Project Posner

Lead opinion by [the court]

    492 PER CURIAM. We have consolidated for decision two appeals reargued en banc on the same day. Although the makeup of the en banc court is slightly different in the two cases, **** the similarity of the issues has persuaded us to treat the cases together. Unfortunately, a majority of the judges has not converged upon a single rationale for the resolution of 493 all the issues in these cases. The purpose of this per curiam opinion is to describe the cases briefly, to announce the outcomes and indicate the basic lines of agreement and disagreement, to articulate the court's unanimous view with regard to the disposition of the state law issues, and to refer the reader to the separate, signed opinions that follow.

   **** See notes * and ** above. Circuit Judge Ripple did not participate in the consideration or decision of either case. All the other active judges participated in the consideration and decision of both cases.

   Both cases primarily charge sexual harassment of a female employee by a supervisory employee in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq. And in both the plaintiff is appealing from a grant of summary judgment.

   In Jansen, with which we begin, the plaintiff has additional claims--of retaliation in violation of Title VII and of intentional infliction of emotional distress in violation of the common law of Illinois. The entire court believes that the district judge was right to grant summary judgment for the defendant, Packaging Corporation of America, on both these claims. Some of the alleged acts of retaliation are outside the scope of Jansen's EEOC charge and are therefore waived. As for the other acts, PCA presented noninvidious reasons for them (for example, that Jansen was assigned a lunch hour--one of the alleged retaliatory acts--in order to assure that the phone in her department would be manned at all times). Since Jansen presented neither evidence that these reasons were mere pretexts nor any other evidence from which retaliatory intent could be inferred, the company was entitled to summary judgment. Dunning v. Simmons Airlines, Inc., 62 F.3d 863, 868-69 (7th Cir. 1995). As for Jansen's claim of intentional infliction of emotional distress, it is preempted by the Illinois Human Rights Act, which confines claims of "civil rights violation" under Illinois law to proceedings under the Act. 775 ILCS 5/8-111(C). Sexual harassment is one of the civil rights violations specified in the Act, 775 ILCS 5/2-102(D), and Illinois' highest court has held therefore that common law tort claims that depend on allegations of sexual harassment may be brought only under the Act. Geise v. Phoenix Co. of Chicago, Inc., 159 Ill. 2d 507, 639 N.E.2d 1273, 1276-78, 203 Ill. Dec. 454 (Ill. 1994). Jansen's common law claim of infliction of emotional distress is supported by the identical factual allegations of her Title VII claims and is therefore pre-empted.

   Jansen's principal claim is of sexual harassment in violation of Title VII. She was hired by PCA as a secretary to Al Antoni, the manager of the Tooling Services Department of PCA's Wheeling, Illinois plant. She has presented evidence that he subjected her to undesired and offensive sexual advances. He once intimated to her that he would hold up her raise if she didn't have sex with him. He held it up for a time, but eventually she did receive it and it was made retroactive. The incident with the raise is the core of her claim that she was subjected to what is known in the case law of sexual harassment under Title VII as "quid pro quo" harassment. In addition, she complains that Antoni's repeated advances created a hostile working environment. Reargument in Jansen was granted in advance of the release of the panel opinion.

   Ellerth was employed in marketing in the Chicago office of the mattress-fabric division of Burlington Industries. Theodore Slowik, the division 's vice president for sales and marketing, was not Ellerth's immediate supervisor, and was based in New York; but he was her supervisor's supervisor, and as such saw her in the course of business on a regular basis. He made sexual advances to her over a period of a year or so and from time to time intimated that she would not be promoted or otherwise do well at Burlington Industries unless she submitted to his advances. Ellerth argues that Slowik's conduct placed Burlington Industries in violation of Title VII on both a quid pro quo and a hostile-environment theory.

   With regard to Jansen's claim of hostile-environment harassment, the entire court agrees that an employer who is negligent in the hiring, supervision, monitoring, or retention of the plaintiff's supervisor (Antoni) is liable for the supervisor's sexual harassment and that the plaintiff has submitted enough evidence of PCA's negligence to create a triable issue, so that summary judgment should not have been granted to PCA. All the judges with the exception of Judges 494 Easterbrook, Rovner, and Wood believe that negligence is the only proper standard of employer liability in cases of hostile-environment sexual harassment even if as here the harasser was a supervisor rather than a coworker of the plaintiff. The view of these judges is set forth in Judge Flaum's opinion, which is joined by Judges Cummings, Bauer (as to No. 96-1361 (Ellerth)), Cudahy (as to No. 95-3128 (Jansen)) (with the reservations indicated in Judge Cudahy's separate opinion), Kanne (with the reservations indicated in Judge Kanne's separate opinion), and Evans; in Chief Judge Posner's opinion, which is joined by Judge Manion; in Judge Manion's opinion, which is joined by Chief Judge Posner; and in Judge Coffey's opinion. Judges Easterbrook, Rovner, and Wood, as explained in Judge Easterbrook 's and Judge Wood's opinions, believe that the proper standard of employer liability in all cases of sexual harassment by a supervisor is respondeat superior, provided, however, that the harassment was committed by the supervisor in the course of exercising his actual or apparent supervisory responsibilities, was foreseeable, and subjects the employer to liability under the principles of the applicable state law. The view that the proper standard of care in cases of a supervisor's creation of a hostile working environment is negligence is thus the law of the circuit, as it is the majority's view.

   Judge Flaum's opinion concludes that Jansen has a viable quid pro quo claim, as do Judges Easterbrook, Rovner, and Wood, though their route to this conclusion is different, as they do not believe that there should be any different standard for an employer's liability for supervisors' harassment depending on whether it is hostile-environment harassment or quid pro quo harassment. Chief Judge Posner and Judges Coffey and Manion disagree that Jansen has a viable quid pro quo claim, Chief Judge Posner and Judge Manion because they believe that strict liability for quid pro quo harassment should be limited to "company acts" (such as firing or demoting), as distinct from mere threats, and Judge Coffey because he rejects strict liability in quid pro quo cases and also because he deems Jansen to have waived her quid pro quo claim.

   In Ellerth's case, the panel decision, reversing the grant of summary judgment, was issued, 102 F.3d 848 (7th Cir. 1996), but, as is our practice, was vacated when rehearing en banc was granted. Judge Wood's opinion for the panel had held that Ellerth had presented enough evidence both of quid pro quo harassment, and of hostile-environment harassment by a supervisory employee, to create triable issues, so that summary judgment should not have been granted to Burlington Industries either. All the judges except Judges Easterbrook, Rovner, and Wood believe that the hostile-environment claim was expressly waived by Ellerth in her briefs to the panel and that the dismissal of this claim should therefore be affirmed. All the judges except Chief Judge Posner and Judges Coffey and Manion believe that Ellerth's evidence of quid pro quo harassment was sufficient to create a genuine issue of material fact, thus precluding summary judgment, although the routes to this conclusion are different. As noted earlier, Chief Judge Posner and Judge Manion believe that an employer's liability for quid pro quo harassment should be limited to company acts, as explained in their opinions, as opposed to mere threats by the supervisor, and there were no company acts here. Judge Coffey believes, as also noted earlier, that there is no strict liability in a quid pro quo case and that there is no proof of negligence on the part of Burlington Industries with respect to Slowik 's harassment of Ellerth.

   The court's inability to forge a majority position with regard to the proper standard for evaluating an employer's liability for sexual harassment by a supervisory employee means that panels of the court that have similar cases in the future, and the district judges of this circuit on remand in these cases and in similar future cases, will have to determine and be guided by the narrowest grounds for the decisions in these two cases. Marks v. United States, 430 U.S. 188, 193, (1977). Perhaps in some future case this court will be able to forge a majority position; perhaps the Supreme Court will bring order to the chaotic case law in this important field of 495 practice. In the meantime, it is important for the district courts of this circuit to recognize in this welter of opinions that certain views do command a majority within our court: in particular, that the standard for employer liability in cases of hostile-environment sexual harassment by a supervisory employee is negligence, not strict liability, and that liability for quid pro quo harassment is strict even if the supervisor's threat does not result in a company act. These principles will bind the panels of this court and the district courts of this circuit until the Supreme Court resolves the issues.

   In accordance with the foregoing discussion, the judgment in Jansen is affirmed with respect to the claims of retaliation and intentional infliction of emotional distress, and is otherwise reversed and remanded; the judgment in Ellerth is affirmed with respect to the claim of hostile-environment harassment but is reversed with respect to the claim of quid pro quo harassment; both cases are remanded to the district court for further proceedings not inconsistent with this opinion.

Concurrence by FLAUM; CUDAHY; KANNE; COFFEY (In Part); EASTERBROOK (In Part); MANION; POSNER; WOOD; ROVNER

FLAUM, Circuit Judge, joined by CUMMINGS, BAUER (in No. 96-1361), CUDAHY (in 95-3128), KANNE (in part), and EVANS, Circuit Judges. Title VII makes it unlawful for any employer "to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin." 42 U.S.C. § 2000e-2(a)(1). It is well established that this language encompasses a prohibition on sexual harassment in the workplace. Harris v. Forklift Sys., Inc., 510 U.S. 17, 370, (1993); Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 64-65, (1986). In Meritor the Supreme Court instructed that traditional agency principles should guide employer liability rules in the harassment context. 477 U.S. at 72. The Court also cautioned, however, that "such common law principles may not be transferrable in all their particulars to Title VII." Id. Accordingly, while I believe that agency principles should inform and "limit" this court's analysis of employer liability, see id., I share Chief Judge Posner 's concern that an undue reliance on the Restatement 2d of Agency ("the Restatement") could obscure the issues at stake.^[1] A frank discussion of the policies underlying this federal imposition of liability upon an employer is necessary.

   The original objective of Congress in enacting Title VII of the Civil Rights Act was to achieve equality in employment opportunities through the eradication of discriminatory barriers. See Griggs v. Duke Power Co., 401 U.S. 424, 430-31, (1971). By definition, harassment that alters the terms and conditions of employment--as it must to be actionable, see Meritor, 477 U.S. at 67--denies its victims (almost invariably women) an opportunity to succeed equal to that of employees who remain free of such intolerable treatment. To further the goals of the Civil Rights Act, therefore, the imposition of liability under Title VII seeks to deter harassment, and our resolution of this issue, to the fullest extent possible, should be geared toward minimizing its occurrence. See 29 C.F.R. § 1604.11(f) ("Prevention is the best tool for the elimination of sexual harassment."). As Congress amended Title VII in the Civil Rights Act of 1991 to permit victims to collect compensatory and punitive damages, see Williams v. Banning, 72 F.3d 552, 553 (7th Cir. 1995); cf. Dockter v. Rudolf Wolff Futures, Inc., 913 F.2d 456, 461 (7th Cir. 1990), liability now serves to compensate victims of harassment as well. Yet the goal of ensuring equal employment opportunities for both men and women dictates that deterrence be the foremost objective.

    496 I.

   A.

