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Lehmann v. Toys ''R'' US Inc.

Decided: July 14, 1993.

THERESA LEHMANN, PLAINTIFF-APPELLANT AND CROSS-RESPONDENT,
v.
TOYS 'R' US, INC., A CORPORATION, DON BAYLOUS, AND JEFFREY WELLS, DEFENDANTS-RESPONDENTS AND CROSS-APPELLANTS.



On appeal from the Superior Court, Appellate Division, whose opinion is reported at 255 N.J. Super. 616 (1992).

Garibaldi, Wilentz, Clifford, O'Hern, Stein

Garibaldi

The opinion of the court was delivered by

GARIBALDI, J.

This appeal presents this Court with two questions concerning hostile work environment sexual harassment claims under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to -42 (LAD). First, what are the standards for stating a cause of action for hostile work environment sex discrimination claims? Second, what is the scope of an employer's liability for a supervisor's sexual harassment that results in creating a hostile work environment? We hold that a plaintiff states a cause of action for hostile work environment sexual harassment when he or she alleges discriminatory conduct that a reasonable person of the same sex in the plaintiff's position would consider sufficiently severe or pervasive to alter the conditions of employment and to create an intimidating, hostile, or offensive working environment.

We further hold that in the determination of an employer's liability for damages when an employee raises a hostile work environment discrimination claim against a supervisor: (1) an employer will be strictly liable for equitable damages and relief; (2) an employer may be vicariously liable under agency principles for compensatory damages that exceed equitable relief; and (3) an employer will not be liable for punitive damages unless the harassment was authorized, participated in, or ratified by the employer.

I.

A. Procedural History

Plaintiff, Theresa Lehmann, brought a civil action in the Law Division against her former employer, Toys 'R' Us, Inc. (Toys 'R' Us); her former supervisor, Don Baylous; and Jeffrey Wells, a human resources manager at Toys 'R' Us. Plaintiff's principal allegations were that defendants subjected her to a hostile work environment on the basis of her sex in violation of the LAD. She asserted that sexual harassment perpetrated and condoned by the defendants had caused her to suffer damages including loss of wages and pension benefits, anxiety, detriment to her health, medical expenses, humiliation, and pain and suffering, and also that she had been required to expend attorneys' fees and to incur other litigation costs. She also alleged various other claims, separate from her LAD claims, including battery, negligence, intentional interference with contractual relations, and intentional infliction of emotional distress.

After a six-day bench trial, the trial court dismissed all of plaintiff's causes of action against defendants except her battery claim against Baylous, for which it awarded her $5,000 as damages.

Plaintiff's appeal to the Appellate Division resulted in the filing of three separate opinions. The Appellate Division unanimously affirmed the trial court's dismissal of plaintiff's non-LAD claims for invasion of privacy, intentional infliction of emotional distress, reprisal, and tortious interference with contractual relations. Lehmann v. Toys 'R' Us, 255 N.J. Super. 616, 605 A.2d 1125. The court also unanimously reversed the trial court's dismissal of plaintiff's hostile work environment sexual harassment claim and remanded the matter to the trial court for further fact-finding. Although the court agreed that the trial court had applied the wrong legal standards in evaluating plaintiff's LAD claim, it was unable to agree (splitting three ways) on the standards that should be applied on remand to determine the sufficiency of Lehmann's hostile work environment claim and the standard that should be applied to determine Toys 'R' Us's liability for sexual harassment by its supervisor. Judge Shebell, writing for the majority, felt that a "more structured test is required at this juncture," 255 N.J. Super. at 642. He therefore adopted, with significant modifications, the first four prongs of the test set forth in Andrews v. City of Philadelphia, 895 F.2d 1469 (3d Cir. 1990). However, he rejected the Andrews court's use of respondeat superior principles to assess an employer's liability for hostile work environment sexual harassment by a supervisor, instead holding that an employer was strictly liable.

Judge D'Annunzio, in a brief separate concurrence, stated his "general agreement" with the majority's approach, but disagreed on the matter of an employer's vicarious liability for sexual harassment by a supervisory employee.

Judge Skillman, Concurring in part and Dissenting in part, rejected the Andrews test, and advocated instead that hostile work environment sexual harassment claims be evaluated under a more flexible standard based on the Equal Employment Opportunity Commission's Guidelines on Discrimination Because of Sex, 29 C.F.R. §§ 1604.1 to 1604.11 (EEOC Guidelines). Judge Skillman also stated that agency principles, rather than strict liability, ought to govern an employer's vicarious liability for sexual harassment by a supervisory employee.

In response to the conflicting opinions rendered by the Appellate Division, both parties filed appeals as of right pursuant to Rule 2:2-1(a), requesting this Court to identify the legal standards for stating an actionable claim of hostile work environment sexual harassment under the LAD and to define the standard for imposing liability on an employer for sexual harassment by its supervisor. Those are the only issues before this Court. We denied plaintiff's petition for certification, which addressed her non-LAD claims. 130 N.J. 19 (1992).

B. Facts

The following facts were adduced at trial. Lehmann testified that she began working for Toys 'R' Us in August 1981 as a file clerk in the Purchasing Department. She received various promotions to supervisory positions.

