Can Customer Misconduct Be the Basis for a Workplace Harassment Claim?

“The customer is always right.”

It’s an age-old slogan in business, encouraging staff to make customer service a priority and take complaints seriously. However, it can be bad legal advice when it comes to customer misconduct that rises to the level of harassment.

Every company has to deal with difficult customers, creating headaches for customer-facing staff. But if customer behavior crosses the line into inappropriate conduct, the employer may be held liable for creating a hostile work environment.

Consider the case of Vincent Fried, a manicurist with a salon at the Wynn Hotel in Las Vegas. Fried had worked at the salon for more than 12 years and received excellent performance reviews. In June 2017, a customer made an explicit sexual proposition, which Fried reported to the salon manager. Fried said he did not feel comfortable interacting with the customer, but the manager instructed him to complete the customer’s pedicure. During the 35- to 45-minute pedicure, the customer continued to make sexual references.

The manager never addressed the issue, despite Fried’s frequent requests, and other employees made inappropriate comments about the incident. Fried filed suit for sex discrimination, retaliation, and a hostile work environment. The district court granted summary judgment to Wynn, but on November 18, 2021, the Ninth Circuit court of appeals reversed Fried’s hostile work environment claim and remanded the case.

Significant Legal Risk

The Fried case is hardly unique. On September 1, 2021, the Fifth Circuit court of appeals reversed and remanded the hostile work environment claim of an employee at Harrah’s Casino in New Orleans. Christina Sansone, a dealer for the casino, complained multiple times to her supervisors about a customer she alleged had sexually harassed her at least twice a week. Sansone’s supervisors told her to ignore the behavior and failed to file a written report until months after her initial complaint.

The Fried and Sansone cases have yet to be tried before a jury. However, a 2014 case made headlines when a jury awarded a plaintiff more than $2.5 million in damages for a similar claim.

Delise Diaz was an employee of AutoZoners, an affiliate of AutoZone in Kansas City, Missouri. A commercial customer commented on her appearance in ways that made her uncomfortable and touched her lower back. Diaz reported the customer’s unwelcome behavior to her supervisor, who told her to go back to work because he did not want to lose the customer’s business. In later incidents, the customer grabbed her and brushed up against her. She reported this inappropriate conduct, but her supervisor and the store manager called her a “crybaby.” The customer’s behavior continued to escalate. Diaz contacted the human resources manager, who took no action for several months.

Diaz sued both AutoZoners and AutoZone. A jury found that the companies created a hostile work environment and retaliated against Diaz when she complained.

What Is a Hostile Work Environment?

A hostile work environment is one in which an employee is subjected to unwelcome verbal or physical conduct that is severe or pervasive, and the employee must submit to such conduct as an explicit or implicit condition of employment. If an employee proves that the employer is responsible for creating the hostile work environment, the employer may be liable for sexual discrimination under Title VII of the Civil Rights Act.

It takes more than an offensive comment to create a hostile work environment, although one severe action may be sufficient. Courts must consider the severity of the behavior and whether it unreasonably interferes with the employee’s work. The harasser’s conduct should be evaluated objectively, from the perspective of a “reasonable person.”

The employee’s contemporaneous protest or complaint can help establish that the conduct was unwelcome, but it is not required. Courts should consider whether the employee feared repercussions for complaining.

Naturally, an employer can violate Title VII by its own acts. However, federal courts have agreed that an employer can be liable for a third party's sexual harassment or racial discrimination if the employer knew or should have known about the third party’s actions. Third parties might include contractors, suppliers, and vendors as well as customers.

What Should Employers Do?

Harassment by customers creates challenges for employers. Customers are not subject to company policies or clear expectations of appropriate conduct. As customers, they cannot be “fired,” although they can be asked to leave. Employees may be reluctant to complain due to embarrassment, fear of reprisal, or concerns that the employer will not take action.

However, companies can take steps to reduce the risk of a hostile work environment complaint based upon third-party actions. Companies should train employees to recognize harassment regardless of the source and encourage them to report it. Supervisors should also be vigilant for harassment, even if it’s not reported.

Managers and supervisors should recognize the importance of promptly investigating such reports and taking appropriate action. For example, a customer could be asked to leave the premises or get assigned to another employee. A company could cease doing business with a vendor whose representative acts inappropriately.

Customer misconduct is on the rise. Throughout the pandemic, some customers have become hostile, even abusive, toward employees enforcing mask mandates and other rules. Social media and shifting norms have helped create a climate in which some customers act inappropriately.

Companies must remember that the customer isn’t always right. Misconduct that rises to the level of harassment must be dealt with swiftly.

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