Addressing third-party discrimination or harassment

By Laura Lapidus, Esq.

The #MeToo movement, now more than 2 years old, brought national attention to workplace discrimination and harassment. As a result of the movement, some states enacted laws on a variety of issues, including mandatory anti-harassment training, as well as changing the standard of proof required in harassment lawsuits. Many businesses, including CPA firms, reexamined their anti-discrimination and anti-harassment policies and procedures, strengthening them if necessary. Proactive firms work diligently to create and maintain a culture that discourages discrimination and harassment in the workplace. However, one aspect of discrimination and harassment prevention is often overlooked — preventing harassment and discrimination of employees by third parties, such as clients or vendors.

Discrimination and harassment in the workplace can lead to low morale, low productivity, and potentially expensive lawsuits. While policies, procedures, and training go a long way in prevention, it is the culture of a firm and the "tone at the top" that is integral to creating a workplace free of discrimination and harassment. But what about the firm's clients and vendors? Do they share a similar culture? And what should a firm do when one of its employees is subjected to a client's culture that does not align with its own? Is a firm responsible if a third party discriminates against or harasses one of the firm's employees?

THE LAW

Generally, claims of harassment by a nonemployee are filed under Title VII of the Civil Rights Act of 1964 (29 C.F.R. §1604.11(e)), under which "[a]n employer may also be responsible for the acts of non-employees, with respect to sexual harassment of employees in the workplace, where the employer (or its agents or supervisory employees) knows or should have known of the conduct and fails to take immediate and appropriate corrective action." The EEOC and the courts apply the same analysis to determine whether a co-employee has harassed another employee. Thus, an employer may be liable for harassment by a third party if the employee is able to show that the employer knew, or in the exercise of reasonable care should have known, that the harassment occurred and failed to take appropriate remedial action (see Roy v. Correct Care Solutions, LLC, 914 F.3d 52 (1st Cir. 2019)).

Similarly, an accounting firm, as an employer, may be held responsible for the discriminatory acts of its clients against a firm employee. The boundaries of the firm's responsibility to protect its employees from discrimination and harassment extend beyond the four walls of its own office and include the location where an employee works, whether it is at a client site or virtually. For example, if a client requests that only male accountants handle their services or if a client refuses to work with an accountant because of his or her national origin, and the employer acquiesces, the employer may be held liable for discrimination (see Sparenberg v. Eagle All., 2015 WL 6122809, at *6 (D. Md. 10/15/15)).

WHAT SHOULD AN EMPLOYER DO?

If an employer becomes aware of allegations of discrimination or harassment against one of its employees by a third party, the first step is to conduct a prompt, thorough investigation of the matter, working with its legal counsel. While this process may be more difficult, because the accused is not under the firm's control and there may be heightened sensitivity regarding the potential impact to the client relationship, the firm should take steps to obtain facts in order to determine if discrimination or harassment has occurred, documenting each step of the investigation. EmployerGard policyholders of the AICPA Insurance Program have access to Beyond HR (visit cnabeyondhr.com), a self-service portal providing risk management resources on various workplace topics, including the investigation of discrimination and harassment complaints.

If the investigation determines that discrimination and/or harassment have occurred, the firm must take appropriate corrective action. The firm should consider notifying the client or vendor of the allegations, and, if possible, work with the client or vendor to remedy the situation. Remedies will vary depending on the facts and the severity of the actions alleged. A warning may be sufficient in some cases, but in other cases, the alleged harasser may need to be removed from contact with the firm's employee. If the client or vendor won't take action, the firm may need to consider severing the relationship. Throughout this process, the terms and conditions of employment of the employee who made the complaint should not be changed, nor should the employee be disciplined.

With more and more people working remotely, it's important to remember that discrimination and harassment can occur not only in-person, but via telephone, via email, or virtually. Ensure that employees who are teleworking are trained regarding the firm's anti-harassment and anti-discrimination policies and procedures and that they understand how to bring such matters to the attention of the appropriate person(s) in the firm.

CONSIDER MITIGATING MEASURES

Firms should consider the following measures to mitigate the possibility of discrimination and/or harassment by third parties:

  • Ensure that anti-discrimination and anti-harassment policies state that employees are protected from discrimination and harassment by third parties.
  • Educate employees, especially managers, to recognize discrimination and harassment by third parties, providing examples of such.
  • Ensure that firm employees know how to bring a complaint to the firm's attention, and advise employees that they will not suffer retaliation for doing so.
  • Consider providing third parties with copies of your firm's anti-discrimination and anti-harassment policies.
  • If you become aware of discriminatory and/or harassing conduct by a third party against an employee, conduct a prompt, thorough investigation and take swift, appropriate remedial action in accordance with the advice of legal counsel.
  • If the anti-discrimination and anti-harassment policies of a client or vendor do not align with those of the firm or if they fail to take appropriate action in response to the firm's investigation, consider severing the relationship.
  • Consider using a survey or audit to determine if employees are experiencing discrimination or harassment (always consult an attorney before conducting a survey or audit).

Although addressing allegations of discrimination or harassment by a third party may be difficult, it is important for a firm to understand that it must address these complaints swiftly and take prompt, remedial action when necessary. Overlooking third-party discrimination and/or harassment may expose the firm to liability.

Laura Lapidus, Esq., is a risk control director at CNA. For more information about this article, contact specialtyriskcontrol@cna.com.

Continental Casualty Company, one of the CNA insurance companies, is the underwriter of the AICPA Professional Liability Insurance Program. Aon Insurance Services, the National Program Administrator for the AICPA Professional Liability Program, is available at 800-221-3023 or visit cpai.com.

This article provides information, rather than advice or opinion. It is accurate to the best of the author's knowledge as of the article date. This article should not be viewed as a substitute for recommendations of a retained professional. Such consultation is recommended in applying this material in any particular factual situations.

Examples are for illustrative purposes only and not intended to establish any standards of care, serve as legal advice, or acknowledge any given factual situation is covered under any CNA insurance policy. The relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice.

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