In November 1985, defendant Don Baylous joined Toys 'R' Us as Director of Purchasing Administration. Baylous supervised approximately thirty people, including Lehmann, who held the position of Purchase Order Management Supervisor. Baylous and Lehmann worked closely together on a daily basis, and at least once a week Lehmann met with Baylous in his office. Lehmann received favorable evaluations and promotions under Baylous's supervision, and was promoted to Systems Analyst for the Purchasing Department in September of 1986.

In or around December 1986, plaintiff began to notice what she considered offensive sexual comments and touchings from Baylous directed at other female employees. Plaintiff witnessed Baylous walk up behind a female employee at the company Christmas party and put his hands on her. The female employee evidently found his touching offensive because she told him loudly and in angry terms to get his hands off her. The record is replete with other instances of Lehmann witnessing Baylous touch and grab other female employees, although the chronology of those events is somewhat unclear.

The first incident directly involving Lehmann occurred in January 1987. Lehmann testified that Baylous directed her to reject a 300-page purchase order and to tell the employee to rewrite it, and that she replied that the employee would be very angry. Lehmann testified that Baylous told her to "just lean over his desk and show him your tits, implying that that way Frank couldn't get upset at me." Lehmann testified that Baylous had, at various times, directed her to "stick your tits out at" a new boss, and to "write a memo to cover your ass * * * because you have such a cute little ass."

On another occasion in January 1987, Lehmann was in Baylous's office with him. She testified that

Don stood up and walked around his desk and stood by the door. I rose and went to my right a little, and I noticed something out of the corner of my eye out of the window, and I said, what's going on out there? At this Don lifted the back of my shirt up over my shoulders. I know my bra strap was exposed, and said, give them a show. And I pulled my shirt down, ran out of the office crying, and I remember running to Marlene Pantess.

Ms. Pantess's testimony corroborated that Lehmann ran out of Baylous's office crying and that she stated that Baylous had lifted up her shirt.

Lehmann testified that on January 22, 1987, she went to Baylous's immediate boss, Bill Frankfort, to complain about Baylous's conduct. Lehmann requested that she not be identified to Baylous as the complainant. She stated that Frankfort told her to handle it herself, and that she replied that she did not feel she could do so because she had been too afraid to confront Baylous up to that point. Lehmann also testified that Frankfort told her not to report the harassment to Howard Moore, the Executive Vice President in charge of purchasing, because he "was very straight-laced, and he was a family man." Several days later, Lehmann wrote and delivered a letter to Frankfort concerning her complaints of sexual harassment, but Frankfort did not open the letter until after Lehmann's resignation.

On January 26, 1987, Eric Jonas, Toys 'R' Us's Manager of Employee Relations, called Lehmann and a female co-worker who also had had problems with Baylous to his office to discuss Baylous's conduct. Lehmann testified that she told Jonas of the specific incidents and gave him a list of names of other women who had experienced inappropriate touchings or comments from Baylous. Lehmann told Jonas that she did not want Baylous fired but wanted his inappropriate behavior stopped. Jonas assured her that he would speak to Baylous. Several days later, Frankfort told Lehmann that Baylous had been spoken to about his conduct.

However, according to Lehmann, Baylous's inappropriate conduct did not cease. In early February 1987, Lehmann was in Baylous's office and began to feel faint. She testified that she asked him to "just kick me into the hall" if she passed out, and that he replied that he would "take advantage of [her]" instead. She reported the incident to Jonas, who instructed her to keep a journal of such incidents. In the following weeks, Lehmann observed Baylous make a comment to a female employee about her anatomy. Lehmann's sister, also a Toys 'R' Us employee, told Lehmann that Baylous had come up behind her and rubbed her shoulders.

In early March 1987, Lehmann informed both Jonas and Frankfort that Baylous had not stopped touching employees and making inappropriate comments. She testified that Jonas told her that she was "paranoid." Jonas also offered Lehmann a transfer within the company, but Lehmann rejected that suggestion because, she said, she loved her job and had not done anything wrong and did not think she was the one who should be transferred.

The following week, Lehmann testified, Baylous grabbed her on the arm and she observed him touching and grabbing other female employees as well. She also was present at a meeting at which Baylous gratuitously announced that the reason that both he and another female employee had colds was not due to sexual intimacy.

Dissatisfied with the results of Jonas's and Frankfort's efforts to control Baylous's conduct, Lehmann took her complaints to Howard Moore, the Executive Vice President in charge of purchasing, on April 6. Lehmann told him that she felt she was being forced out of the company. Moore was dismayed that such conduct was going on without his knowledge.

Later that same day, Lehmann was called to personnel to meet with Laurie Lambert. Lehmann related to Lambert all that had occurred. Lambert offered Lehmann a transfer, but Lehmann again protested "why should I have to transfer when I worked so hard for this job that I love after six years of being in this company?"

The next day, Lehmann gave Baylous two weeks notice of her resignation, stating that it was for personal reasons. She was again summoned to meet with Lambert. Lambert again offered Lehmann a transfer, and recommended that Lehmann confront Baylous directly with her allegations to clear the air. Lehmann rejected both suggestions.

