Interpreting California's Fair Employment and Housing Act ("FEHA"), a California state appellate court held recently that employers are not liable when their customers or clients sexually harass their employees. Although the ruling would appear, at first glance, to minimize employer exposure in such a case, employers should view the decision with caution and should continue to protect their employees from harassment regardless of the source.

In Salazar v. Diversified Paratransit, Inc., a bus driver sued her employer under the FEHA after a male passenger repeatedly sexually harassed her by touching her hair, continuously staring at her, and exposing himself to her while riding on her bus. The employer was aware of the male passenger's ongoing sexual harassment since three other female bus drivers had previously filed complaints about him.

A divided panel of the California Court of Appeal determined that an employer is directly liable only for harassment that its employees commit and specifically rejected employer liability for the conduct of clients and customers who are not employed by the employer.

It remains to be seen whether this decision will stand. Two justices of the court, over a vigorous dissent, rejected the contrary views of the California Department of Fair Employment and Housing and the federal Equal Employment Opportunity Commission ("EEOC"), as well as the decisions of a number of federal courts. The court also rejected legislative pronouncements, including a provision of the FEHA, that employers are obligated to provide their employees with harassment-free workplace environments. We expect that the decision will be revisited, perhaps by the state Supreme Court. If the decision is left to stand, we would also expect that the Legislature would consider legislative repeal.

Even during the current application of this decision, and any subsequent uncertainty over its viability, employers would be wise to remain vigilant and protect their employees from harassment by customers, clients, vendors, and others. Employers should also respond to complaints about harassment by such non-employees in the same way as they do where the alleged harasser is an employee. Not only may the decision be overturned, but the EEOC and the federal courts continue to expect employers to shield employees from harassment from every source where the employer knows or has reason to know of the harassment, which apparently was the case in Salazar v. Diversified Paratransit, Inc. Employers also remain exposed to liability under various negligence and other tort theories.

Tracy A. Warren is a member of the Labor and Employment Law Practice Group of Luce, Forward, Hamilton & Scripps LLP in the San Diego office and can be reached at 619.699.2547 or twarren@luce.com .