   With this premise as my starting point, I turn first to a discussion of the appropriate standard for employer liability in instances of quid pro quo harassment. Quid pro quo harassment occurs where "submission to sexual demands is made a condition of tangible employment benefits." Dockter, 913 F.2d at 461; see also Nichols v. Frank, 42 F.3d 503, 511 (9th Cir. 1994) (quid pro quo occurs where supervisor "conditions a job, a job benefit, or the absence of a job detriment, upon an employee's acceptance of sexual conduct"). Pre-Meritor, we held in Horn v. Duke, 755 F.2d 599, 603 (7th Cir. 1985), that employers were strictly liable for quid pro quo harassment perpetrated by their supervisory employees. Our holding in Horn was premised in part on agency law, see id. at 605, but was prior to Meritor's explicit directive. Until the panel decision in Ellerth, this court had yet to revisit our holding more fully guided by agency principles. See Baskerville v. Culligan Int'l Co., 50 F.3d 428, 431-32 (7th Cir. 1995). In the period since Meritor, seven other circuits have stated that an employer should be held vicariously liable for a supervisor's quid pro quo harassment under agency principles. See Davis v. City of Sioux City, 115 F.3d 1365, at *2 (8th Cir. 1997); Nichols, 42 F.3d at 513-14 (9th Cir. 1994) (collecting cases); Bouton v. BMW of N. Am., Inc., 29 F.3d 103, 106-07 (3d Cir. 1994); Karibian v. Columbia Univ., 14 F.3d 773, 777 (2d Cir.), cert. denied, 512 U.S. 1213, (1994); Sauers v. Salt Lake County, 1 F.3d 1122, 1127 (10th Cir. 1993); Kauffman v. Allied Signal, Inc., 970 F.2d 178, 185-86 (6th Cir.), cert. denied, 506 U.S. 1041, (1992); Steele v. Offshore Shipbuilding, Inc., 867 F.2d 1311, 1316 (11th Cir. 1989).^[2] I believe this circuit should follow suit.

   Agency law supports the imposition of vicarious liability upon employers for supervisory quid pro quo harassment. Section 219(a) of the Restatement provides that an employer is liable for torts of an employee committed while acting within the scope of his or her employment. We have previously explained that "the deliberate act of an employee acting within the scope of his authority is the act of the employer, for an employer, at least where it is a corporation, acts only through agents." Shager v. Upjohn Co., 913 F.2d 398, 404 (7th Cir. 1990); see also Lancaster v. Norfolk & Western Ry., 773 F.2d 807, 820 (7th Cir. 1986), cert. denied, 480 U.S. 945, (1987); Horn, 755 F.2d at 605. Scope of employment, however, is an amorphous term. While Judge Wood in her examination of the subject would hinge the imposition of liability on "scope of employment" delineated by the "meaningful limitation[s]" of section 228 of the Restatement, see Wood, p. 186, I harbor reservations whether those limitations are indeed instructive.^[3] Section 228 appears to 497 have little relevance in the sexual harassment setting. In my judgment, reliance on the Restatement in this instance is the type of formalism that does not get us far in practice.

(1) Conduct of a servant is within the scope of employment if, but only if:

(a) it is the kind he is employed to perform;

(b) it occurs substantially within the authorized time and space limits;

(c) it is actuated, at least in part, by a purpose to serve the master, and;

(d) if the force is intentionally used by the servant against another, the use of force is not unexpectable by the master.

I imagine that subsections (a) and (c) would infrequently be of analytical value in a sexual harassment case, for presumably employers are not in the business of harassment, and it is not conceivable that harassment of an employee will serve the interests of an employer. Moreover, the time and space limitation of subsection (b) has very little meaning in the context of supervisory harassment: the supervisor/subordinate dynamic does not magically dissolve when an employee punches out for the day, for the supervisor resumes a position of authority the very next morning. Subsection (d) I had always understood to be applicable in instances where force is part of the job description (e.g., the proverbial bouncer). Subsection (d) may be transferrable to cases of sexual harassment since, as Judge Easterbrook pointed out in oral argument, statistically speaking, every employer should anticipate harassment. I cannot envision, however, if given the universality of this expectation, how this subsection functions as a "meaningful limitation." In sum, I am unable to conclude how subsection 228 can be applied with great utility to the bulk of sexual harassment litigation. Nor am I concerned (nor do I seek to make any prediction) that liability will be avoided if the court were to follow Judge Wood's analysis, as has been charged, see Wood, p. 187. I simply am of the view that a command to circumscribe liability through subsection 228 would leave the district courts without sufficient guidance.

   In instances of discrimination, courts have relied upon the concept of delegated authority to flush out the term "scope of employment." (Agency purists may choose to recognize "delegated authority" as a wholly alternative theory.) When a supervisor wields the authority actually delegated to him to dole out job benefits and detriments in order to condition such employment consequences upon receipt of sexual favors, "the supervisor, by definition, acts as the company." Steele, 867 F.2d at 1316; see also Kotcher v. Rosa and Sullivan Appliance Ctr., Inc., 957 F.2d 59, 62 (2d Cir. 1992) ("The supervisor is deemed to act on behalf of the employer when making decisions that affect the job benefits) of the employee. From the perspective of the employee, the supervisor and the employer merge into a single entity."); Bouton, 29 F.3d at 106-07 ("Scope of employment liability is often invoked in quid pro quo cases because the supervisor has used his authority over the employee's job to extort sexual favors"); Nichols, 42 F.3d at 514 ("A harasser is able to grant such job benefits or detriments only because he has . . . authority to do so 'delegated to him by his employer'. . . .") (internal citations omitted). It is my belief that liability for sexual harassment should stem from the delegation of authority which can be used to harass.^[4]

   Although we did not formally adopt this "delegated authority" justification in Horn, we recognized and explained the argument:

By delegating power to [a supervisor], the "employer" and [the supervisor] essentially merged; as long as the tort complained of was caused by the exercise of this supervisory power, [the supervisor] should be deemed as acting within the scope of his employment, and the employer should be held liable for the tort.

755 F.2d at 605. We have also noted the argument approvingly in several post-Meritor cases, including Shager, where we explained that "a supervisory employee who fires a subordinate is doing the kind of thing that he is authorized to do, and the wrongful intent with which he does it does not carry his behavior so far beyond the orbit of his responsibilities as to excuse the employer." 913 F.2d at 405; see also Hunter v. Allis-Chalmers Corp. Engine Div., 797 F.2d 1417, 1422 (7th Cir. 1986). In sum, because a supervisor would be unable to engage in quid pro quo harassment without the authority and power furnished by the employer, the supervisor's conduct is properly imputed to the employer. See Bouton, 29 F.2d at 107; see also Meritor, 477 U.S. at 70-71 (outlining position of EEOC: "where a supervisor exercises the authority actually delegated to him by his employer, by making or threatening to make decisions affecting the employment status of his subordinates, such actions are properly imputed to the employer whose delegation of authority empowered the supervisor to undertake them").

    498 These precedential statements and the Restatement answer only the question of whether agency law supports the imposition of vicarious liability. The question remains whether the imposition of liability on the employer for quid pro quo harassment serves Title VII's goal of deterring sexual harassment. Implicit in this question is whether a negligence standard better serves the objective of deterrence. The imposition of liability beyond that which is likely to deter sexual harassment serves no constructive purpose and unnecessarily imposes costs on employers, costs that are ultimately passed on.

   In choosing an appropriate standard of liability, we must ask what it is that we expect employers to do in preventing their employees from engaging in harassment. If courts expect only that companies, once made aware of harassment, will take appropriate remedial measures, negligence would appear the appropriate standard. A negligence standard, which asks whether an employer knew or should have known about an employee's acts of harassment and failed to take appropriate remedial action, see Baskerville, 50 F.3d at 432; Juarez v. Ameritech Mobile Communications, Inc., 957 F.2d 317, 320 (7th Cir. 1992); Guess v. Bethlehem Steel Co., 913 F.2d 463, 465 (7th Cir. 1990), necessarily focuses on the steps that employers should take in detecting and subsequently correcting harassment. Underlying a negligence theory is the assumption that employers should not be liable for harassment that they could not be expected to detect. Pursuant to a negligence standard for supervisory harassment, we would presumably require a posted anti-sexual harassment policy, a grievance procedure that allows a complainant to circumvent the supervisory chain of command, and prompt remedial action. See Baskerville, 50 F.3d at 432 (discussing "reasonable" company actions in co-worker harassment situation); see also Meritor, 477 U.S. at 72-73 (existence of discrimination policy and grievance procedure "relevant" to negligence analysis, but not "necessarily dispositive"). Liability would ensue where the policy or process was inadequate or the handling of an identified harasser was deficient. Regrettably, inherent in this scheme is that an harasser will always possess the opportunity to make at least one quid pro quo demand before an employer would incur liability.

   While posted policies and grievance procedures are important, I believe that the remedial goals of Title VII demand more. Companies' efforts to deal with sexual harassment should be systemic and proactive, rather than discrete and reactive. We know that companies can implement grievance procedures and discipline wayward employees; but we also know that companies can hire, train, and promote employees with an eye toward preventing undesirable behavior. In the abstract, a negligence standard conceivably could account for a company's systemic efforts to promote a workplace free of sexual harassment. Employers who had not done enough to reduce the likelihood of harassment throughout the workplace would be found negligent, even if they had no notice that a specific employee was a harasser. In reality, a negligence standard tends to focus on a company's response to specific instances of harassment. Yet a company's reasonable response to a known harasser is not necessarily indicative of reasonable efforts to prevent harassment from occurring in the first place. By refusing to allow companies to escape liability, even in the first instance of supervisory quid pro quo harassment, we better serve the goal of deterrence.^[5]

An employer should take all steps necessary to prevent sexual harassment from occurring, such as affirmatively raising the subject, expressing strong disapproval, developing appropriate sanctions, informing employees of their right to raise and how to raise the issue of harassment under Title VII, and developing methods to sensitize all concerned.

 29 C.F.R. § 1604.11(f).

   Chief Judge Posner warns that if the costs of preventing harassment exceed the harm of the harassment (measured in terms of the harassed employees' recoveries), companies will prefer to pay the occasional judgment rather than to take what he views as unreasonable measures to reform the workplace. 499 See Posner, p. 45. This is an important point, for it suggests that there may be limits beyond which a judicially-fashioned rule, despite its good intentions, will have no power to prevent the discriminatory behavior that Title VII is designed to eradicate. I believe, however, that this concern is premised on an overly pessimistic view of companies' ability to influence the working environment. Cf. Coffey, p. 124. Companies have available a variety of measures--short of installing video surveillance cameras--through which they can both monitor and impact behavior patterns in the workplace. The costs of preventing future harassment essentially represent an investment in long-term freedom from liability. A company faced with recurring liability for harassment perpetrated by its supervisory employees will have an incentive to foster a culture in which harassment is not tolerated.

   B.

