In Townsend v. Benjamin Enters., the Second Circuit Court of Appeals ruled on two important issues under Title VII of the Civil Rights Act of 1964 (“Title VII”). Both plaintiff Martha Townsend (a former office manager for defendant) and a former Human Resources Director (to whom Townsend complained about harassment) sued for sexual harassment and retaliation, respectively. The HR Director claimed that she was terminated for discussing Townsend’s internal sexual harassment complaint with a management consultant hired by the company. Addressing this specific issue for the first time, the Court held that participation in only an internal employer investigation – such as by a human resources officer – does not qualify as protected activity under Title VII’s participation clause when it is not in conjunction with or following a formal charge with the Equal Employment Opportunity Commission (“EEOC”). Thus, the HR Director’s discussion with the management consultant about Townsend’s internal complaint was not protected activity, and she could not maintain a retaliation cause of action under Title VII with respect to her termination.

 

Second, the Court turned to Townsend’s claims of sexual harassment against the company’s Vice President (who was the husband of the company’s President). At trial, plaintiff proved that she had been subjected to a hostile work environment and the jury concluded that the VP was the proxy or alter ego of the company. As a result, the VP’s misconduct was imputed to the company. On appeal, the company argued that it had an affirmative defense to liability based on the Supreme Court’s decisions in Faragher v. City of Boca Raton, 524 U.S. 775 (1998) and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998), and that the trial court erred in concluding that there is a proxy or alter ego exception to the affirmative defense. Generally, employers have an affirmative defense to hostile work environment claims under Title VII when the employer (i) exercises reasonable care to prevent and promptly correct any harassing behavior and (ii) the plaintiff unreasonably fails to take advantage of the protective or corrective opportunities provided by the employer or to otherwise avoid harm. The company argued that the Faragher/Ellerth “affirmative defense remains available even when the alleged harasser holds a sufficiently high position within the hierarchy of an organization to be considered the organization’s proxy or alter ego.” In another question of first impression the Court disagreed, holding that this defense is unavailable when the supervisor in question is the employer’s proxy or alter ego, such as here.

This case represents a split victory for employers. On one hand, the Court explicitly limited the reach of Title VII’s participation clause for retaliation claims. On the other hand, the Court created an exception to the Faragher/Ellerth affirmative defense without setting forth a bright-line rule for determining whether an actor holds a “sufficiently high position within the hierarchy of an organization” to render the defense unavailable. Accordingly, employers should remain diligent in training supervisors, especially high-level managers, about Title VII’s prohibitions and the need to prevent and promptly correct harassing behavior.