Jury Finds Costco Failed to Prevent Sexual Harassment of a Female Employee by Customer; Hit With $250k Verdict

By XobeeAdmin on February 3, 2017 in Legal Update

In December 2016, an Illinois federal court awarded $250,000 in damages to a former employee of Costco who was sexually harassed by a Costco customer. The employee worked for Costco between 2009 and 2012. She claimed that a frequent customer repeatedly touched her without her permission, tried to hug her, and regularly followed her around the store, where the customer commented about the employee’s looks and asked about the men in her life. As a result, the employee brought a Title VII claim against the company and asserted that Costco’s lack of action created a hostile work environment. The employee argued that these acts, coupled with Costco’s inability to remedy the situation, led to her abrupt medical leave.

At trial, EEOC attorneys argued that Costco knew about the harassment, but failed to take steps to stop the customer’s inappropriate conduct. Evidence showed that the employee submitted two complaints to the company, each one year apart, that documented the customer’s harassment. After the first complaint, Costco warned the customer to keep away from the employee, but he did not comply. Then, the employee filed a second complaint, which led Costco to cancel the customer’s membership card.

The federal jury found that Costco’s decision to cancel the customer’s membership was not an adequate response to the harassment because the cancellation occurred more than one year after the employee initially complained about the inappropriate conduct. Costco was ordered to pay $250,000 in damages.

This case reminds employers that harassment of employees by third-parties, such as customers or vendors, must not be tolerated.  Such conduct must be reported immediately to the appropriate company management personnel, investigated and addressed. Title VII of the Civil Rights Act forbids sexual harassment in the form of: unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature when the conduct affects an individual’s employment, unreasonably interferes with work performance, or creates an intimidating, hostile, or offensive work environment. Employers are liable under Title VII for sexual harassment by employees and non-employees if an employer knows or should know about the harassment and fails to take immediate and appropriate corrective action. Many states, (e.g., California) also have laws that require employers to take immediate and appropriate corrective action in such situations.

Tips for Employers:

  1. Include an express policy in the company handbook that prohibits sexual harassment by employees and by non-employees, such as customers, vendors, independent contractors, and other third parties.
  2. Train supervisors and other employees to treat customer and other third party sexual harassment claims similar to sexual harassment claims brought by an employee against another employee; that is, this type of conduct must be investigated and immediate steps taken to stop such conduct.
  3. Provide a copy of the company’s sexual harassment prevention policy to third parties, such as vendors who provide services to your company daily, to put them on notice that the company will not allow harassment of its employees.

The case is Equal Employment Opportunity Comm’n  v. Costco Wholesale Corp., N.D. Ill., No. 14-6553.

For more information on California’s Fair Employment and Housing Act re: sexual harassment, see: https://www.dfeh.ca.gov/files/2016/09/DFEH-185.pdf

For more information on Nevada law re: sexual harassment, see: https://detr.state.nv.us/Nerc_pages/NERC_docs/Facts_About_Sexual_Harassment.pdf

For more information on Title VII, see https://www.eeoc.gov/eeoc/publications/fs-sex.cfm


SHLC will offer its next Sexual Harassment and Bullying Prevention Training for California Managers webinar on February 28, 2017. This live webinar will satisfy all the California sexual harassment training requirements. For more information on this and other events, please visit https://suttonhague.com/events/.