   Defining an actionable quid pro quo, of course, is central to the liability standard. A minority of this court is of the opinion, as was the district court in Jansen, that an adverse job consequence is necessary to succeed on a quid pro quo claim (this idea takes the guise of "company act" in Chief Judge Posner's opinion). See Posner pp. 49-53; Manion, pp. 154-57; Kanne, p. 32. Thus, where the employee submits, or the supervisor turns out to have bluffed, or the harassment is reported before any follow-through on the quid pro quo threat, there is no cause of action under a quid pro quo theory. I cannot agree: a clear and serious quid pro quo threat alters the "terms and conditions" of employment in such a way as to violate Title VII and therefore can constitute an actionable claim even if the threat remains unfulfilled.

   Principles of agency law support this construction. Making a clear and unambiguous threat of an adverse job consequence is an exercise of the supervisor's delegated authority, just as actually inflicting the consequence invokes that authority. Included in the supervisor's delegated power to hire, fire, promote, evaluate is the authority to threaten to use that power if certain conditions or requirements are not satisfied. For example, no one would question that a supervisor was exercising the authority entrusted to him if he informed an employee that the employee would be fired if his work did not improve. Thus, a supervisor's quid pro quo threat, i.e., a threat that clearly conditions concrete job benefits or detriments on compliance with sexual demands, can be imputed to the employer for purposes of liability. This position has a toehold in the case law.^[6] Cf. Posner, p. 51 (citing cases requiring adverse job consequence). It should be noted, that many of the cases stating that an adverse job consequence is an element of a sexual harassment claim were decided prior to the 1991 amendments to the Civil Rights Act, when only equitable relief was available. See, e.g., Chamberlain v. 101 Realty, Inc., 915 F.2d 777, 783 (1st Cir. 1990); Hicks v. Gates Rubber Co., 833 F.2d 1406, 1414 (10th Cir. 1987); Highlander v. K.F.C. Nat'l Mgmt. Co., 805 F.2d 644, 648 (6th Cir. 1986). In that context, it arguably made sense to require some realized adverse action. Now that emotional damage is compensable, the scope of quid pro quo should encompass clear unfulfilled threats that cause serious emotional harm.

   This construction of an actionable quid pro quo serves Title VII's goal of deterrence as well. If the aim is to guard against sexual harassment, there is no justification for distinguishing between those cases in which a supervisor carries through - on his threats from those cases in which the employee either submits to the supervisor's demands or 500 in which the supervisor does not act upon his threats. Liability in this situation serves the goal of preventing such abuse from occurring by creating incentives for companies to take steps in hiring and training their supervisors. And while compensation of the victim may be secondary in overall importance to the goal of deterrence, it is undeniable that an employee can be harmed by an unfulfilled quid pro quo. A supervisor's unambiguous communication that adverse job action is imminent if sexual favors are not forthcoming causes the employee real emotional strife. An employee who does not submit may well undergo anxiety, distress, and loss of productivity regardless of whether the threat is carried out. Further, holding employers responsible for threats that clearly condition tangible job benefits upon the receipt of sexual favors and result in injury, even if no adverse job consequences follow, is consistent with the fact that the employee who submits to such a threat is afforded a remedy. See, e.g., Nichols, 42 F.3d 503; Karibian, 14 F.3d 773. Employees who have the wherewithal to call the supervisor 's "bluff" and suffer emotionally as a consequence should not have to go uncompensated, nor should a "bluff" so likely to cause harm go unrecognized by the law. The potential to succeed against a company on a claim of such an abuse of power is no "windfall."

   That said, and cabined by Meritor's directive, we must recognize an exception to the rule of vicarious liability for unambiguous quid pro quo threats: no liability should result where a victim or plaintiff could not have reasonably believed that it was within the supervisor's power to affect the conditions of the plaintiff's job. As explained above, where the supervisor is using his actual delegated authority, liability may be imposed on the company. An employer may also be held liable where a supervisor's quid pro quo threat exceeds his actual authority, but the victim reasonably relies on the supervisor's threat because of his apparent authority.^[7] See Restatement § 219(2)(d). Apparent authority, appropriately described by Judge Wood as "the shadow of actual authority," see Wood, p. 190, exists only "to the extent that it is reasonable for the third person dealing with the agent to believe that the agent is authorized," and the third person actually believes the agent to be authorized. Restatement § 8 cmt. c. Thus, only where it would be reasonable for a victim of harassment to believe that the authority used to harass had been delegated to the supervisor would liability ensue.

   II.

   I now turn to the employer's liability for a supervisor's creation of a hostile work environment. The Supreme Court has held that Title VII offers protection for a hostile work environment, defined as a workplace "permeated with 'discriminatory intimidation, ridicule, and insult'... that is 'sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment.'" Harris, 114 S. Ct. at 370 (quoting Meritor Savings Bank, FSB v. Vinson, 477 U.S. at 63, 67, (1986)). Traditionally, plaintiffs alleging and courts assessing sexual harassment have differentiated between quid pro quo and hostile work environment claims. See Meritor, 477 U.S. at 65;^[8] Dockter 501 913 F.2d at 458. It could be argued that no principled distinction can be drawn between the two types of harassment in cases where the harassment is perpetrated by a supervisor. In either instance, the supervisor may use the authority delegated to him to harass, for, as Justice Marshall observed in his Meritor concurrence, "[a] supervisor's responsibilities do not begin and end with the power to hire, fire, and discipline employees, or with the power to recommend such actions. Rather, a supervisor is charged with the day-to-day supervision of the work environment and with ensuring a safe, productive workplace." 477 U.S. at 76. A minority of this court takes this position and treats sexual harassment under a unified approach informed by the Restatement. See Wood, pp. 172-78.

   I believe sound reasons exist to distinguish between liability standards for quid pro quo and hostile work environment harassment.^[9] My conclusion that harassment of the quid pro quo variety should give rise to employer liability is premised on the belief that companies can effectively communicate to their employees the message that such behavior will not be tolerated. Yet when it comes to the hostile work environment, the courts have been hard pressed even to define the phrase. See Harris, 114 S. Ct. at 372 (Scalia, J., concurring) (" 'Abusive' (or 'hostile,' which in this context I take to mean the same thing) does not seem to me a very clear standard--and I do not think clarity is at all increased by adding the adverb 'objectively' or by appealing to a 'reasonable person's' notion of what the vague word means."); see also id. at 371 (opinion of the court) ("This is not, and by its nature cannot be, a mathematically precise test . . . but we can say that whether an environment is 'hostile' or 'abusive' can be determined only by looking at all the circumstances."); Baskerville, 50 F.3d at 430 ("It is not a bright line, obviously, this line between a merely unpleasant working environment on the one hand and a hostile or deeply repugnant one on the other."); Nichols, 42 F.3d 503, 510 (9th Cir. 1994) ("Questions relating to love and sex are among the most difficult for society to answer--in or out of the workplace--and courts are hardly experts in the realm. Still, we must find ways to define sexual harassment."). Given this definitional difficulty, as well as the variety of views in society as to what constitutes abusiveness, see Nichols, 42 F.3d at 510, I have less confidence in employers' abilities to communicate a consistent message to their employees regarding what constitutes a hostile work environment. Further, it may not be possible for employers to take the measures necessary to eradicate all arguably offensive conduct from the workplace. Because "'abusiveness' is to be the test of whether legal harm has been suffered, opening more expansive vistas of litigation," Harris, 114 S. Ct. at 372 (Scalia, J., concurring), I believe that a more judicious approach is called for when it comes to imposing vicarious liability in hostile work environment cases.

   While agency principles may not "limit" the imposition of a stronger standard of liability in the context of a supervisory hostile work environment, see Wood, p. 186,^[10] we should not lose sight of the purpose of imposing liability on supervisors: deterrence. Because a hostile work environment is difficult to define, employers may be unable to send 502 an unambiguous message to employees. I believe the appropriate inquiry in dealing with this conduct remains whether the company has taken due care to prevent harassment and to respond to complaints of harassment. Traditionally, courts have viewed negligence as a close approximation of what the prevention of harm should cost to the company. See United States v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir. 1947) (Learned Hand's famous test); see also McCarty v. Pheasant Run, Inc., 826 F.2d 1554 (7th Cir. 1987) (collecting cases). By its conception, negligence possesses the flexibility to respond by degree to amorphous or variable harms, such as this one. We observed in Carr v. Allison Gas Turbine, "the greater the [sexual] harassment--the more protracted or egregious, as distinct from isolated ... or ambiguous, it is--the likelier is the employer to know about it or to be blameworthy for failing to discover it." 32 F.3d 1007, 1009 (internal citations omitted). Given courts' definitional uncertainty, the cumulative nature of such harassment, and my unwillingness to unfairly penalize an employer, it is best to let the standard of liability remain at negligence.

   Further, a negligence standard dovetails with the Supreme Court's construction of hostile environment as "severe and pervasive," so that, in theory, a harassed employee will not be left without a remedy against a complicit company. In the overwhelming majority of cases, a plaintiff will have no cause of action until, at a minimum, two instances of harassment have accrued. If we assume prompt reporting (i.e., reporting at initial stages of harassment),^[11] employer liability will be triggered by the very creation of the hostile environment, as the employer will have allowed the harassment to reach the level of "severe and pervasive." As explained above, the law should not tolerate "one free" quid pro quo demand. Similarly, the law should not exhibit patience with an employer that permits harassment, once reported, to reach the point where it creates a hostile work environment.

   This is not to say that we should ignore the reality that when the authority wielded by supervisors over subordinates is used to create a hostile environment, employees may be less likely to report such harassment. While the appropriate standard for both supervisor and co-worker hostile work environment harassment is negligence, I agree with Chief Judge Posner, see Posner, p. 46, that what constitutes due care may not be the same in both cases. Because employers entrust supervisors with authority over other employees who may be abused, harassment by a supervisor is more likely to affect the "terms and conditions of employment." A heightened duty of care should apply both in terms of the machinery available to employees to complain of harassment and in terms of a company's duty to investigate and respond effectively to such complaints. See Meritor, 477 U.S. at 73 (grievance procedure flawed because it required reporting to supervisor); cf. Carr v. Allison Gas Turbine, 32 F.3d 1007, 1009 (7th Cir. 1994) ("It would be unrealistic to expect management to be aware of every impropriety committed by every low-level employee.").^[12] This intensified concern for supervisory abuse is implicit in the concept of negligence 503 and in the Supreme Court's multi-factor approach, see Harris Forklift, 114 S. Ct. at 371; it is manifest in the Supreme Court's reaction to Meritor's grievance procedure. Conscious of the power dynamic between supervisor and supervisee and eager for the realization of Title VII's goal, I stress it here.

   III.

