Retroactivity Of Third Party Harassment Law Questioned

Originally published September 9, 2004

In 2003, the California Legislature, in what was described as a "clarification" of existing law, amended Government Code section 12940 to expressly provide that an employer may be liable for the acts of sexual harassment by non-employees. The application of this amendment, however, has resulted in conflicting opinions by two different Appellate Courts, leaving the validity and constitutionality of the retroactive application of this amendment in question.

By way of background, in Salazar v. Diversified Paratransit, Inc., a female employee filed suit against her employer and supervisor alleging sexual harassment by a customer in violation of the California Fair Employment and Housing Act ("FEHA"), Government Code section 12940. On appeal, the Appellate Court held that the FEHA did not create employer liability when a non-employee client or customer sexually harasses an employee. The Supreme Court granted the employee's petition for review.

In response to the ruling in Salazar v. Diversified Paratransit, Inc., the California Legislature in 2003 amended Government Code section 12940, expressly providing that an employer may be liable for the acts of non-employees, with respect to acts of sexual harassment of an employee or applicant where the employer, or its agents or supervisors, knew or should have known of the conduct and failed to take immediate and appropriate corrective action. The California Legislature indicated that the purpose behind the amendment was to "clarify the meaning and effect of existing law and to reject the interpretation given to the law in Salazar v. Diversified Paratransit, Inc."

Following the amendment of Government Code section 12940, the California Supreme Court sent the Salazar v. Diversified Paratransit, Inc. case back to the Appellate Court with instructions to reconsider its ruling in light of the California Legislature's amendment to Government Code section 12940. The Appellate Court held that the amendment was a clarification and not a change in existing law, and therefore held that the employer could be held liable for the sexual harassment of an employee by a customer.

Similarly, in Carter v. California Dept. of Veterans Affairs, a female nurse filed suit against the Department of Veterans Affairs alleging that the employer was liable under Government Code section 12940 for the harassing conduct of a patient. At trial, a jury found that the employee was subjected...