When defending against Law Against Discrimination (LAD) sexual harassment claims, employers have long been asserting the “anti-harassment policy” affirmative defense. For the first time, however, the New Jersey Supreme Court announced, in Aguas v. State of New Jersey, No. A-35-13, ___ N.J. ___ (2015), that such an affirmative defense is, in fact, available to employers under theories of direct and vicarious liability.[i]

In Aguas, the plaintiff, a Department of Corrections officer, filed a hostile work environment LAD claim against the State of New Jersey, under both direct and vicarious liability theories. Slip Op. at *12, 17. In the complaint, the plaintiff alleged that she was subjected to sexual harassment by her supervisor and his assistant. Id. at *7, 12. The plaintiff did not allege that she suffered any adverse employment action due to the hostile work environment. Id. at *12. In its defense, the State asserted that: (1) the plaintiff was not subjected to a hostile work environment and (2) the State could not be directly or vicariously liable for any purported hostile work environment because, pursuant to its anti-harassment policy, the State provided “prompt and remedial action in response to [the plaintiff’s] claim,” including a “thorough investigation” of the plaintiff’s allegations. Id. at *12. Based on its anti-harassment policy affirmative defense, the State filed a motion for summary judgment, which was granted by the trial court and upheld on appeal to the Appellate Division. Id. at *13-14.

On appeal, the New Jersey Supreme Court clarified two determinative issues in LAD jurisprudence. First, the Court held that an employer’s anti-harassment policy is an affirmative defense to direct and vicarious liability:

[T]he defendant employer has the burden to prove, by a preponderance of the evidence, both prongs of the affirmative defense: first, that the employer exercised reasonable care to prevent and to correct promptly sexually harassing behavior; and second, that the plaintiff employee unreasonably failed to take advantage of preventive or corrective opportunities provided by the employer or to otherwise avoid harm. The employee may rebut the elements of the affirmative defense.

Id. at *41 (internal citations omitted). The Court explained that, under a theory of direct liability, the affirmative defense is relevant to rebutting the plaintiff’s allegation that the employer is negligent. Under a theory of vicarious liability, the affirmative defense is relevant to rebutting the plaintiff’s allegation that the supervisor was acting within its agency relationship. Although this distinction may seem academic, the Court noted that if “both [theories of liability] are pled in a sexual harassment action . . . the two claims must be addressed separately.” Id. at *22.

In arriving at this holding, the Court analyzed federal and state precedent, including Burlington Industries v. Ellerth, 524 U.S. 742, 765 (1998), Faragher v. City of Boca Raton, 524 U.S. 775, 807-08 (1998), Lehmann v. Toys ‘R’ Us, Inc., 132 N.J. 587, 592 (1993), and agency principles of direct and vicarious liability under the Restatement (Second) of Agency § 219(2)(b) and (d). The Court also found that permitting this affirmative defense was in accord with “the paramount objective identified by this Court in Lehmann: the prevention of sexual harassment.” Id. at *39. The Court emphasized, however, that the affirmative defense is not available if the “harassment culminates in a tangible employment action,” or the anti-harassment policy “fails to provide meaningful and effective policies and procedures for employees to use in response to harassment.” Id. at *37-38 (quotation marks omitted). In the end, the Court reversed and remanded to the trial court for further proceedings in accordance with its holdings.

The Bottom Line. While employers and defense attorneys alike may consider Aguas as a recitation of the status quo, Aguas provides necessary clarification for asserting the anti-harassment policy affirmative defense. Specifically, employers facing LAD hostile work environment claims should clearly assert this affirmative defense under both direct and vicarious theories of liability. Failure to do so could lead to waiver of this defense.

 [i] The Supreme Court also held that the definition of a supervisor should include not only an employee who has the authority to recommend or impose an adverse employment action, but also one “ who is authorized to direct another employee’s day-to-day work activities as a supervisor, even if that individual does not have the authority to undertake or recommend tangible job decisions.” Id. at *45-46. Notably, that expansive definition excludes an employee “who merely relays other officials’ instructions regarding work assignments and reports back to those officials” as well as an employee “who directs only a limited number of tasks or assignments . . . .” Id. at *45.

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