   I conclude with an application of my suggested approach to the facts of these cases, the elaboration of which I leave to the per curiam opinion, Chief Judge Posner, see Posner, pp. 53-57, Judge Coffey, see Coffey pp. 126-37, and Judge Wood, see Wood, pp. 190-98. Under the standards set forth above, Jansen has created genuine issues of material fact as to whether she was subjected to quid pro quo harassment. Although it is by no means a foregone conclusion, a reasonable jury could find that by telling Jansen, "I haven't forgotten your review, it's on my desk," while at the same time patting his crotch, Antoni was conditioning a favorable performance review, and thus a raise, on Jansen's submission to his sexual desires. Because this alleged exchange could constitute a meaningful threat, and there is no evidence as yet that Jansen did not view the threat as real, a reasonable jury could conclude that Jansen was subjected to compensable quid pro quo harassment.

   Jansen has also shown enough to get before a jury on her hostile work environment claim. Antoni allegedly subjected Jansen to months of sexually suggestive remarks and inappropriate acts and gestures, that could be considered "severe and pervasive." There is evidence in the record that PCA should have been aware of Antoni's campaign of abuse. While Jansen did not complain through official channels initially, she did complain to fellow employees. PCA was on notice that Antoni had allegedly harassed his two previous secretaries. Further, there is evidence that Jansen, like the two previous secretaries, was unaware of any sexual harassment policy at PCA. A reasonable jury, deliberating under the heightened standard of care applicable in the supervisory context, could find PCA liable.

   Ellerth, like Jansen, has put forward sufficient evidence to survive summary judgment on her claim of quid pro quo harassment. Her pleadings submitted to the district court, specifically her motion opposing summary judgment together with its accompanying affidavits, while unartful, plainly articulate a basis for a quid pro quo claim. Cf. Saxton v. American Tel. & Tel. Co., 10 F.3d 526, 533 (7th Cir. 1993). This basis is comprised of the following alleged statements made by Slowick to Ellerth. While in the lounge of a hotel where Ellerth had come at Slowick's request during a business trip, after an evening of allegedly ogling Ellerth, Slowick said, "you know, Kim, I could make your life very hard or very easy at Burlington." In a later phone conversation, when Ellerth asked permission to undertake a special project, he said, "I don't have time for you right now, Kim, unless you tell me what you're wearing." In a subsequent telephone conversation, Slowick denied her request and then asked her if she were wearing shorter skirts, as that would make her job "a whole heck of a lot easier." Slowick, at an interview regarding Ellerth's promotion during which he rubbed Ellerth's knee, said he had hesitations about promoting her because she was not "loose enough for him."^[13] From these essentially uncontested statements, a reasonable jury could conclude that Slowick was conditioning or threatening to base "the terms and conditions" of Ellerth's employment on Ellerth's catering to Slowick's sexual desires, and thus subjected to her compensable quid pro quo harassment.

   Ellerth, while perhaps having shown enough to get before a jury on her hostile work environment claim, has waived the right to do so. Before the original panel, Ellerth argued that liability should be imposed for hostile work environment because Slowick "was aided in accomplishing the tort by the existence of an agency relationship." See Restatement § 219(2)(d). This argument alone would not prevent recovery under an alternate theory. See 5 Charles A. Wright & Arthur R. Miller, Federal Practice 504 and Procedure § 1219 (1990) (theory of the pleading doctrine). Perhaps overly ambitious, however, Ellerth goes farther in her reply brief for the argument en banc and disavows any argument that liability should be imposed because of employer negligence. See Restatement § 219(2)(b). As I believe liability remains linked to negligence, I join Chief Judge Posner in his assessment that Ellerth has no remedy here. See Posner, p. 57.

   CUDAHY, Circuit Judge, concurring. I participated in this en banc rehearing as a member of the panel that originally heard Jansen (with Judges Coffey and Flaum). Hence, my participation is limited to that case.

   I join Judge Flaum's concurring opinion, and I write primarily to elaborate on what constitutes an appropriately "heightened" duty of care for employers whose supervisors engage in hostile environment harassment. For, as Judge Flaum indicates, there are good reasons for a heightened standard for supervisor misconduct in contrast to the same misconduct by fellow employees.

   It may be that Judge Wood's analysis converges with Judge Flaum's on the bottom line. Judge Wood mentions circumstances in which supervisors may exceed the scope of their employment and therefore act without delegated authority. See Wood, pp. 188-89. In his negligence analysis Judge Flaum calls for a heightened standard of employer care. See Flaum, p. 25; see also Posner, pp. 46-7. I doubt that the result in Jansen, for example, would differ under one or the other of these approaches. Nevertheless, it is necessary to distinguish quid pro quo from hostile environment claims. The Supreme Court distinguished them in Meritor with an implication, at least, that they might better be treated differently. Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 72, (1986). Justice Marshall, concurring in the judgment in Meritor, read the majority opinion this way and objected to "a special rule, to be applied only in 'hostile environment' cases." Id. at 77 (Marshall, J., concurring in the result). But the opposite view seemingly prevailed, and we must take our guidance from that fact. The other circuits have taken this lead. See, e.g., Faragher v. City of Boca Raton, 111 F.3d 1530 (11th Cir. 1997) (en banc); Nichols v. Frank, 42 F.3d 503 (9th Cir. 1994); Bouton v. BMW of N. Am., Inc., 29 F.3d 103 (3d Cir. 1994); Kauffman v. Allied Signal, Inc., Autolite Div., 970 F.2d 178 (6th Cir. 1992); but cf., Karibian v. Columbia Univ., 14 F.3d 773 (2d Cir. 1994).

   That the Supreme Court distinguished the two kinds of harassment claims makes sense. In a quid pro quo situation, a supervisor acts with actual or apparent authority when he promises employment goodies or threatens their withdrawal to extract sexual "cooperation." Quid pro quo is always a creature of power. It is the classic paradigm of powerful males forcing their wills on vulnerable females. A hostile environment, on the other hand, can be created by persons of equal, or even inferior, status to the victim. Supervisory rank may facilitate it, and power may enhance it, but neither is essential, or even central, to the creation of a hostile environment.

   In Jansen, the supervisor Antoni allegedly created a hostile environment. Power is not of the essence there, as it certainly is for quid pro quo harassment. One can imagine a lesser figure doing almost the same thing as Antoni. But his rank in the company was of considerable help to him in creating a milieu of abuse. It is not easy to articulate exactly how a supervisor's abusive conversation and posturing implicates his authority. Still, the intuition remains that the delegated power certainly helps--just as it helped Antoni. Just as it is the centrality of power and authority that dictates strict liability for quid pro quo harassment, it is the shadow of power and authority that dictates a heightened negligence standard for supervisory hostile environment harassment.

   The negligence standard used to govern hostile or abusive environment claims involving a supervisor must be negligence as related to a special and demanding duty of care. The standard of care should be somewhat like that imposed on packers of parachutes or open heart surgeons. See W. PAGE KEETON 505 ET AL., PROSSER & KEETON ON THE LAW OF TORTS § 38, at 208-9 (5th ed. 1984); see also, e.g., Rustay v. Consol. Rail Corp., 775 F. Supp. 161, 163-65 (D. N.J. 1991) (operating railroad requires greater duty of care). Judge Flaum has pointed out a weak link in a negligence approach: the assumption that a system can be built under which victims of supervisory sexual harassment will feel free to report the problem to the company. See Flaum, pp. 24-5. There ought to be a presumption that in the reporting system under examination, victims could not reasonably be expected to report their problems (unless, of course, the victim actually did). The employer would have an opportunity to overcome this presumption. But, if no evidence were presented, the presumption would import liability.

   Also, under the negligence standard, one of the principal liability issues is whether the employer had actual or constructive notice of the creation of a hostile environment by a supervisor. In Faragher v. City of Boca Raton, 864 F. Supp. 1552, 1563 (S.D. Fl. 1994), the district court held that, if a situation in the company were sufficiently severe to amount to a hostile environment, it was by the same token sufficiently visible to put the employer on constructive notice. In general, this approach has merit. See Meritor, 477 U.S. at 72 (citing with approval Taylor v. Jones, 653 F.2d 1193, 1197-99 (8th Cir. 1981) (holding employer liable for racially hostile working environment based on constructive knowledge)). I would create a rebuttable presumption that, if a situation attributable to a supervisor is severe enough to create a hostile environment, the employer is on constructive notice that remedial measures are required. The employer, of course, could offer evidence to the contrary.

   These two presumptions give concrete meaning to Judge Flaum's call for a heightened duty of care. As I noted at the outset, this view might lead to verdicts not too different from Judge Wood's approach. These presumptions, however, would respect and reward prudent employers who (1) provide a genuinely protected channel for reporting harassment and (2) remain in close touch with the possibility of harassment by supervisors in their own organizations. The diligent employer will have an opportunity to adduce evidence to this effect and thereby to escape liability.

   KANNE, Circuit Judge, concurring. I join Judge Flaum's thoughtful opinion--except for reservations in two areas. First, with regard to quid pro quo harassment, I do not think an employer should be held strictly, liable for mere threats made by a supervisory employee. I agree that our focus should be on deterring sexual harassment, but I believe a negligence standard will adequately do the job. A negligence standard will serve to deter quid pro quo threats because employers will rationally seek to avoid liability 1) by establishing policies and procedures to circumscribe improper conduct by supervisors, and 2) by imposing appropriate sanctions against errant supervisors once notified by an employee that a supervisor has made a quid pro quo threat. Beyond that, there is not much an employer realistically can do to put a stop to quid pro quo threats that do not result in any adverse job consequence. Imposing strict liability for such threats would therefore yield little (if any) greater deterrence and generate significantly greater litigation costs than a negligence standard. Moreover, quid pro quo threats may be ambiguous, and if such threats make an employer strictly liable, plaintiffs will attempt to turn all instances of supervisor sexual harassment into "implied threats" in order to take advantage of strict liability's easier burden of proof.

   On the other hand, I cannot agree with Chief Judge Posner's position that in her threat-only situation (i.e., without an adverse job consequence) Jansen does not have a viable quid pro quo claim. Although strict liability is inappropriate for quid pro quo threats, Jansen should still be able to win on her quid pro quo theory if she can prove her employer's negligence in failing to obviate quid pro quo threats. Quid pro quo claims involving only threats deserve scrutiny for employer negligence because of the qualitatively more oppressive nature of quid pro quo harassment. Perhaps the facts here will 506 demonstrate that the employer was not negligent, but Jansen's quid pro quo claim should be remanded along with her hostile environment claim so the district court can make the negligence determinations. Admittedly, in this and many cases involving mere threats, adding a quid pro quo claim to a hostile environment claim may not make much practical difference because the supervisor's threat will already be relevant to the hostile environment negligence analysis. In some cases, however, the quid pro quo claim will stand alone, and negligent employers should be liable for such quid pro quo threats.

   My second reservation regarding Judge Flaum's opinion concerns his treatment of hostile environment harassment. I cannot agree with Judge Flaum's language suggesting that employers are under a "heightened duty of care" for instances of supervisor harassment. A negligence standard always entails a fact-specific inquiry regarding what care the parties reasonably should have taken. The training, authority, and control given supervisors by an employer will therefore always enter the negligence equation. Calling this a "heightened duty of care" may suggest to some that employers should be presumed liable for supervisor hostile environment harassment. I cannot endorse any such presumptions that take this type of case outside the normal rules of negligence and further complicate this increasingly difficult issue.

