California Court of Appeal Holds Employer Not Strictly Liable Under FEHA for Harassment by Supervisor Who Did Not Supervise Plaintiff

The California Court of Appeal (Second Appellate District) issued an important decision addressing employer liability for sexual harassment committed by a supervisor who did not supervise the plaintiff.

In Doe v. Wells Fargo Bank, N.A., the court held that an employer is not strictly liable under the Fair Employment and Housing Act (FEHA) if the harasser did not supervise the plaintiff. The court concluded that strict liability applies only when the harasser is the plaintiff's supervisor acting in a supervisory capacity; otherwise, the negligence standard governs. This published decision provides useful guidance for California employers defending harassment claims.

Factual Summary

Plaintiff Jane Doe worked as a wealth advisor in Wells Fargo's private bank. The alleged harasser, Eric Pagel, was an investment strategist who worked with her clients. Although Doe viewed Pagel as “a superior,” he was not Doe’s supervisor, Wells Fargo did not designate him as a supervisor of any employee, and he had no power to hire, fire, or approve time off.

After a January 2020 work dinner in Bakersfield, Pagel went to Doe’s hotel room where the two had sex. Doe said she was too intoxicated to consent; Pagel said the encounter was consensual. Doe first raised concerns informally with a coworker, who did not escalate them. After Doe reported the alleged assault to Wells Fargo’s ethics hotline in November 2020, Wells Fargo expedited an investigation and placed Pagel on paid leave. The investigator found the sexual harassment and assault allegations unsubstantiated but identified policy violations, and Wells Fargo issued Pagel a “final notice.”

Doe sued for sexual harassment under the FEHA. Wells Fargo moved for summary judgment, arguing it could not be liable for harassment under either a strict liability or negligence standard. In opposition, Doe argued that Wells Fargo was strictly liable for sexual harassment by any supervisor, regardless of whether the harasser supervised her. The opposition did not address the negligence standard for harassment. The trial court granted summary judgment, finding that strict liability did not apply and that Wells Fargo took prompt and appropriate corrective action in response to Doe’s complaint. Doe appealed, and the Court of Appeal affirmed. The Court of Appeal declined to reach Doe’s negligence and ratification theories because she forfeited them.

The Court's Holding

Under the FEHA, employers are strictly liable for harassment by a supervisor, but liable for coworker harassment only if negligent. An employer is negligent if it knew or should have known of the harassment and failed to take immediate and appropriate corrective action. Doe conceded Pagel was not her supervisor but argued strict liability applies whenever the harasser supervises anyone. The court disagreed.

The court reasoned that a supervisor with no authority over the plaintiff stands in the same position as a coworker, and that Doe’s proposed rule would produce arbitrary results, such as strict liability for a mid-level manager who harasses her own boss. For purposes of its analysis, the court assumed, without deciding, that Pagel supervised other employees.

Importantly, the court did not limit strict liability to a plaintiff's direct or immediate supervisor, noting that the FEHA's broad definition of “supervisor” may reach others.

Takeaways for Employers

The Doe v. Wells Fargo Bank, N.A. case provides important takeaways for employers:

1. Prompt, Appropriate Remedial Measures Remain Critical: Although the Court of Appeal did not reach the negligence standard, the trial court found that Wells Fargo took prompt and appropriate corrective action, which supported summary judgment. Upon receipt of a complaint, employers should promptly conduct a thorough, unbiased investigation of the employee’s concerns and take appropriate remedial action where warranted.
2. The Harasser's Relationship to the Plaintiff Controls: The liability standard depends on whether the harasser supervises the plaintiff, not whether the harasser supervises anyone else. Although Doe involved sexual harassment, the FEHA applies the same supervisor and coworker liability standards to harassment based on any protected characteristic, so the court’s reasoning could extend to other types of harassment claims. Employers defending harassment claims should closely examine the reporting lines and actual authority between the plaintiff and the accused harasser in evaluating risk and potential liability.
3. “Supervisor” Is Still Broadly Defined: The FEHA defines “supervisor” to include anyone who can direct, discipline, or effectively recommend action as to other employees using independent judgment. Because the court did not limit strict liability to direct supervisors, employers should not assume indirect or informal reporting relationships fall outside it. Employers should consider maintaining job descriptions and documented reporting lines that reflect each employee’s actual authority.
4. Open Questions Remain: The court did not decide whether a FEHA plaintiff may rely on a common law ratification theory or address strict liability for harassment by an employer’s “agent.” Plaintiffs will likely continue testing these theories.

While this decision offers helpful clarity, harassment claims remain highly fact-specific. Employers should consider working with employment counsel to evaluate reporting structures, policies, and investigation procedures to minimize the risk of liability.