Well-intentioned employers responding to internal complaints of sexual (or other unlawful) harassment often feel beleaguered. They find themselves wondering whether the law expects them to have investigative skills surpassing those of Sherlock Holmes, and clairvoyant insight into who is telling the truth and who is not. Employers often feel that, to avoid liability for a hostile work environment, the law requires them to err on the side of the complainant and to punish the accused – only to risk a lawsuit by the accused claiming defamation, reverse discrimination, or wrongful discharge. In short, legal counsel, human resource managers, and other managers often perceive themselves to be trapped in a "no win" situation when confronted with internal complaints of harassment.

Reed Smith recently obtained a ruling from the United States Court of Appeals for the Third Circuit(fn1) that provides to employers a large new measure of comfort as they respond to internal harassment complaints. Knabe v. The Boury Corp., No. 95-3614 (3d Cir. May 29, 1997). Knabe makes clear that employers need not be perfect, clairvoyant, or draconian toward the accused in order to avoid liability for an alleged sexually (or other) hostile work environment – so long as, once employers know or have reason to know of the alleged harassment, they respond promptly and take remedial action that is reasonably calculated to prevent further harassment.(fn2) In Knabe, the Third Circuit affirmed the district court’s decision to dismiss – without the time and expense of a trial – a sexually hostile work environment claim because, even though the employer’s investigation was flawed and incomplete, the employer took adequate remedial actions in response to the plaintiff’s internal harassment complaint.

One cannot fully appreciate the practical significance of the Knabe decision without awareness of the case’s facts. Because the district court had granted summary judgment for the employer, the Third Circuit had to assume that the plaintiff’s version of the facts was true, and to view all of the facts in the light most favorable to her.

Knabe, a waitress, alleged that her supervisor, the restaurant’s manager ("Manager"), did the following: bumped into her from behind on a dozen occasions; rubbed himself against her; ran his hands over her buttocks in behind-the-counter spaces; pretended to pull up his pants and zipper while exiting a room with Knabe; asked her if she was wearing underwear; and asked her if she had been having sex with her fiancé when he called her at home to ask her to come in to work early. Knabe also alleged that the Manager threatened to fire her if she reported his conduct, and took her off of the work schedule after she threatened to complain about him. Knabe admitted that no managers (other than the alleged harasser) witnessed the alleged incidents.(fn3)

After Knabe complained to the Manager’s supervisor (who will be referred to as the "Investigator") about the Manager’s alleged misconduct, the Investigator confronted the Manager and asked him whether he had asked Knabe about having sex with her fiancé (which the Manager denied) – but not about any of the other alleged offensive conduct. The Investigator also interviewed three (and only three) of Knabe’s coworkers, who reported that they had not witnessed the Manager make any improper statements to Knabe and had never observed any inappropriate behavior by a manager in the restaurant.

The Investigator made no findings as a result of her investigation. She believed that she could not make a finding that sexual harassment had occurred without a corroborating witness.

Nonetheless, the Investigator took the following remedial steps: she met with the Manager and informed him that he must return Knabe to the work schedule immediately; she reminded the Manager that the "company does not tolerate any sexual comments or actions"; she told the Manager that any "company violations of this policy will receive possible suspension and or termination"; they signed a "record of conversation" acknowledging the conversation; and she met with Knabe and informed her she was restored to the work schedule, and that Knabe should contact her or certain other managers if the conduct recurred.

Knabe responded that she could not return to work unless the Manager was transferred or fired. Knabe never returned to work.

The Knabe decision is significant to employers in many ways, including:

1. Internal Investigations Need Not Be Flawless. The Investigator’s limited and incomplete questioning of the Manager and witnesses, and her failure to interview other possible witnesses, were not fatal to the employer’s defense in Knabe. In holding that the employer was relieved of liability, the Third Circuit reasoned that the pivotal question in determining employer liability is not whether the investigation was adequate; rather, the determinative question is whether the employer’s remedial actions were adequate:

Slip op. at 11 (emphasis added) .

Employers still must use extreme caution and make every effort to conduct thorough and probing investigations into employee complaints. Ignorance is not a defense. The Third Circuit added these words of caution to employers:

Slip op. at 13-14.