Footnotes

[1]

   I also second the Chief Judge's observations regarding the wisdom of looking to state law to derive our agency principles. See Posner, pp. 35-38. With the potential for significant differences among state interpretations of agency law, Title VII remedies (available only against an employer) would be heavily dependent upon vagaries of regionalism. In light of the history giving rise to the Civil Rights Act, it is hard to imagine that this was an end envisioned by Congress.

[2]

   Judge Wood appears to conclude that the Eleventh Circuit's recent en banc opinion in Faragher v. City of Boca Raton, 111 F.3d 1530 (11th Cir. 1997), abrogates the decision in Steele that employers should be held "strictly liable" for supervisory quid pro quo harassment. See Wood, p. 178. By my reading, Faragher is solely a hostile work environment case and contains no suggestion that Steele is or should be overturned. By the same token, I read the Second Circuit in Karibian as treating quid pro quo harassment and hostile work environment as separate forms of harassment with distinct theories of liability. Cf. Wood, p. 178.

[3]

   Subsection 228(1) reads,

[4]

   Judge Wood argues that a supervisor can harass just as an offensive co-worker might. Wood, p. 173. In my view, a supervisor, by virtue of his position in a hierarchy, always possesses a degree of leverage over a supervisee that does not vary with the nature of harassment. This difference in approach informs my view that a "delegated authority" rationale has more relevance to our analysis of supervisory harassment than the less precise "scope of authority." Moreover, this distinction might gain added significance in the context of co-worker harassment cases.

[5]

   The EEOC's "Guidelines on Discrimination Because of Sex" recommend:

[6]

   Courts have described a valid quid pro quo claim in terms that could encompass a situation based on threats only. See, e.g., Nichols, 42 F.3d at 513 ("We conclude that a supervisor's intertwining of a request for the performance of sexual favors with a discussion of actual or potential job benefits or detriments in a single conversation constitutes quid pro quo sexual harassment. "); Karibian, 14 F.3d at 778 (2d Cir.) ("The relevant inquiry in a quid pro quo case is whether the supervisor has linked tangible job benefits to the acceptance or rejection of sexual advances."); Sparks v. Pilot Freight Carriers, Inc., 830 F.2d 1554, 1559 (11th Cir. 1987) (by "making or threatening to make decisions affecting the employment status of his subordinates," supervisor subjects his employer to strict liability).

[7]

   As there may exist the potential for some misread of this issue, see Coffey p. 129 n.37; Manion, pp. 160-64, I want to underscore that my focus is not any apparent authority to harass, which would be an anomaly to say the least, but the apparent authority to alter the terms and conditions of the workplace that makes harassment possible.

[8]

   In explaining the EEOC's definition of hostile work environment, the Supreme Court distinguishes hostile work environment from quid pro quo harassment. See Meritor, 477 U.S. at 65. Judge Wood argues that the Supreme Court did not make this distinction in its discussion of employer liability. See Wood, p. 176. In Meritor such a distinction or clarification would not have been necessary as Meritor was resolved as a hostile work environment case. Judge Wood asserts that Meritor involved allegations of quid pro quo sexual harassment. While I am unable to locate these allegations in the Court's opinion, the original complaint may well have contained such allegations, though no reference to the same are found in the district court opinion. See Vinson v. Taylor, No. 23 Fair Empl. Prac. Cas. (BNA) 37, (D.D.C. 1980). Moreover, the district court found that the plaintiff "was not required to grant Taylor or any other member of Capital sexual favors as a condition of either her employment or in order to obtain a promotion." Id. at *7. Thereafter the Court of Appeals considered only the plaintiff's argument under a theory of hostile work environment, see Vinson v. Taylor, 243 U.S. App. D.C. 323, 753 F.2d 141, 144-46 (D.C. Cir. 1985), as did the Supreme Court. See also Cudahy p. 29.

[9]

   Bifurcation of a complaint in this manner in no way suggests that harassment will always take the form of either hostile work environment or quid pro quo harassment. See Wood, p. 172. Courts have simply created a mechanism for pleading a case. When faced with a situation such as the instant suits, a plaintiff may plead both theories. Trial courts, recognizing the artificial nature of the distinction, should be liberal in construing EEOC complaints. See Wood, pp. 198-99.

[10]

   Judge Wood, with a broad interpretation of scope of employment, envisions vicarious liability for behavior which would traditionally fall under the rubric of hostile work environment. My view of agency principles, informed by the concept of delegated authority, is not as expansive a basis on which to ground vicarious liability for hostile work environment harassment.

[11]

   I believe we must assume prompt reporting. A negligence standard will encourage companies to publicize sexual harassment policies and provide effective grievance procedures. If the culture is such that there is some hindrance to reporting, it will be a factor considered by the courts in determining negligence. Perhaps placing the burden of reporting on the harassed employee and making public this burden through the dissemination of policies will foster an atmosphere where victims of harassment will be more ready to realize their rights. Cf. Cudahy, p. 30.

[12]

   Judge Coffey, Judge Manion, and Judge Wood express concern that employers will be "baffled" by this heightened duty of care. See Coffey, p. 89, Manion, p. 151, Wood, p. 189. I believe that this heightened duty has been present in courts' approach to supervisory sexual harassment as the supervisory relationship has been for some time a focal point of our concern; it should therefore pose no confusion to employers. Moreover, employers should regularly rethink their responsibility for and approach to the supervisory work environment. If this heightened duty does indeed cause employers pause, I expect it to produce more innovative and thoughtful approaches to this problem from them. I would add that my approach to negligence is in accord with Chief Judge Posner's, joined by Judge Coffey and Judge Manion in this respect.

[13]

   I note Ellerth was subsequently promoted.

Dissent by POSNER; MANION; COFFEY (In Part); EASTERBROOK (In Part); WOOD; ROVNER

   POSNER, Chief Judge, joined by MANION, Circuit Judge, concurring and dissenting. These cases present the court with difficult and important questions concerning the application of Title VII of the Civil Rights Act of 1964 to sexual harassment by supervisory employees. I agree with the basic approach to these questions, and most of the specific answers to them, in Judge Flaum's concurring opinion. Our most substantial difference concerns the employer's liability, in "quid pro quo" sexual harassment cases, for what I shall call "noncompany acts"; these are illustrated by a supervisor's threat that is not followed up by termination, demotion, or other acts that change the contractual relation between the victimized employee and the employer. I shall explain this difference between us after setting forth a general approach that differs somewhat from his.

   When the Supreme Court in Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 72, (1986), said that "Congress wanted courts to look to agency principles" to determine the liability of employers sued under Title VII for sexual harassment of one employee by another, the Court was not ruling that Title VII incorporates the American Law Institute's Restatement of Agency. Obvious as this point should be to any reader of the Supreme Court's opinion--for the opinion states that "common-law [agency] principles may not be transferable in all their particulars to Title VII," 477 U.S. at 72--it hasn't sunk in all the way. One of the briefs in the cases before us actually states, "Since Congress placed a comma after the first clause of § 219(2)(d) [of the Restatement] . . . ." The courts do not make this mistake; but the Restatement has become their template for analyzing the issue of employers' liability for harassment by supervisors. This is the wrong approach, and I am pleased that Judge Flaum does not follow it.

   In saying that it is wrong to rely on the Restatement, I do not mean that it is wrong to bring agency principles into the application of Title VII. That is inescapable. Title VII creates a statutory tort of employment discrimination but imposes liability only on the "employer"; what is to count as the employer's discriminatory act, and so warrant a remedy under Title VII, is a question of agency that the federal courts must by default answer as a matter of federal common law. Often courts create a federal common law principle simply by borrowing a part of the law of the state in which the legal dispute arose. That would not be a sound approach here, and a majority of the judges of this court reject it; nor is it the tenor of the Supreme Court's reference in Meritor to the judicial role: "Congress wanted courts to look to agency principles." Given that the employer is the only person made liable by the statute, the question of agency is central to its administration, so that to defer to state 507 law could introduce striking geographical disuniformities and indeed would empower a state to nullify Title VII.

   It is true that the Supreme Court recently repudiated a comprehensive federal judicial power to create common law, but it was speaking of federal common law in "its strictest sense," Atherton v. FDIC, 670 (1997), that is, of legal doctrine that could not be construed as interpretive. In Atherton it was a standard of care for directors of all financial institutions and had no more warrant than the fact that the institution was federally chartered or insured. Deciding what agency principles shall govern liability under a liability-creating statute such as Title VII is not free-wheeling common-law rulemaking; it is filling a statutory gap, a standard office of interpretation. There is no novelty in formulating federal principles of agency law in interpreting federal statutes that are silent on agency. See, e.g., Central States Trucking Co. v. J.R. Simplot Co., 965 F.2d 431 (7th Cir. 1992); United States v. Balistrieri, 981 F.2d 916, 930 (7th Cir. 1992). I have not found a case which suggests that liability under Title VII should depend on the agency law of the state where the dispute arose. The parties to the cases before us have not suggested that we take such an approach, and Judge Manion's opinion marshals compelling authority against it.

   Both cases before us arose in Illinois, but the parties have not enlightened us about the Illinois law of agency. In fact Illinois courts almost always refuse to hold employers liable for the sexual misconduct of their employees, including their supervisory employees. See Deloney v. Board of Education, 281 Ill. App. 3d 775, 666 N.E.2d 792, 797-98, 217 Ill. Dec. 123 (Ill. App. 1996) (truant officer who molested 16-year-old student); Randi F. v. High Ridge YMCA, 170 Ill. App. 3d 962, 524 N.E.2d 966, 970, 120 Ill. Dec. 784 (Ill. App. 1988) (sexual assault by employee of day-care center on 3-year-old); Webb v. Jewel Cos., Inc., 137 Ill. App. 3d 1004, 485 N.E.2d 409, 92 Ill. Dec. 598 (Ill. App. 1985) (sexual assault by security officer on suspected shoplifter); Hoover v. University of Chicago Hospitals, 51 Ill. App. 3d 263, 366 N.E.2d 925, 9 Ill. Dec. 414 (Ill. App. 1977) (sexual assault by doctor on patient); Dockter v. Rudolf Wolff Futures, Inc., 684 F. Supp. 532, 535-36 (N.D. Ill. 1988) (sexual harassment by manager) (interpreting Illinois law), aff'd, 913 F.2d 456 (7th Cir. 1990). St. Paul Fire & Marine Ins. Co. v. Downs, 247 Ill. App. 3d 382, 617 N.E.2d 338, 187 Ill. Dec. 130 (Ill. App. 1993), found sexual molestation of a patient by a psychiatrist to be arguably within the scope of the psychiatrist's employment, but based this on the patient's psychological dependence on the psychiatrist, distinguishing the other cases that I have cited. 617 N.E.2d at 344. Downs belongs to the class of cases, illustrated also by sexual molestation by police officers, as in our recent West v. Waymire, 114 F.3d 646, 649 (7th Cir. 1997), in which the employer has entrusted the employee with unique power to molest or otherwise oppress subordinates or members of the public; the distinction between these cases and the ordinary case of sexual harassment by a supervisory employee is stressed in Deloney v. Board of Education, supra, 666 N.E.2d at 799 n. 5. In Deal v. Byford, 127 Ill. 2d 192, 537 N.E.2d 267, 130 Ill. Dec. 200 (Ill. 1989), scope of employment was admitted, hence not an issue, and anyway the employee was clearly acting in furtherance of the employer's interests. See 537 N.E.2d at 270, 272-73. And Pyne v. Witmer, 129 Ill. 2d 351, 543 N.E.2d 1304, 135 Ill. Dec. 557 (Ill. 1989), did not involve an intentional tort.

