Employment Law

Halloween Party Turns Scary for State in New Court Decision: Appellate Court Says Employer May Be Held Liable for Off-Duty, Off-Premises Sexual Harassment Claims

Can an employer be held liable for sexual misconduct at a private party that takes place after an employer-sponsored holiday party?  A recent Tennessee Court of Appeals case appears to say “yes” and thereby presents a new concern for employers considering employer-sponsored events. In Phelps v. State, an employee sued her employer, the State of … Continued

Can an employer be held liable for sexual misconduct at a private party that takes place after an employer-sponsored holiday party?  A recent Tennessee Court of Appeals case appears to say “yes” and thereby presents a new concern for employers considering employer-sponsored events.

In Phelps v. State, an employee sued her employer, the State of Tennessee, for sexual harassment and retaliation claims under the Tennessee Human Rights Act (THRA).  The instances of alleged sexual harassment included serious sexual misconduct (including a sexual assault) at an after-party following a State-sponsored Halloween party.  The court ruled that the State could be liable for these “after-party” events, even though they took place after hours and away from the place of employment.

Background

Plaintiff Kelly Phelps, a restaurant server at a state park facility, attended a Halloween party organized by her restaurant managers.  The managers encouraged employees to attend the party and provided drink coupons to employees.  The managers also made and sold Jell-O shots to party attendees.

The party included mostly employees, but some non-employees also attended.  One of the attendees was Josh Walsh, the assistant park manager.  According to the court, Walsh got drunk and “proceeded to grope, molest, and make uncomfortable at least five women at the party.”  Walsh also served as the judge of a lap dance contest held during the party.

After the party ended, some employees and non-employees, including Phelps, attended an after-party at a maintenance worker’s residence, located on state park property.  At the after-party, Walsh allegedly rubbed himself against Phelps on two occasions and made other lewd acts toward her.

Phelps and three other employees complained of sexual harassment by Walsh.  Phelps initially complained to her managers that Walsh was a “creeper” the day after the party.  Several weeks later, she provided her managers with a more complete report about the events from the Halloween party and after-party.  Despite these reports, the State did not immediately remove Walsh from his duties.  Rather, the head park manager “blamed the women and suggested that Mr. Walsh’s behavior was acceptable.”  To make matters worse, Walsh was allowed to remain around the women who had complained about him.  Phelps alleged Walsh stared at her, smirked at her, and smiled at her “in an intimidating, harassing, and hostile manner” during her shifts, and he drove by her house to intimidate and stare at her after-hours.  Phelps claimed this went on while the State was investigating her sexual harassment complaint.

After she lodged her complaint against Walsh, Phelps was issued a written reprimand for an “inappropriate article of clothing” she wore to the Halloween party – a bawdy message on the back of a baby bib adorning her child vampire costume.  However, Phelps was the only employee written up for her party attire, despite other suggestive and salacious employee costuming.

In addition to her written reprimand, Phelps claimed that her hours and shifts were reduced, she was not given favorable shifts, and she was not assigned favorable sections of the restaurant floor in retaliation for lodging her complaint against Walsh.

During lower court proceedings, the trial court allowed one of Phelps’ co-workers in a separate action to proceed against the State where she alleged claims arising from conduct taking place during the Halloween party.  However, the trial court disposed of Phelps’ claims, finding Walsh’s conduct toward Phelps at the after-party was not sexual harassment and discrimination “in the workplace,” as prohibited by the THRA.  The trial court reasoned that the after-party took place at a private residence, employees were not required to attend, and the social gathering was “unconnected to work.”

Appeals Court States that Employers May Be Liable for Off-Duty Harassment

The Court of Appeals disagreed, declining to apply a bright-line rule cutting off THRA claims for conduct that occurs “away from the physical premises owned or controlled by an employer, or after traditional work hours.”  Instead, it analyzed the THRA consistent with federal courts construing Title VII.  The court explained that “courts addressing whether an employer can be held liable for a supervisor or co-worker’s sexual harassment occurring off-premises and/or after traditional work hours consider the totality of the circumstances,” including:

  1. The proximity in time and space to the “traditional workplace.”
  2. The relationship of the event to the employees’ work duties.
  3. The extent to which the employer planned, promoted, or sponsored the event.
  4. The degree to which employees were pressured or encouraged to attend the event and the number of employees in attendance.
  5. The employer’s knowledge of any pattern of similar harassment by the offending employee under prior similar circumstances.
  6. Any other circumstances pertinent to the inquiry.

Considering the totality of the circumstances in the case at hand, the court found “a sufficient nexus between the workplace and the alleged harassment [at the after-party] for a reasonable trier of fact to conclude that the sexual assaults perpetrated against the Plaintiff” and the acts ensuing thereafter did affect a term, condition or privilege of her employment.  Among the factors the court found persuasive in reaching its decision were the proximity in space and time to the workplace; the pressure for employees to attend; the fact that the majority of the party and after-party attendees were employees; the State’s sponsorship of the party; the State’s provision of alcohol and encouragement for employees to buy and drink alcohol; and Phelps’ testimony that the after-party was a “continuation” of the State-sponsored Halloween party; as well as the dispute over whether the employer knew about prior inappropriate behavior exhibited by Walsh before the party.

On the retaliation claims, the court declined to decide whether a written warning alone is sufficient to show a materially adverse action by the State.  The court held Phelps’ claims that her work schedule was changed and the State’s failure to take action after she reported Walsh could be sufficient to support a retaliation claim.  The case will now proceed in the trial court.

Takeaway for Employers

Employers would be wise to heed the warnings of this spooky tale as they consider the unintended consequences of employer-sponsored events, including potential exposure for conduct following such events even if off-duty and off-premises.

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