Under California’s Fair Employment and Housing Act (“FEHA”), employers generally are strictly liable for a supervisor’s harassment, even where the employer is unaware of the supervisor’s alleged bad actions.  While this left many employers without much recourse in the event supervisors misbehaved, a recently published Court of Appeal decision offers some hope.  In Atalla v. Rite Aid Corp., 2023 WL 2521909 (Cal. Ct. App. Feb. 24, 2023), the Court of Appeal established limits on the extent to which employers can be held responsible for conduct stemming from employees’ personal relationships and after-hours conduct.

Hanin Atalla (“Atalla”), a pharmacist, sued Rite Aid alleging that Erik Lund (“Lund”), a Rite Aid district manager, had sexually harassed her, among other claims.  Atalla’s harassment claim stemmed from a series of late-night text messages containing a video of Lund engaging in a sexual act and a photo of his genitals.  Rite Aid did not dispute that Lund had sent the sexually explicit communications, but maintained that it was not liable for harassment based on Lund’s conduct because he was not acting in his capacity as a supervisor at the time.  The trial court granted summary judgment to Rite Aid on Atalla’s sexual harassment claim, among others, and Atalla appealed.

The Court of Appeal affirmed summary judgment for Rite Aid because it agreed that the alleged harassment occurred when Lund was not acting in his capacity as a supervisor.  In reaching this conclusion, the Court relied on evidence demonstrating a long-standing personal relationship between Atalla and Lund that predated their working relationship.  Atalla had testified that her preexisting relationship with Lund “was wholly unconnected to her work” at Rite Aid, and there was evidence establishing that, both before and after Lund and Atalla worked together, they “texted about a range of topics, extensively and frequently, including … concerning family, vacations, food and dining, alcohol and drinking, people and pets, exercise, as well as chit chat about work,” and they “regularly met for coffee and lunch, got together for holiday and birthday dinners, and were acquainted with each other’s spouses.”

As for the text exchange in question, the Court concluded that it was not work-related and, thus, could not form the basis of a harassment claim against Rite Aid.  The Court noted that Lund sent the photo and video while intoxicated at a hotel late in the evening and Atalla received the texts at her home.  Although Atalla argued that Lund’s explicit photos followed a discussion of work, Lund’s text asking how Atalla’s work day had gone was a “common inquiry for a friend.”  Accordingly, the Court of Appeal explained that Rite Aid was not strictly liable because Rite Aid demonstrated that the harassment occurred outside of work and that Atalla a willing participant in the personal friendship that pre-existed Atalla’s employment.

Ultimately, while Atalla provides some protection for employers when employees engage in purely personal conduct, unconnected to work, employers still will face liability for work-related actions by supervisors.  Accordingly, employers should consult with experienced employment counsel regarding training and other means to ensure that their supervisors’ work-related conduct does not result in liability.

Source: Philippe A. Lebel and Ryan McGill

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