2. Employers Are Not Required To Credit Complainants’ Allegations. While the Third Circuit disagreed with the Investigator’s assumption that she could not decide that an uncorroborated complaint was justified, the court also explicitly recognized that "an employer need not credit a complaint simply because an employee makes it." Slip op. at 12 n.11. Obviously, any determinations against a complainant should be based on legitimate and well-documented reasoning.

Another word of caution: a finding against the harassment complainant had better be based on a thorough investigation. In Knabe, the flawed, incomplete investigation was not dispositive because the employer took corrective measures reasonably calculated to prevent future harassment whether or not it had occurred. Where the employer decides to take no corrective action, the quality of the investigation will be more closely scrutinized and far more important for purposes of insulating the employer from legal exposure.

3. Employers’ Corrective Actions Need Not Necessarily Be Punitive Or Acceptable To The Complainant. The Knabe decision expressly recognizes that the "reasonably calculated to prevent further harassment" definition of what constitutes "adequate" remedial measures means:

• the less severe and frequent the harassment, the more likely it becomes that even a non-punitive remedy will be found to be adequate, and visa versa. As they say, "the punishment must fit the crime."

• Employers are not necessarily required to take punitive action against the alleged perpetrator.(fn4)

• The complainant is not entitled to dictate the employer’s remedy.

• Courts are not to ask whether employers could have done more than they did – again, the only question is whether the corrective actions they did take were reasonably calculated to prevent further harassment.

Given these principles, the Third Circuit held that the Investigator’s remedial actions in Knabe (making the Manager aware of his responsibilities and Knabe aware of her rights in the event of future misconduct) were adequate as a matter of law – regardless of whether or not they would have proved effective had Knabe continued to work at the restaurant.

4. The Adequacy Of Employers’ Corrective Actions Should Not Be Second-Guessed With 20/20 Hindsight. Managers and legal counsel handling harassment complaints have to assess whether their corrective actions are "reasonably calculated to prevent future harassment" at the time they decide upon and implement those actions. The Third Circuit in Knabe instructs that courts must do the same. As a result, just because corrective action may ultimately prove to be ineffective in preventing further harassment, that does not necessarily mean the action was inadequate. Effectiveness can prove adequacy, but the absence of effectiveness does not prove inadequacy.

5. Adequate Corrective Action Precludes A Constructive Discharge Claim. Dissatisfied that the employer did not transfer or fire the Manager, Knabe quit and argued she was constructively discharged and, therefore, should recover damages as if her employment had been terminated involuntarily. The Third Circuit rejected this contention. The test for proving constructive discharge is that "the conduct complained of would have the foreseeable result that working conditions would be so unpleasant or difficult that a reasonable person in the plaintiff’s shoes would resign." Slip op. at 3 n.1. The Third Circuit in Knabe concludes that its holding that the employer’s corrective action was not lacking by definition means that Knabe could not meet the constructive discharge test.

Conducting a harassment investigation is not a science and, despite good intentions, investigations may sometimes be flawed. Employers now can rest easier that, if they act promptly and reasonably, and take measured steps that are reasonably calculated to prevent further harassment, they are now more likely to be insulated from liability without the time and expense of a trial.

(fn1) The Third Circuit’s holdings are binding on all federal courts in Pennsylvania, New Jersey, Delaware and the Virgin Islands.

(fn2) The Knabe holding is not relevant to quid pro quo harassment cases where a supervisor is alleged to have used his or her actual authority (e.g., to promote, to evaluate performance, to terminate) to gain sexual favors.

(fn3) This admission that there were no management witnesses other than the alleged harasser was significant because it established that the employer did not have any reason to know of the alleged harassment before Knabe’s internal complaint. An employer’s obligation to respond to potential harassment is triggered not only upon a complaint by the alleged victim, but also upon learning of alleged harassment through management observation or, in some circumstances, through secondhand information.

(fn4) Significantly, the court observed that employers have a legitimate interest in avoiding lawsuits by those accused of harassment and, therefore, should not be expected to punish the alleged perpetrator without adequate grounds for doing so.