When Client Harassment Hits the Workplace: What the 6th Circuit’s Landmark Ruling Means for Employers and Investors
A recent ruling from the 6th U.S. Circuit Court of Appeals is shaking up how we think about employer liability for harassment—not from employees, but from clients. In the case of Bivens v. Zep, Inc., the court ruled that an employer is only liable for harassment by a non-employee (in this case, a client) if the employer intended for the harassment to occur. This sharply contrasts with the broader negligence standard favored by most other circuits and the U.S. Equal Employment Opportunity Commission (EEOC).
Here’s why this matters deeply for investors, advisors, and companies navigating risk in today’s complex workplace environments.
The Case in Focus: Bivens v. Zep, Inc.
A former sales representative for Zep, Inc., a cleaning products manufacturer, alleged she was harassed by a client—a motel manager who locked her in an office and propositioned her. Although she reported the incident and the client was reassigned, she was later terminated amid company-wide layoffs. She sued Zep for harassment, retaliation, and discrimination.
The 6th Circuit upheld the dismissal of her claim, emphasizing that since the harasser was not an agent of Zep, the company would only be liable if it intended the harassment to occur. This stands in contrast to the EEOC’s 2022 guidance, which holds employers liable if they are negligent in preventing or addressing harassment by non-employees.
Why the 6th Circuit’s Stand is a Game-Changer
The 6th Circuit’s decision breaks from the majority of circuits (1st, 2nd, 8th, 9th, 10th, and 11th) which apply a negligence standard. It also diverges from the EEOC’s position, which has been the go-to guidance for many HR professionals and legal advisors. The court cited the Supreme Court’s Loper Bright Enterprises v. Raimondo decision, which allows courts more freedom to interpret laws independently of agency interpretations.
This means that in Kentucky, Michigan, Ohio, and Tennessee (the 6th Circuit’s jurisdiction), employers face a significantly higher bar to prove liability for client harassment. They must demonstrate intent, not merely negligence.
The Broader Implications for Investors and Advisors
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Risk Assessment and Regional Nuances: Investors evaluating companies with operations in the 6th Circuit states should note this legal nuance. Companies may face lower legal risks related to client harassment claims here compared to other states. However, this also means that companies might adopt less stringent client harassment policies, which could affect workplace culture and employee satisfaction—factors increasingly linked to long-term productivity and profitability.
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Compliance and Policy Strategy: For corporate advisors and HR leaders, this ruling is a call to revisit harassment prevention policies. While negligence remains the standard in most circuits, companies operating nationally must tailor their policies to meet the strictest standards to avoid liability. A one-size-fits-all approach to harassment prevention may no longer suffice.
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Litigation Trends and Investor Due Diligence: This ruling may embolden employers in the 6th Circuit to contest harassment claims more aggressively, potentially reducing litigation costs. However, it could also spark legislative responses aimed at tightening protections, which investors should monitor closely. For example, recent data from the EEOC shows a 12% increase in harassment complaints filed by employees against non-employees in 2023, signaling rising tensions around this issue.
What Should Investors and Advisors Do Now?
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Conduct Jurisdiction-Specific Legal Risk Audits: Understand the legal landscape in each state of operation. For companies in the 6th Circuit, assess whether their harassment policies align with this higher intent standard or if they’re prepared for potential shifts in legislation.
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Push for Proactive Culture Building: Investors should encourage portfolio companies to go beyond legal minimums. Implement comprehensive harassment prevention training that includes scenarios involving clients and third parties, not just employees.
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Monitor EEOC and Legislative Developments: The EEOC’s stance and multiple circuit courts’ negligence standards may prompt legislative changes. Stay ahead by tracking proposed bills and regulatory updates that could impact employer liability.
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Evaluate Leadership Accountability: The Zep case highlights the importance of supervisors’ and decision-makers’ knowledge in harassment and retaliation claims. Companies with transparent, accountable leadership structures are better positioned to manage these risks.
Looking Ahead: Will Other Circuits Follow the 6th?
The 6th Circuit stands nearly alone with the 7th Circuit in this interpretation, but as workplace harassment issues gain national attention, we may see more courts reconsidering liability standards. The interplay between judicial interpretation and agency guidance will be a key battleground for employment law in 2024 and beyond.
Final Thought
While this ruling may reduce immediate liability risks for some employers, it underscores a broader trend: the complexity of workplace harassment law is increasing. For investors, advisors, and companies, the best defense remains a robust, proactive approach to workplace culture and legal compliance—one that anticipates not just current laws but the evolving legal and social landscape.
Sources:
- U.S. Equal Employment Opportunity Commission (EEOC) Harassment Guidance, 2022
- 6th U.S. Circuit Court of Appeals, Bivens v. Zep, Inc., 2023
- U.S. Supreme Court, Loper Bright Enterprises v. Raimondo, 2023
- EEOC Data on Harassment Complaints, 2023
By understanding these dynamics, Extreme Investor Network readers can stay ahead of legal risks and make smarter, more informed investment and advisory decisions in an ever-changing employment law environment.
Source: 6th Circuit breaks from EEOC on employer liability for client harassment