Are You Liable for Your Employees' Bad Actions?

Say you have a manager who can't keep his hands to himself. One woman gets fed up and sues for sexual harassment. Who would a court hold liable?

You'd think it would be the jerk with the roaming hands who didn't get the memo about treating women with respect. You'd think wrong.

For the past 20 years, courts have ruled that Title VII of the Civil Rights Act, which prohibits discrimination against employees because of sex, includes sexual harassment. But just who is legally responsible in these cases? The statute in question makes it illegal for an employer--"a person engaged in commerce with 15 or more employees" and "any agent of such a person"--to engage in discrimination and sexual harassment. So can your company get off the hook by claiming that the perpetrator, though an agent of the company, is the only one responsible?

The answer is no. While the U.S. Supreme Court has never ruled on this issue, the majority of the federal appellate circuits have ruled that the individual supervisor is not personally liable.

That doesn't mean you have to keep a harasser on your work force. In many cases, courts treat employers more leniently if they educate their supervisors about what sexual harassment is, establish a culture where it isn't tolerated and, when someone reports it, take prompt action.

Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.

This article was originally published in the August 2005 print edition of Entrepreneur with the headline: Fault Lines.