Lehmann testified that a few minutes later, Baylous entered the room. She related to him her complaints. She testified that he was apologetic at first, but that he grew angry and she became increasingly upset. Following the confrontation, Lehmann left Toys 'R' Us and did not return to complete her final two-week period.

Baylous denies that he ever engaged in sexually harassing conduct. He admits that he was formerly a "touchy" person, using pats on the back to convey approval and tapping people to get their attention. However, he denies that he ever touched any employee in a sexual manner, and vigorously denies the "sweater-lifting incident." He also admits to having made some suggestive comments, such as asking one employee if she had gone home for a "quickie" and telling another employee that she had a "cute rump," but he maintained that those comments were intended and interpreted as jokes. He denied ever telling Lehmann to "stick out" or "show" her "tits" or telling her that she had "a cute ass."

Jeffrey Wells, Toys 'R' Us's head of personnel, testified that he had made inquiries and discovered that there had been no window washing undertaken on the building in January 1987. That evidence was offered to refute Lehmann's statement that she saw scaffolding outside Baylous's window at the time of the shirt-lifting incident. Wells also testified that the company had continued investigating the allegations after Lehmann's departure, and that it had concluded that Baylous had not engaged in sexual harassment. Wells's Conclusions about Baylous's conduct were consistent with Baylous's testimony about himself.

Eric Jonas testified that he had monitored Baylous's conduct by making unannounced visits to Baylous's department. He also stated that he had interviewed four of the women whom Lehmann had identified as able to corroborate her complaints, and that none could do so.

Lehmann contended that Toys 'R' Us's investigation was inadequate. She asserted that despite the fact that Toys 'R' Us has a written corporate policy against sexual harassment requiring all claims to be fully investigated, the investigation documented, and those responsible subject to discipline or discharge, Jonas did not keep any substantive written records and failed to question key witnesses about important events. The trial court agreed.

This court wishes to note that it was unimpressed with Toys R Us' investigation of plaintiff's complaints. It appears from the testimony that the Toys R Us' employees in charge of investigating this matter did not properly and thoroughly attend to plaintiff's allegations, thus exacerbating plaintiff's problems.

Although Lehmann and defendants disagree about whether Baylous engaged in sexually harassing conduct, all agree and stipulated that Baylous did not attempt to obtain any sexual advantage from any employee of Toys 'R' Us.

The trial court, for the most part, declined to resolve the factual dispute between the parties. Instead, it assumed that all of Lehmann's allegations were true and held that nonetheless she had failed to state a claim for hostile work environment sexual harassment. The Appellate Division unanimously agreed that a hostile work environment in violation of LAD would be established if plaintiff's factual allegations were credited by a finder of fact. We affirm the Appellate Division's judgment that the trial court's dismissal of plaintiff's LAD claims must be reversed and the matter remanded for further fact-finding.

II. Sexual Harassment and The Law Against Discrimination

The New Jersey Law Against Discrimination was first enacted in 1945. Its purpose is "nothing less than the eradication 'of the cancer of discrimination.'" Fuchilla v. Layman, 109 N.J. 319, 334, 537 A.2d 652 (quoting Jackson v. Concord Co., 54 N.J. 113, 124, 253 A.2d 793 (1969), cert. denied sub nom. University of Medicine & Dentistry of N.J. v. Fuchilla, 488 U.S. 826, 109 S. Ct. 75, 102 L. Ed. 2d, 51 (1988). The opportunity to obtain employment "is recognized as and declared to be a civil right." N.J.S.A. 10:5-4.

The LAD was enacted to protect not only the civil rights of individual aggrieved employees but also to protect the public's strong interest in a discrimination-free workplace. Fuchilla, supra, 109 N.J. at 335. Freedom from discrimination is one of the fundamental principles of our society. Discrimination based on gender is "peculiarly repugnant in a society which prides itself on judging each individual by his or her merits." Grigoletti v. Ortho Pharmaceutical Corp., 118 N.J. 89, 96, 570 A.2d 903 (1990) (citation omitted).

The LAD specifically prohibits employment discrimination based on sex. N.J.S.A. 10:5-12 provides:

It shall be unlawful employment practice, or, as the case may be, an unlawful discrimination:

a. For an employer, because of the race, creed, color, national origin, ancestry, age, marital status, affectional or sexual orientation, sex * * * of any individual, * * * to refuse to hire or employ or to bar or to discharge * * * from employment such individual or to discriminate against such individual in compensation or in terms, conditions or privileges of employment * * * .

The legislative history of the LAD is silent on the subject of sexual harassment.

In construing the terms of the LAD, this Court has frequently looked to federal precedent governing Title VII of the Civil Rights Act of 1964, 42 U.S.C.A. § 2000e to § 2000e-17 ("Title VII"), as "a key source of interpretive authority." Grigoletti, supra, 118 N.J. at 97. Although the "substantive and procedural standards that we have developed under the State's LAD have been markedly influenced by the federal experience," ibid., we have "applied the Title VII standards with flexibility" and "have not ...


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