    Green Hills Country Club v. Illinois Human Rights Comm'n, 162 Ill. App. 3d 216, 514 N.E.2d 1227, 1230, 113 Ill. Dec. 216 (Ill. App. 1987), does hold that an employer is strictly liable for any type of sexual-harassment by a supervisory employee, but it bases this holding on an Illinois statute dealing with sexual harassment, 775 ILCS 5/2-102(D), and does not mention the common law of agency. Judge Easterbrook (and Judge Wood by implication) fastens on this statute as the ground for believing that the plaintiffs in our two cases have a good claim, noting the Supreme Court's reference in Meritor to the Restatement of Agency-- though the Restatement is limited to common law, Restatement (Second) of Agency 3 (1958), so that Meritor's reference to it is not plausibly interpreted 508 as authority for deferring to a state statute. Nor are Restatements confined to state common law, as my colleague believes. The Meritor suit had not been filed in any state, but in the District of Columbia. The Supreme Court neither mentioned this fact nor suggested that the place to look for the agency principles applicable to the case was the law of the District of Columbia. My colleague is right that the "common law of agency has stood the test of time." But the observation is doubly irrelevant: he forswears reliance on common law principles of agency in favor of a statute that departs from those principles; and they were not, as I shall point out, developed with reference to the novel and atypical tort of sexual harassment.

   His argument implies that by a stroke of the pen Illinois could eliminate all Title VII liability in that state that depended on the principles of agency law. This would mean all Title VII liability in which the employer was not a personal participant in the infringement of the employee's rights. A state statute that provided that a decision to fire or take other adverse action against an employee on the basis of her sex would not be imputed to the employer unless the employer's owner or chief executive officer had approved the action would do the trick. My colleague resists this implication, arguing that an attempt by a state to curtail Title VII liability would be preempted by the federal statute. But if as he believes Congress left the formulation of agency principles to the states, there is nothing in Title VII that could conflict with a state's decision to adopt the narrowest of such principles to govern sexual harassment or other forms of discrimination. He says we needn't fear that states might discriminate against Title VII plaintiffs by formulating narrow agency principles because the principles would apply to claims under state law as well as under federal law. But the state statute on which he relies for the agency principles applicable to Title VII sexual harassment suits filed in Illinois is not a general agency or tort statute; it is limited to discrimination. The logic of his position is that a state hostile to discrimination claims could draft a special, and especially narrow, set of agency principles to govern discrimination cases alone.

   Just as I do not think that Title VII's silence with respect to the applicable agency principles points us toward the incorporation of state law, so I do not think that its silence can tell us anything about the structure of those principles. It thus cannot tell us whether, as I believe no one thinks (and the Supreme Court seems in Meritor to have nixed, see 477 U.S. at 72), the employer should be strictly liable for all acts of sexual harassment on or off the premises (in Ellerth's case, largely off) by all employees, or whether distinctions should be made on the basis of kinds of employee (such as supervisory or nonsupervisory) or kinds of act (such as demotion versus a sexual solicitation versus forcible rape), or some combination of the two.

   The Second Restatement of Agency (there is no third) was promulgated 40 years ago, before Title VII was enacted and before the concept of sexual harassment had emerged as a distinct legal concept. There is nary a hint in the text or legislative history of Title VII that Congress intended to incorporate the Restatement by reference. It would have been loopy to do so. The Restatements are intended to provide a compact statement of common law principles. The essence of the common law method of rulemaking is suppleness and flexibility, facilitating adjustment to altered circumstances, and is inconsistent with treating any statement of common law principles as a petrified text.

   The provisions of the Second Restatement of Agency are designed mainly for two types of case neither of which is before us. The first is the tort committed against a stranger, as where a truck driver employed by the defendant runs down a pedestrian. The second is the contract between a stranger and an agent of the defendant. The Restatement does not completely ignore torts committed by one employee against another, see § 473, but it subjects them to the "fellow servant " rule. § 474. This nineteenth-century doctrine excuses the employer from liability for negligent injury of one employee by another. Farwell v. Boston & Worcester R.R., 45 Mass. (4 Met.) 49 (1842). If the absorption 509 of the Second Restatement of Agency into Title VII were taken seriously, courts would have to explore the implications of the fellow servant rule for the law of sexual harassment. This they rarely do (but see Guess v. Bethlehem Steel Corp., 913 F.2d 463, 465 (7th Cir. 1990)), though, as it happens, the position they have arrived at with respect to harassment by coworkers is consistent with the rule. As I shall note in a moment, an employer is not automatically liable for coworker harassment; there is employer liability only if the employer is negligent.

   The fellow servant rule might be thought inapplicable to sexual harassment because the rule is invariably stated in terms of the employee's negligent rather than intentional torts, and sexual harassment is intentional on the part of the harasser, that is, of the fellow employee. But the only reason the rule seems to be just about torts of negligence is that the liability of an employer for his employees' intentional torts is so much more limited than his liability for - their unintentional (usually, negligent) torts that the employer would rarely have occasion to invoke the rule other than in the negligence setting. The fellow servant rule was applied to an intentional tort in Gabrielson v. Waydell, 135 N.Y. 1, 31 N.E. 969 (N.Y. 1892), and while it is an old case, most fellow servant cases are old, the fellow servant rule having largely gone down the drain when employers' liability acts and workmen's compensation acts superseded the common law of employer liability for industrial accidents. See Pomer v. Schoolman, 875 F.2d 1262 (7th Cir. 1989), for a rare modern case.

   If the fellow servant rule were sought to be applied to harassment by a supervisory employee, we would have to decide whether the harasser was a "vice-principal," W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 80, p. 572 (5th ed. 1984), exercising a nondelegable duty of care, or merely a "superior . . . servant." Restatement, supra, § 479. The employer would be liable for the vice-principal's harassment but not the superior servant's. The issue of classification would be made difficult to the point of unreality by the fact that the Restatement nowhere addresses sexual harassment of one employee by another, or indeed sexual harassment of any sort. It is impossible to tell from its discussion of nondelegable duties whether the supervisors in our two cases would have been thought vice-principals.

   Sexual harassment differs from most other torts, and especially from the most common torts--the deliberate or accidental infliction of physical injury--in being "invisible" or largely so other than to victim and perpetrator. The employer will know whether one of his employees sustains a physical injury on the job; he is much less likely to know that one of his employees is being sexually harassed on the job. The feasibility of an employer's controlling the torts of his employees is, as I shall show, an important consideration in crafting agency principles, and one dependent on the particular tort.

   I may be in a minority of judges in not believing (or at least in being willing publicly to deny) that the most fruitful way of approaching a novel issue of law is through seeking analogies in legal doctrines designed with quite other issues in mind. Nevertheless, had the Supreme Court told us to use the Second Restatement of Agency as the framework for evaluating sexual harassment under Title VII, I would bow to its command. It did not; but by citing the Restatement it gave lawyers and judges a straw to grasp at. The straw has broken in their hand. The Restatement turns out to be hopelessly vague in its bearing on the issue of employers' liability for sexual harassment, being vaguely worded and addressed to other issues. So judges can in good faith reach opposite results when they seek guidance in the Restatement to employers' liability for sexual harassment by supervisory employees. See, e.g., Faragher v. City of Boca Raton, 111 F.3d 1530 (11th Cir. 1997) (en banc). The judges and lawyers who insist that the Restatement of Agency is The Way either are disingenuous, wishing to conceal their true grounds of decision, or are in the grip of the formalist belief that difficult cases can be decided by teasing out the meaning of words in a text composed with other problems in mind, without need to examine the social policies that the law might be thought to be serving. "We condemn Lochner as formalistic 510 not because it involves a choice, but because it attempts to describe this choice as compulsion." Frederick Schauer, "Formalism," 97 Yale L.J. 509, 511-12 (1988). Since neither the text nor the legislative history of Title VII indicates what agency principles the authors of the statute had in mind, the formalist gropes for another text, finds the Restatement, and treats it inappropriately as a surrogate statute.

   It is time that we threw away the crutch of the Restatement and, recognizing the differences between workplace sexual harassment and the actual subject matter of that antiquated screed, ask as an original matter--as I think the Supreme Court invited us to do in Meritor when it understated that the common law of agency might not be fully transferable to sexual harassment--what the best regime of liability would be for these cases. It would be misleading even to speak of applying to this case "the law of agency." That would imply the existence of some ready-at-hand body of rules that we have only to apply to a new set of circumstances. The problem is not application; it is creation. I think it equally question-begging to ask whether a supervisor's conduct is "attributable" to the employer, or whether he may be said to "speak for" the employer, or whether an employer must be deemed to "delegate his common law duties" to his supervisory employees. These are just additional ways of asking whether the employer should be liable.

   I understand the attraction of seeking a textual answer elsewhere, perhaps in local law, as Judge Easterbrook suggests; but this evasion of the occasional duty of judicial creativity will not work either, as I have explained and Judge Manion more fully. We thus cannot avoid the task of trying to create a set of agency principles that will deter sexual harassment without imposing an unreasonable burden on employers. I do not consider the burden of liability on employers a negligible consideration in formulating federal common law rules to govern aspects of employment regulation. Our labor markets are becoming choked by regulation, all well meaning but cumulatively an impediment to the efficient employment of the nation's most valuable economic resource, which is its workers.

   I emphasize deterring sexual harassment rather than compensating its victims because, unlike many torts--and again the clearest illustrations are torts that inflict physical injury--sexual harassment does not usually bring about a significant change in the victim's wealth. The victim may be humiliated and deeply distressed by it; rarely will she (or the very occasional he) be impoverished by it. This is not to say that psychological pain should not figure in the calculation of damages. It should. All I wish to emphasize is that an award of damages in these cases is not primarily designed to protect the victim 's standard of living. The payment of damages in the usual case of sexual harassment is an instrument for deterring future incidents of such harassment rather than for restoring lost earnings or for financing expensive curative or rehabilitative measures.

