By Eric J. Janson and Richard Sloane

On April 26, 2011, in EEOC v. Xerxes Corporation, No. 10-1156 (4th Cir. April 26, 2011), the U. S. Court of Appeals for the Fourth Circuit emphasized the importance of responsiveness and, where appropriate, prompt remedial action by employers in addressing allegations of harassment by co-workers.  In a unanimous opinion (with two concurring opinions), the Fourth Circuit affirmed in part, vacated in part, and remanded the District Court’s grant of summary judgment in favor of the employer.

Xerxes is a fiberglass tank manufacturer based in Minneapolis, Minnesota.  In July 2008, the EEOC filed a lawsuit on behalf of three current or former African-American employees of Xerxes’ manufacturing plant in Williamsport, Maryland.  The complaint alleged a hostile work environment on the basis of race in violation of Title VII of the Civil Rights Act of 1964.  Specifically, the complaint asserted that the employees were the targets of racial slurs and racially derogatory comments, pranks and practical jokes, and threatening notes from their co-workers.  The alleged harassment included name-calling such as “Black Polack,” “Buckwheat,” and “boy;” White co-workers’ frequent used of the N-word; and the discovery of a note (delivered on a piece of fiberglass) in the locker of an African-American employee that included the following language:  “KKK plans could result in death, serious personal injury….”

As of at least 2006, the company had an anti-harassment policy in place, prohibiting “Sexual, Racial, and Other Objectionable Conduct or Unlawful Harassment.”  The policy provided specific examples of prohibited conduct and, among other directions, instructed employees to “Immediately report the incident to your supervisor and plant manager.” 

When the employees reported these incidents to Xerxes, the company conducted investigations, took disciplinary action against the alleged harassers, and thereafter conducted company-wide training on its anti-harassment policies and complaint procedures.  Additionally, the company reported the threatening notes to local law enforcement officials.  The District Court found these measures to provide a sufficient basis to grant Xerxes’ motion for summary judgment on the EEOC’s multiple claims of co-worker racial harassment.  The District Court held that “whenever Xerxes learned of harassment, it acted quickly and reasonably effectively to end it.” 

On appeal, the Fourth Circuit indicated that, to survive summary judgment on a claim of a racially hostile work environment, the EEOC “must demonstrate that a reasonable jury could find [the] harassment (1) unwelcome; (2) based on race; and (3) sufficiently severe or pervasive to alter the conditions of employment and create an abusive atmosphere.” Additionally, the EEOC was required to present “sufficient evidence of a fourth element:  that there is some basis for imposing liability” for the harassment on the employer. In focusing on this critical fourth element, the Fourth Circuit examined the point at which Xerxes knew or should have known of the alleged harassment. 

In making this inquiry, the Fourth Circuit looked to a variety of factors, including the timeliness of a complaint following an alleged act of harassment, any evidence of undue delay by the employer in responding, and a determination as to whether the employer’s response was proportional to the seriousness and frequency of the alleged harassment.  For example, this involves a consideration of the repetition of unlawful conduct to demonstrate the unreasonableness of prior responses.  The Fourth Circuit reasoned that while Title VII requires employers to take steps reasonably likely to stop the harassment, the statute does not require an employer to “dispense with fair procedures for those accused or to discharge every alleged harasser.” Thus, an employer should conduct a thorough investigation into allegations of unlawful activity.  Even if a jury later concludes that harassment occurred, an employer may escape liability with a finding of a reasonable and proportional response to the alleged activity.  The Fourth Circuit determined that through this process, the rights of the victim, the alleged harasser, and the employer are balanced. 

In reviewing the factual record, the Fourth Circuit concluded that there was a genuine issue of material fact as to the point at which Xerxes had notice of alleged racial slurs and pranks at its Maryland plant – enough for the EEOC’s case to survive the company’s motion for summary judgment. 

In his concurring opinion, Judge Wilkinson noted that: “The undisguised ugliness of the incidents alleged here stands as a rebuke to complacency and a reminder that the task of racial reconciliation in our country remains incomplete.”  In her separate concurring opinion, Judge Motz recalled that none of the alleged harassers were management officials, noting:  “If an employer’s president or another management official … had perpetrated this harassment, it would certainly be imputable to the employer.”  Had that been the case, the EEOC would have had much stronger evidence to have placed the employer on notice. 

The Fourth Circuit’s decision to vacate part of the District Court’s grant of summary judgment provides an important reminder to employers as to the significance of a prompt and appropriate response to allegations of unlawful conduct such as harassment, retaliation, or discrimination.  Of course, it is important for employers to have anti-discrimination policies in place, and that such policies are broadly and regularly communicated to all company employees.  Likewise, employers need well-defined complaint reporting and investigative procedures so that an appropriate response can be crafted and implemented to nip a problem in the bud.  The Xerxes decision should serve as a “wake up” call to employers as to the potential perils of slow responses to allegations of harassment, discrimination, or retaliation, and the fact that the EEOC views such situations as top litigation targets for pattern or practice lawsuits against companies.