth tests were not applicable to Ms. Yucis’s situation.

Ms. Yucis argued that the fifth test applied to her circumstances, arguing that an employee is aided by his employment when harassing a customer because he would not have interacted with that customer but for his employment.  The court rejected this argument as well, explaining that for an employee to be aided by his employment in committing a wrongful act, he must have taken advantage of some special mechanism or authority afforded to him by his employment. For example, courts have held that a hotel employee was “aided by his employment” in sexually assaulting a hotel guest where he had access to the guest’s room key because of his employment. Similarly, a sheriff deputy was “aided by his employment” in coercing a civilian into a sexual act because the deputy’s position gave him “unique access to a citizen who is depending upon the law enforcement officer for protection.” Because Ms. Yucis did not allege any facts suggesting that the store manager’s harassment was enabled by a mechanism he obtained through his employment or that his position as a sales manager afforded him any special authority over her, the Third Circuit refused to find vicarious liability. The court also dismissed Ms. Yucis’s equitable claim, finding that she lacked the requisite standing.

In this post-“Me Too” world, sexual harassment of employees is top-of-mind to many employers, but this case serves as a good reminder that sexual harassment allegations can come in many forms. Although this case demonstrates that employers will not always be liable for sexual harassment committed by its employees against customers, employers should still strive to eradicate sexual harassment of all kinds in the work environment and should make sure that their anti-sexual harassment policies and expectations are clearly written and sufficiently articulated to employees. Further, employers should consider implementing sexual harassment training for all employees, and should remember that in some states, such as New York, California, and Illinois, sexual harassment training is mandatory for certain employers.