A recent unpublished decision out of the Superior Court of New Jersey, Appellate Division suggests some new dangers to employers, large and small, which failed to avail themselves of what is known as the Faragher defense to sexual harassment and hostile work environment claims.  Even those that offer annual training to staff and management may find themselves defenseless through inaction or inattentiveness.

In Lehmann v. Toys ‘R’ Us, Inc.[1], the New Jersey Supreme Court has held that an employer may be vicariously liable, in accordance with principles of agency law, for sexual harassment committed by a supervisor that results in a hostile work environment. When a supervisor acts beyond the scope of his or her employment, the employer will be vicariously liable if the employer contributed to the harm through its negligence, intent, or apparent authorization of the harassing conduct, or if the supervisor was aided in the commission of the harassment by the agency relationship.

Employers are not, however, without a defense. For claims alleging vicarious liability for supervisory sexual harassment, in 2015, the New Jersey Supreme Court issued its opinion in Aguas v State[2] which adopted as the governing standard the test set forth by the United States Supreme Court in Burlington Industries v. Ellerth[3]. Under the Ellerth/Faragher analysis, the employer in a hostile work environment sexual harassment case may assert as an affirmative defense to vicarious liability that it exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise, provided that the employer has not taken an adverse tangible employment action against the plaintiff employee. The Court adopted this defense primarily because it furthers the purpose of the New Jersey Law Against Discrimination (LAD), N.J.S.A. § 10:5-1 et seq., of eliminating sexual harassment in the workplace by motivating employers to maintain effective anti-harassment policies, and by encouraging employees to take prompt action against harassing supervisors in accordance with those policies. The affirmative defense is consonant with the Court’s prior jurisprudence and advances the legislative goal of the LAD.

Most employers are aware of their responsibility to provide staff and management training toward the elimination of sexual harassment and a hostile work environment.  They have learned that they need to have a clear policy in place that prohibits it, and which policy must set forth a fair and open complaint procedure. Where many companies fail is the cultural change of creating a “from the top down” management style that aggressively investigates complaints and promptly corrects them. In this area, it is most important to remember the well coined phrase “action speaks louder than words”.


But there is a new and developing theory that will impose a “double hit” on employers that fail to follow the Aguas/Faragher guidelines to permit an affirmative defense to sexual harassment claims.  A company’s failure to properly enforce its policy is now being used as a sword against the company as plaintiffs are now alleging that a company’s failure to follow its own policy will actually create a separate cause of action for breach of contract against the employer.  What this means is that, in addition to the traditional claims or violations of federal and state discrimination laws, a complaining staff member will now allege a straight breach of contract action against the employer for its failure to follow its own policy.  Thus, not only will an employer lose the Aguas and Faragher defense but may also create a new theory of liability upon itself by its failure to adhere to its own policies that prohibit sexual harassment in the workplace.  Recently, this theory of liability was recognized by the Superior Court of New Jersey, Appellate Division in Maselli v Valley National Bankcorp[4], which was called upon to decide whether or not Valley National Bancorp could rely upon disclaimers in its policy manual declaring all staff as “at will” employees and specifically that part of its policy that stated that no employment contract or rights to employment would be created by its policy manual.  The bank alleged that this disclaimer also precluded plaintiff from alleging contractual rights against the bank for its alleged failure to follow its own policy manual.  The court suggested that disclaimers, if clearly written, could preclude a contractual cause of action on this basis but declined to afford the defendant bank that relief based upon ambiguities which it found in the policy.

After Maselli, all employers should evaluate the language in its policy manual and determine whether or not it needs revision consistent with the pronouncement of Maselli and to renew its commitment to create a cultural change in its management style for the elimination of sexual harassment in the workplace. This will enable the company to avail itself of the important defenses offered in Aguas, Ellerth and Faragher. 

Price, Meese, Shulman & D’Arminio, P.C. is well acquainted with these intricate and important details in employment law and can offer these critical services to all employers throughout the tristate area.  To contact the author, John Molinelli, click here.  


[1] 132 N.J. 587 (1993)

[2] 220 N.J. 494 (2015)

[3] 524 U.S. 742 (1998), and Faragher v City of Boca Raton, 524 U.S. 775 (1998)

[4] Unpublished No. A-0440-16T1, decided February 13, 2018