Lehmann v. Toys R Us, Inc.

• Decision Date: 14 July 1993
• Citation: 132 N.J. 587,626 A.2d 445
• Parties: , 63 Fair Empl.Prac.Cas. (BNA) 241, 64 Empl. Prac. Dec. P 43,016, 62 USLW 2055 Theresa LEHMANN, Plaintiff-Appellant and Cross-Respondent, v. TOYS 'R' US, INC., a corporation, Don Baylous, and Jeffrey Wells, Defendants-Respondents and Cross-Appellants.
• Court: New Jersey Supreme Court

Page 587

132 N.J. 587

626 A.2d 445, 63 Fair Empl.Prac.Cas. (BNA) 241,

64 Empl. Prac. Dec. P 43,016, 62 USLW 2055

Theresa LEHMANN, Plaintiff-Appellant and Cross-Respondent, v. TOYS 'R' US, INC., a corporation, Don Baylous, and Jeffrey Wells, Defendants-Respondents and Cross-Appellants.

Supreme Court of New Jersey.

Argued Feb. 1, 1993.

Decided July 14, 1993.

Fredric J. Gross, Mount Ephraim, for appellant and cross-respondent.

James R. Williams, New York City, a member of the New York bar, for respondents and cross-appellants (Greenberg, Dauber & Epstein, Newark, attorneys, Mr. Williams, Scott T. Baken, New York City, a member of the New York bar, and Ina B. Lewisohn, Trenton, of counsel).

Alexander P. Waugh, Jr., Asst. Atty. Gen., for amicus curiae Attorney General of New Jersey (Robert J. Del Tufo, Atty. Gen., Jeffrey C. Burstein, Deputy Atty. Gen., on the brief).

Nadine Taub and Michelle Joy Munsat, Newark, submitted a brief on behalf of amici curiae Women's Rights Litigation Clinic and NOW-NJ.

Paul I. Weiner, Roseland, submitted a brief on behalf of amicus curiae Employment Law Council (Timins & Weiner, attorneys).

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 (1992). 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, 605 A.2d 1125. 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, 611 A.2d 657 (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,...