   There is no novelty in grounding principles of agency on deterrence. A recognized objective of imposing "vicarious" liability for the torts of employees (the liability that goes by the name of "respondeat superior") is to reduce the amount of tortious behavior. Hartmann v. Prudential Ins. Co., 9 F.3d 1207, 1210 (7th Cir. 1993); Konradi v. United States, 919 F.2d 1207, 1210 (7th Cir. 1990); Alan O. Sykes, "The Boundaries of Vicarious Liability," 101 Harv. L. Rev. 563, 570 (1988). Our court has adopted (and it is not alone in doing so) the deterrent perspective as its guide to dealing with cases involving the creation of a hostile environment by the plaintiff's coworkers. The standard of employer liability in those cases is negligence: an employer who knew or should have known about the harassment and failed to take reasonable remedial measures is liable. McKenzie v. Illinois Dep't of Transportation, 92 F.3d 473, 480 (7th Cir. 1996); Baskerville v. Culligan International Co., 50 F.3d 428, 432 (7th Cir. 1995); Carr v. Allison Gas Turbine Division, 32 F.3d 1007, 1009 (7th Cir. 1994); Doe v. Lago Vista Independent School District, 106 F.3d 1223 (5th Cir. 1997); Rosa H. v. San Elizario Independent School District, 106 F.3d 648, 656 (5th Cir. 1997); 511 Splunge v. Shoney's, Inc., 97 F.3d 488, 490 (11th Cir. 1996); Burns v. McGregor Electronic Industries, Inc., 989 F.2d 959, 966 (8th Cir. 1993). The thinking is that if the employer has a realistic opportunity to prevent harassment, he must take it.

   But if the goal is deterrence, why, it may be asked, is the standard negligence rather than strict liability? The reason is the infeasibility of an employer's stamping out this sort of harassment without going to extreme expense and greatly curtailing the privacy of its employees, as by putting them under continuous video surveillance. If the victim of sexual harassment complains to a supervisor, or a worker who notices what's going on complains to a supervisor, or the harassment is so pervasive (considering its nature, frequency, and number of victims and perpetrators) that the employer knows or should know about the harassment, the employer ought to take steps to correct the problem. He has or should have the information; he has only to act upon it. And since everyone knows by now that sexual harassment is a common problem in the American workplace, the employer ought in addition to take, in advance of specific cases of harassment, preventive measures against it, as by adopting and announcing a policy against sexual harassment and creating a discreet and convenient machinery by means of which victims can obtain relief without exposing themselves to retaliation. These are the responsibilities that a negligence standard imposes. They should deter most sexual harassment by coworkers without the courts' subjecting the employer to strict liability. A law that requires the employer to do more than is feasible to control harassment will impose costs without creating deterrent benefits. In the long run, these costs will be borne largely by consumers, in the form of higher prices for the employer's product, and workers, in the form of lower wages (because the higher costs are labor costs). Many consumers and workers are women, so women, who are the principal victims of sexual harassment, will pay a big part of the costs that employers incur as a consequence of excessively harsh principles of employers' liability.

   In these circumstances, strict liability would not only be expensive and unnecessary, and possibly regressive as well; it would be futile. If the law imposes liability in harassment cases in which there is no reasonable measure that the employer could have taken to prevent the harassment, the only effect of the law will be to impose extra costs on employers and those with whom they are linked contractually. Employers will prefer paying the occasional judgment to incurring costs that, by definition, exceed the employer's foreseeable liability--by definition because, were the costs less than the expected liability, the failure to incur them would be negligence; it is only when they are greater, so that the employer would not be negligent for failing to incur them, that strict liability bites. The bite may come out of the hides of innocent workers and consumers, rather than deterring any more harassment than a negligence standard would do.

   What this shows is that strict liability doesn't always have the happy result of just deterring a bad practice more effectively than the negligence standard. Sometimes the incremental contribution of strict liability to deterrence is nil or slight, and easily outweighed by the additional costs of a more expansive liability. This is implicit in the rejection of strict liability for coworker harassment cases, a rejection to which I believe all members of this court subscribe.

   But the cases in which the issue is the employer's liability for harassment by coworkers are the easy ones. The difficult ones are those in which, as in the cases before us, the harasser is a supervisor rather than a line employee. We must distinguish between two types of sexual harassment by supervisors. In the first type, the supervisor uses or attempts to use his supervisory authority to obtain sexual favors from an employee. This is the domain of what has come to be called "quid pro quo" harassment. In the second type of case, the supervisor does not use or attempt to use his supervisory authority at all. He harasses an employee, but he does so in exactly the same way that an employee who had no supervisory authority would harass another employee. He uses unwanted terms of endearment; he fondles 512 or rubs up against his victim; he displays sex toys or tells dirty jokes; he brags about his sexual skills; he proposes marriage; he threatens to kill himself; in the extreme case, illustrated by Martin v. Cavalier Hotel Corp., 48 F.3d 1343 (4th Cir. 1995), he rapes her. These are modes of harassment equally available to a nonsupervisory employee. The proper standard of employer liability here is negligence, just as in the case of harassment by nonsupervisory employees, because it is as costly for the employer to police this kind of harassment by a supervisor as it is to police the identical harassment by a coworker. I believe that we all have qualms about Martin, the case that carries strict liability for the acts of a supervisory employee to its logical extreme.

   Although the standard should be the same in the two types of hostile-environment case, the application of the standard is bound to differ as a practical matter. Even if the supervisor is scrupulous in forbearing to invoke his authority over the employee he is harassing, the existence of that authority is a fact of which the victim is bound to be constantly aware. She is more likely than in a case of coworker harassment to submit and less likely to complain. She may believe that because her harasser is a supervisor he is highly valued by the company and that as a consequence the higher-ups in the company will reject her complaint--will in fact fire her, not the harasser. Because such fears will often be reasonable, due care on the part of employers to prevent sexual harassment by its supervisory employees may require the creation of additional complaint machinery when the complaint is against a supervisor. Whether the employer had complied with this heightened duty of due care would be a jury issue in the first instance.

   But I would not go further and impose strict liability on the employer for hostile-environment harassment by a supervisor. The "theory" that by making him a supervisor the employer had clothed him with the appearance of authority to harass employees is empty. Since everyone knows by now that sexual harassment is unlawful, a company that publicizes and enforces a stern policy against sexual harassment has done all that it can reasonably be expected to do to dispel its supervisors' "apparent authority" (to lapse into Restatement -speak) to harass. The adequacy of the policy in the circumstances (what if the harasser is the chief executive officer of the employer?) is a factor to be considered in making the required determination of negligence. There is no need to have a separate standard just because the harasser is a supervisor. Excessive complexity is the bane of American law; we have an opportunity to make it a little simpler.

   So much for hostile-environment harassment. Let me turn now to quid pro quo harassment. We have to distinguish between two types of such harassment. In the first, the supervisor brings about a significant alteration in the terms or conditions of his victim's employment. He fires her, or denies her a promotion, or blocks a scheduled raise, or demotes her, or transfers her to a less desirable job location, or refuses to give her the training that the company's rules entitle her to receive. In all these examples the supervisor is using his delegated authority to do a company act. Strict liability is appropriate in this kind of case, because it is likely to deter this kind of sexual harassment more effectively than negligence liability would. The employer who is strictly liable will monitor the exercise of this delegated authority very carefully, knowing that it will be liable if the authority is abused. And this monitoring should be relatively easy to do. For it is usually a mistake for a firm, quite without regard to any potential legal liability, to give a supervisor unilateral authority to alter a subordinate's terms or conditions of employment significantly. In well-managed companies, decisions having such consequences are subject to rules, and to review by higher-ups in the company--the industrial equivalent of appellate review. The rules will be more carefully formulated and the supervisor's compliance with them in firing or otherwise hurting a subordinate more carefully reviewed by the supervisor's superiors if the employer is strictly liable for the supervisor's use of his delegated powers to harass subordinates. Courts applying a negligence standard would have great difficulty determining how closely the supervisor should be supervised. Such questions as 513 how many tiers of review should be provided before an employee can be fired or demoted are not easily answered in terms of reasonableness or due care, the criteria of negligence. The regime of strict liability shifts the responsibility for deciding these questions to the employer, who knows more than judges do about how to control supervisory employees.

   Could the argument that I have just sketched be made in support of strict liability for all sexual harassment by company employees, including harassment by coworkers? Employers know more than we do about how to extirpate that form of workplace sexual harassment too. True; but courts know, more or less, what is reasonable for the employer to do about hostile-environment harassment--institute a tough policy, disseminate it, establish a procedure by which a worker can complain without fear of retaliation (so don't require that the complaint be made to the man who is harassing her!), respond promptly and effectively to any report of possible harassment. Knowing what the employer should do, the courts have only to decide whether he did it, in order to decide whether he was negligent and should be liable. But when it comes to designing the optimum system for reining in the discretion of supervisory employees, the courts are at sea and it makes sense therefore to shift the responsibility entirely to the employer to create and administer an effective system for the review and control of company actions taken by supervisors in the exercise of their delegated authority.

   Strict liability is inappropriate, however, when the supervisor merely makes threats, even if the threats are effective. This is why it is important to distinguish between the type of quid pro quo harassment in which the supervisor actually alters the terms or conditions of his victim's employment and the type of harassment in which he merely threatens to do so, whether or not the victim yields to the threats. Suppose the supervisor threatens to fire a subordinate unless she'll have sex with him, and she agrees--or refuses and he does not carry out his threat. In either case, because he has not used his delegated authority to commit a company act, there is no way in which a system for vetting such acts would catch him out. In a well-regulated company a supervisor who wants to fire a subordinate has to obtain the approval of higher-ups, as I have said, and they will have an opportunity therefore to determine the bona fides of his proposal. But if he doesn't propose to fire her, whether because she has submitted to his sexual extortion or called his bluff, there will be no proposed action to review. It will be no more feasible for the company to determine what is going on than it would be if the harasser were a coworker who had threatened to steal the victim's work tools if she didn't submit to him.

   Romantic encounters, including romantic encounters between supervisors and supervised, are a fact of the workplace. Title VII does not purport to forbid them, and would be quixotic if it did. Many happy marriages have grown out of such encounters. Some of the encounters are abusive from the start, and some start well and turn ugly and engender charges of sexual harassment that sometimes have and sometimes lack merit. The words, the gestures, the other behaviors that differentiate the fully consensual relationship from the coercive relationship will often be invisible to the supervisor's superiors. The yielding to a threat will look no different from the yielding to a lawful proposal. It is only when the threat is carried out that the abusive supervisor does something, such as firing the supervised employee, that the employer will know about and should monitor. It is facile to suggest that employers are quite capable of monitoring a supervisor's actions affecting the work environment. Large companies have thousands of supervisory employees. Are they all to be put under video surveillance? Subjected to periodic lie-detector tests? Trailed on business trips by company spies? Even the EEOC does not go so far. The culminating recommendation in its "Guidelines on Discrimination Because of Sex" to employers is that they should "develop[] methods to sensitize all concerned" to the problem of sexual harassment. 29 C.F.R. § 1604.11(f). This is easy to say, but, as the armed forces have recently discovered to their sorrow, hard to do. It is unrealistic to expect that adopting strict liability in lieu of negligence, a relatively 514 esoteric and marginal change in the law, will do much to create a corporate culture in which sexual harassment is unthinkable. Granted, the problem of monitoring the noncompany acts of supervisory employees is primarily a problem of large employers, for in companies that are at or near the statutory minimum of 15 employees, 42 U.S.C. § 2000e(b), noncompany acts will presumably be visible to top management, creating de facto strict liability. But it is the large companies that are the usual targets of litigation, because of their deep pockets.

