In a season filled with many highly-anticipated rulings from the Supreme Court, one that warrants particular attention by Arizona employers is its June 24, 2013 decision in Vance v. Ball State University, in which the Court clarified the circumstances under which employers will be held strictly (i.e., automatically) liable for harassment by supervisors.

According to previous Supreme Court rulings, employers could be held automatically liable for harassment by a supervisor if the harassment culminated in a “tangible” employment action.  If, however, the harasser was not the victim’s supervisor, but instead merely a co-worker, then the employer only could be held liable if it was negligent in controlling working conditions.

It was under this 15-year old legal precedent that a federal court in Indiana considered Maetta Vance’s lawsuit.  Vance, an African-American woman, worked in the Banquet and Catering Department at Ball State University. Over the course of her employment, Vance lodged numerous complaints of racial discrimination and retaliation, including against Saundra Davis, a white catering specialist.  Vance alleged that Davis intimidated and harassed her due to her race.  Although the parties disputed the facts, they agreed that Davis did not have authority to hire, fire, demote, transfer, promote, or discipline Vance, although she could direct Vance’s daily tasks.

The trial court concluded that, even if Vance’s factual allegations were true, the University could not be held strictly liable for Davis’ alleged creation of a racially hostile work environment because Davis was not empowered to make tangible employment decisions regarding Vance, and therefore was not a supervisor.  Other courts, however, had ruled inconsistently, finding that strict liability applies to “supervisors” who have the right to exert significant direction over another’s daily work, even if they cannot hire or fire.

The Supreme Court concluded that, while an employer will be held automatically liable for harassment perpetrated by employees who have the authority to hire, fire, promote, reassign, or make significant changes in benefit decisions with respect to other employees, they will not be automatically liable if, as in the Vance case, the “supervisor” can do no more than direct another employee in the performance of routine duties.  According to the Court, establishing a “bright line” test for determining supervisory status is essential to providing guidance to employers, employees, courts and juries in harassment cases.  The Court rejected the far more amorphous standard proposed by Vance.

This outcome is clearly favorable to employers, as it reduces the number of employees whose actions can result in automatic employer liability for workplace harassment.  That said, Arizona employers should nonetheless continue to be vigilant in preventing, investigating, and disciplining harassers.  Additionally, because employers can be held strictly liable for the actions of their supervisory employees, they must continue to draft and disseminate clear policies prohibiting racial, sexual, and other forms of unlawful harassment.  Supervisors and managers – and not just the most senior managers in an organization, but all supervisors who have authority to hire, fire, demote, and promote employees – should be trained on, and held accountable for complying with, these policies.  Complaints of harassment should be promptly escalated for investigation, and credible complaints of harassment should result in prompt disciplinary action against the harasser, up to and including termination.  Failure to do so could expose employers to substantial liability.  Arizona employers are therefore urged to review their current policies, amend those policies if and to the extent necessary, and consider implementing or refreshing manager training on harassment prevention.

Lawrence J. Rosenfeld is a partner and Laura Lawless Robertson is a senior associate at Squire Sanders in Phoenix.