Employer liability for sexual harassment occurring in the workplace varies from country to country. Courts have generally established the standards by which the court or jury determines an employer's vicarious liability for the sexually harassing behavior of its employees, agents, clients or vendors. These standards have a direct effect on the sexual harassment prevention policies that employers adopt and on the balance sheet of companies. In the United States for example, large compensatory and punitive damages have been assessed against private and public companies in sexual harassment cases.

The standard of liability applied to employers tends to vary depending on the type of harassment involved and the role of the harasser in the organization. Employers are often held liable for the sexually harassing conduct of supervisors and managers in quid pro quo sexual harassment cases because, when applying agency law principles, such employees can be deemed to be acting as the agent of the employer when it comes to negotiating employment status, benefits, and conditions. In determining employer liability for hostile work environment sexual harassment, courts and juries sometimes take into account the employer's degree of knowledge of the harassing behavior and the actions taken by an employer to prevent sexual harassment by its employees, agents, vendors or clients.

United States Approach

United States courts apply three different standards of care in workplace sexual harassment cases depending on the type of harassment involved and the role of the harasser in the organization. 

• Supervisor/ Quid Pro Quo Harassment: The U.S. Supreme Court has held that an employer is always liable for a supervisor or manager's harassment if it results in a tangible employment action. Tangible employment actions include demotion, firing, or unfavorable changes in work assignment. From Burlington Industries, Inc. v. Ellerth, 118 S. Ct. 2257 (1998), Faragher v. City of Boca Raton, 118 S. Ct. 2275 (1998); and U.S. Equal Employment Opportunity Commission, Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors, Notice No. 915.002 (June 18, 1999). It can also include employee resignation, under the constructive discharge doctrine, if the employee can show the "abusive work­ing environment became so intolerable that her resigna­tion qualified as a fitting response.” Cited in: Pennsylvania State Police v. Suders, 542 U.S. 129 (2004).
• Supervisor/ Hostile Work Environment Harassment: In order to encourage employers to adopt sexual harassment policies and restrict the application of automatic liability in cases of hostile work environment harassment, the U.S. Supreme Court has held that, if supervisor harassment does not involve a tangible employment action, the employer may be able to escape liability or limit damages by establishing a specific affirmative defense. To establish this defense, employers must show that it (1) exercised reasonable care to prevent and correct promptly any harassing behavior, and (2) that the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. From Burlington Industries, Inc. v. Ellerth, 118 S. Ct. 2257 (1998), Faragher v. City of Boca Raton, 118 S. Ct. 2275 (1998); and U.S. Equal Employment Opportunity Commission, Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors, Notice No. 915.002 (June 18, 1999).
• Co-Worker or Non-Employee / Hostile Work Environment Harassment: U.S. courts and the U.S. Equal Opportunity Employment Commission have determined that, in respect of sexually harassing conduct by one co-worker toward another, an employer is liable for this hostile work environment harassment if the employer (or any of its agents or management level employees) knew or should have known of the misconduct. The employer can escape liability, however, if it can show that it took immediate and appropriate corrective action. The standard of liability is the same for harassment committed by non-employees such as clients or vendors of the employer. In non-employee cases, however, the Commission also takes into account "the extent of control and any other legal responsibility which the employer may have with respect to conduct of [harassing] non-employees." From U.S. Equal Employment Opportunity Commission, Guidelines on Discrimination Because of Sex, 29 C.F.R. s. 1604.11(d) and (e). See also U.S. Equal Employment Opportunity Commission, Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors, Notice No. 915.002 (June 18, 1999); Burlington Industries, Inc. v. Ellerth, 118 S. Ct. 2257 (1998); and Burrell v. Star Nursery, Inc.,170 F.3d 951 (9th Cir. 1999)(affirming a dismissal of a claim of sexual harassment against co-workers where there was no witness testimony or report filed by the victim to indicate that the employer or managing employees should have known about the harassment).

Canada's Approach

The Canadian Human Rights Commission has summarized the Canadian courts' employer liability standard for cases involving sexual harassment in the workplace as follows:

Ultimately, employers are responsible for acts of work-related harassment. The Supreme Court has said that the goal of human rights law is to identify and eliminate discrimination. Employers control the organization, and are therefore the only ones who can actually reverse the negative effects of harassment and ensure a healthy work environment. So no matter what kind of workplace you own or business you operate, you have a responsibility to make sure your employees do not experience harassment. If harassment does occur, you must show that you did everything you could do to prevent it, or to alleviate its effects.

From Canadian Human Rights Commission, Anti-Harassment Policies for the Workplace: An Employer's Guide (citing Robichaud v. Treasury Board, 1987) (March, 2006).

Japan's Approach

In Japan, courts have applied Article 709 of the Civil Code to hold harassers and employers liable for sexual harassment in the workplace. Article 709 defines as torts all actions in violation of the equality principles set out in the Constitution. As a result, Japan's approach to employer liability standards is based on a doctrine of tort law, respondeat superior. Respondeat superior holds an employer liable for the wrong-doing of an employee when the misconduct is committed within the scope of employment. This doctrine of vicarious liability may be used to hold an employer in Japan responsible for acts of sexual harassment committed by an employee. From Japanese Civil Code, Article 715.

France's Approach

By contrast with Japan, France does not recognize the legal theory, respondeat superior. Under French Penal Code, Article 121-1, "[n]o one is criminally liable except for his own conduct." Nonetheless, legal entities such as corporations can be criminally liable "for the offences committed on their account by their organs or representatives" when their representatives/employees are perpetrators or accomplices to acts of sexual aggression. From French Penal Code Article 222-33-1, with reference to Article 121-2.

Australia's Approach

Following two recent cases in New South Wales and Queensland, an Australian employer may be held vicariously liable for sexual harassment committed by its employees if the employer did not take all reasonable steps to prevent the misconduct:

• In one case, the employer was found not to have taken all reasonable steps to prevent unwanted sexual touching and comments by an employee. The employer's managing staff had prior knowledge of the harasser's harassing conduct toward previous employees but "had failed to recognize his behaviour as potentially unlawful, or implement.appropriate monitoring strategies to ascertain whether staff felt humiliated, intimidated or offended. This inaction permitted the harasser to continue conducting himself 'as usual'" and was deemed by the court to be an implicit authorization of the harassing conduct. The employer was found liable for the harassment even though it had taken prompt action to investigate the matter and dismiss the harasser.
• In the second case, an employer was held to be liable for sexual harassment by an employee. "Only having an 'open door' complaints policy in place was not enough for the employer to show it had taken reasonable steps to protect their employees." The court requires that employers take all reasonable steps, including the training of managers and the establishment of clear reporting procedures.

From Geraldine Dann, Lauren Sharp, and Glenn Fredericks, Are you liable? Sexual Harassment in the Workplace (November 2003).

A recent case held an employer liable for the rape of an employee away from the workplace and outside of working hours. Federal Magistrates Court of Australia, Lee v. Smith & ORS (2007).  The Federal Magistrate in that case determined that the rape was “the culmination of the earlier incidents of sexual harassment directly in the workplace” and “arose out of the work situation.”  Id.  The court also found that the rape resulted in part from the employer’s failure to adhere to correct policies to prevent and mitigate sexual harassment.