The Legal Background
Before this ruling in Frieler, it has been unclear whether Minnesota would apply pre-existing federal law, which provides that an employer is not responsible for sexual harassment by non-managerial co-workers, so long as the employer (1) has in place an effective policy prohibiting sexual harassment and providing a clear means of reporting and seeking relief from such harassment if it should happen, (2) communicates that policy to all employees, and (3) takes prompt and effective steps to investigate, stop and remedy any harassment that does take place. This same affirmative defense is available to employers for sexual harassment by supervisors, so long as the harassment is not accompanied by a tangible employment action, such as a hiring, promotion, compensation or discharge decision.. This employer defense is generally referred to as the “Faragher/Ellerth defense,” because it was first articulated in decisions of the United States Supreme Court in cases bearing those names and addressing sexual harassment claims arising under Title VII of the federal Civil Rights Act.

The Facts
The facts of this case provide important context for the ruling. The alleged acts of harassment were egregious, amounting to repeated instances of serious, private, physical sexual contact. There were no witnesses. The plaintiff admittedly delayed making any report, expressing worries about retaliation. She eventually was part of a report only after co-workers to whom she confided initiated the reporting. The company, which had in place a good anti-harassment policy, immediately undertook an investigation pursuant to that policy, and the alleged perpetrator, while denying the harassment, immediately resigned by retiring. As a long term employee, his retirement was marked by a celebratory party, with which the plaintiff took exception under the circumstances. The plaintiff claimed some ostracism from co-workers sympathetic with the person she accused.

The Ruling
The ruling affirming lower court dismissal of the plaintiff’s assault and battery claims was 6-1, with only Justice Page dissenting. The statutory ruling on the MHRA harassment claim was closer: 4-3, with 3 dissenting justices voting for full affirmance of the employer's summary judgment victory in the lower courts, on grounds that employers should only be responsible for a supervisor's sexual harassment if the employer knew or should have known of that wrongful conduct and failed to take timely and appropriate action. This was the standard announced by the MN Supreme Court back in 1980 when, in Continental Can Co. v. State, the Court first recognized that sexual harassment could violate the MHRA. The Minnesota legislature subsequently inserted the "knew or should have known" standard into the MHRA in 1982 but then removed that language in 2001. The Frieler majority found significance to the 2001 deletion, rejecting the plaintiff's argument for strict employer liability and instead accepting, based on legislative history, the proposition that by the latest amendment, the legislature intended to conform Minnesota law to the prevailing federal analysis. The dissenters found the legislative history ambiguous and nonbinding and construed the legislative purpose to be simply to leave the standard of proof for sexual harassment to the courts, and thereby leave room for continuation of the "knew or should have known" standard the MN Supreme Court had previously articulated, not only in Continental Can but also in its more recent 2001 ruling in Goins v. West Group. Significantly, no justice supported strict liability; i.e. none of the judges voted to hold employers automatically responsible for supervisor harassment.

What’s Next?
On remand, a jury will be asked to determine (1) whether the sexual harassment claimed by the plaintiff but not witnessed by anyone actually happened and (2) whether the alleged perpetrator, who was not the plaintiff's supervisor at the time of the alleged harassment but was a supervisor with arguable influence in a department transfer the plaintiff sought and was granted, sufficiently acted as her supervisor to expose the employer to liability for his alleged harassing acts. If the answer to the second question is “no,” the employer will be free to invoke the affirmative defense, based on its anti-harassment policy, to avoid liability. If the answer is “yes,” it appears the company’s fate will hinge on the answer to the first question about whether the plaintiff was indeed harassed as she claims.

Final Note
In this opinion, the Minnesota Supreme Court basically assumed without discussion that the mere grant of the simple, lateral department transfer, coupled with an increase in work hours from part time to full time, constituted a “tangible employment action” associated with the alleged harassment, such that the employer will be liable if the harassment happened and was perpetrated by a person acting in a supervisory capacity. In Frieler, the plaintiff admittedly never reported the alleged harassment and also never suffered an adverse employment action. She did receive the lateral transfer to a department she desired and suffered no disappointing employment decision. (Note that a qualifying tangible action need not be an adverse action. Where submission to sexual harassment leads to favorable tangible employment action, the test is met.) Hence, even if the answer to question 2 above is “yes” as to the supervisory status of the alleged harasser, the employer should have access to the affirmative defense if the lateral inter-department transfer is not enough to constitute a tangible action. Ordinarily, case authority supports the proposition that a lateral transfer ordinarily is not an adverse action sufficient even to support a discrimination claim. See, for example, Holland v. Sam’s Club, 487 F.3d 641, 645 (8th Cir. 2008) (transfer from forklift operator to stocker was not adverse employment action where plaintiff’s wages and benefits did not change); Zain v. Polarfab, 2007 WL 1191704, at *4-5 (Minn. Ct. App. Apr. 24, 2007) (lateral transfer between work groups was not adverse action under MHRA). Although the Minnesota Supreme Court offered no comment on its analysis, perhaps the fact that an upgrade to full-time status was involved made a difference here. The Court may be called upon in the future to clarify the scope of just what constitutes a “tangible employment action” for purposes of supervisor sexual harassment analysis.

The Frieler opinion also embraces a definition of “supervisor” which seems more expansive than prevailing federal law. It will be important to follow future decisions to determine if the Court is more inclined to assure that Minnesota state law conforms to federal law, as it determined was the legislative intention, or if the Court is inclined to forge an independent path in this area.