   The distinction that I am proposing between the harassing supervisor who commits a company act, such as firing, and the supervisor who merely threatens such acts, has at least a footing in the case law. See Gary v. Long, 313 U.S. App. D.C. 403, 59 F.3d 1391, 1396 (D.C. Cir. 1995); Sauers v. Salt Lake County, 1 F.3d 1122, 1127 (10th Cir. 1993); Kotcher v. Rosa & Sullivan Appliance Center, Inc., 957 F.2d 59, 62 (2d Cir. 1992); Hicks v. Gates Rubber Co., 833 F.2d 1406, 1414 (10th Cir. 1987). There are hints of it in Judge Easterbrook's and Judge Kanne's separate opinions. It is, for sure, not the orthodox approach, see, e.g., Karibian v. Columbia University, 14 F.3d 773, 778 (2d Cir. 1994); Highlander v. K.F.C. Nat'l Management Co., 805 F.2d 644, 648 (6th Cir. 1986); I would go so far as to concede that it has the curse of novelty; but the cases that take the orthodox approach do not explain why they do so, and the approach that I am proposing in its stead is not foreclosed by any decisions of the Supreme Court. The Court in Meritor said that Congress intended "to place some limits on the acts of employees for which employers under Title VII are to be held responsible." 477 U.S. at 72. It didn't tell us what those limits are.

   We can test my proposed approach by considering its application to other forms of discrimination forbidden by Title VII. The closest parallel is sex discrimination that does not involve harassment in the usual sense. Compare two cases. In one, a supervisor denies a raise to a subordinate because of her sex. In another, the supervisor slaps her because of her sex. In the first case, the supervisor has done a company act, and the company is strictly liable. In the second case, the supervisor has not done a company act, and there is no liability under Title VII unless the employer was negligent in hiring or failing to fire or supervise the employee. In Restatement-speak, the supervisor in the second case has not acted in the employer's interest; but that is just a conclusion. The practical reason why the employer is not liable is that the supervisor's act took place outside the channels in which action by supervisors is realistically controllable by their superiors.

   The distinction between company and noncompany acts points the way to the proper handling of a theoretical third category of supervisor sexual harassment. That is where the supervisor uses his supervisory authority to create a hostile work environment, perhaps by encouraging his male subordinates to harass his female subordinates. If he does this without committing any company acts, then the case should be assimilated to the ordinary case of noncompany harassing acts by a supervisor, and the employer's liability should be governed by negligence. If the supervisor commits company acts, then the employer should be strictly liable. As a practical matter, the employer will be liable in almost any case in which a supervisor is orchestrating a campaign of sexual harassment, for the employer will either learn of the campaign or be negligent in failing to notice it.

   I do not think it is an objection that my proposed approach might occasionally require applying different standards of employer liability to different conduct of the same supervisory employee, whose sexual harassment of a subordinate might include both company acts and noncompany acts. Suppose a worker got drunk at a company party and on his way out of the building bumped into and injured a customer, then got into his car and on his way home hit a pedestrian, both accidents being due to his drinking. The company would be strictly liable to the customer--respondeat superior would apply--but the pedestrian would have to prove the company negligent in order to establish its liability to him, because the drive was not within the scope of his employment.

    515 My proposed approach is summarized in the following table. The term "company act" signifies an act that significantly alters the terms or conditions of employment of the victim of sexual harassment and "noncompany act" signifies hostile-environment harassment by coworkers or supervisors or the kind of quid pro quo harassment that involves only unfulfilled threats (either because the victim submits or because she calls the supervisor's bluff), so that no company act is committed. The difficult borderline case is that of constructive termination precipitated by a threat. The termination will look to the supervisor's superiors like a voluntary quit. But since there is always some paperwork involved in an employee's quitting, the higher-ups in the company will have some ability to monitor constructive discharges, and I would therefore impose strict liability in such cases.

   LIABILITY FOR SEXUAL HARASSMENT UNDER

   TITLE VII: A SUGGESTED APPROACH By supervisor By coworker "Company employer strictly N.A. act" liable "Noncompany employer liable employer liable act" only if negligent only if negligent

   I now apply the suggested approach to the facts of our two cases. In Jansen there was no company act and therefore no quid pro quo violation. Antoni did hold up Jansen's performance review and raise for several months, but the review was favorable, the raise was made retroactive, and Jansen herself admits that delays of the length she encountered were commonplace. The delays she encountered were not significant alterations in the terms or conditions of employment--therefore were not "company acts" as I am using that term in order to denote the proper scope of quid pro quo liability. For they were not visible to and therefore corrigible by higher-ups in the company. The tenuous character and trivial consequences of Antoni's threat furnish a practical argument for the limited scope of quid pro quo liability that I am urging.

   Jansen has, however, presented enough evidence to establish a prima facie case of hostile-environment harassment. What Antoni did to Jansen over a period of some eighteen months--a barrage of threats and sexual solicitations--was highly offensive, and not mere sexual banter or even the kind of mildly obnoxious vulgarity that we held in Baskerville v. Culligan International Co., supra, did not rise to the level of actionable harassment. The only issue is whether Packaging Corporation should have discovered what was going on. The answer is yes, a tentative yes but one that can be given with enough confidence to defeat summary judgment for the employer. Two previous complaints of sexual harassment had been lodged against Antoni. The second, it is true, was somewhat cryptic; but the company's response to it, which was to counsel Antoni about the company's sexual harassment policy, showed that Packaging Corporation "read" the complaint as one of sexual harassment, as it pretty obviously was. Antoni was also well known to be having sex with another worker, and while this relationship was apparently consensual, the fact that he was married to someone else at the time should have alerted the company to the possibility that he was sexually incontinent. The company's lackadaisical if not perverse reaction to Jansen's complaint (accusing her of sexual harassment) is further evidence of the company's negligence with regard to the harassment of female employees.

   So the grant of summary judgment to Packaging Corporation with regard to the charge of sexual harassment should be reversed. But the only issue for determination by the jury on remand should be whether the company was negligent in failing to protect Jansen from Antoni. There is, moreover, a serious question whether she can obtain substantial damages, given her failure to complain for eighteen months. We have held that the doctrine of avoidable consequences, on which see, e.g., Outboard Marine Corp. v. Babcock Industries, Inc., 106 F.3d 182, 184 (7th Cir. 1997); Ellerman Lines, Ltd. v. S.S. President Harding, 288 F.2d 288, 289-90 (2d Cir. 1961) (Friendly, J.); Keeton et al., supra, § 65, pp. 458-59, is applicable to violations of Title VII as to other torts. Hunter v. Allis-Chalmers Corp., 797 F.2d 1417, 1427 (7th Cir. 1986). The precise issue is whether if Jansen had complained sooner the company would have taken effective action. This is 516 uncertain given the lackluster way in which the company responded when she did complain. The uncertainty creates an issue for a jury.

   On my view of the scope of quid pro quo liability, Ellerth like Jansen is purely a hostile-environment case. Slowik was Ellerth's supervisor. It is of no consequence, so far as his supervisory authority over her was concerned, that there was another supervisor in between them; this just shows how much power he had over her, given that he was that much higher in the corporate hierarchy. But he never committed a company act against her, such as denying her a promotion, although he obliquely threatened to do so. Therefore she should have to show that the company was negligent in failing to detect and prevent the harassment. The evidence of negligence is too thin to create a jury issue--so it is no surprise that Ellerth doesn't even argue that Burlington was negligent. Although aware of the company's policy against sexual harassment, Ellerth did not complain about Slowik to anyone in the company's human resources department or to anyone else who might have taken corrective action; she did not complain to her supervisor. Unlike Jansen's employer, Burlington Industries had no other sources of information about its supervisor's misbehavior. The fact that Slowik told off-color jokes and commented on Ellerth's legs at a lunch in which a vice-president of Burlington was present could not be thought to put Burlington on notice of probable harassment. The vice-president had no reason to think Ellerth offended by Slowik's banter; not all women would be. (Slowik had also patted Ellerth's knee under the table at that lunch, but there is no indication that this was visible to the vice-president.) Although there is a bit of evidence that Slowik may have harassed another woman employed by Burlington, there is no evidence that this other harassment came or should have come to the attention of any higher-ups in the company. The fact that Ellerth complained to a few of her fellow nonsupervisory employees (and toward the end to a customer service manager) also did not put the company on notice. The precedents in our court and the other circuits do not authorize the basing of a finding of negligence on such scraps of evidence. See, e.g., Doe v. R.R. Donnelley & Sons Co., 42 F.3d 439, 447 (7th Cir. 1994); Juarez v. Ameritech Mobile Communications, Inc., 957 F.2d 317, 320-21 (7th Cir. 1992); Murray v. New York University College of Dentistry, 57 F.3d 243, 250 (2d Cir. 1995). A case in which the plaintiff does not think enough of her ability to prove negligence to even raise a negligence claim would be a pretty dubious vehicle for going beyond the precedents.

   But it is an even weaker case for negligence than I have yet let on. Ellerth 's claim that she feared that complaining about Slowik would cost her her job is inconsistent with her claim that she quit the company because Slowik had made her working conditions unbearable. If the choice is to quit the company or complain, you obviously should complain, since if the complaint gets you in trouble you're no worse off than you would have been quitting--unless you are seeking a reference for your next job, and there is no evidence of that in Ellerth's case.

   Her action in quitting rather than complaining underscores the importance of agency principles that place appropriate pressure on victims of sexual harassment to protect themselves from harassment by complaining to the harasser's superiors. Tort law in general allocates responsibility for the avoidance of nonintentional injuries (not just for their consequences) to both injurer and victim, rather than to the injurer alone. Sexual harassment is an intentional injury by the harasser, but an unintentional injury (in the usual case and in the two cases before us) by the harasser's superiors, or in other words by the employer itself. The employer is innocent; the victim is innocent; the optimal system of liability for minimizing sexual harassment requires cooperation by both. Once Ellerth decided that Slowik had made the workplace unendurable, she had nothing to lose and everything to gain by complaining. It follows that as between her and her employer, she was in the better position to prevent the misconduct of her supervisor. Slowik had a responsibility to his principal not to harass Ellerth, but Ellerth had a responsibility to her principal too--a duty to complain about Slowik through proper channels. 517 With rights should come responsibilities.

   In any event, Ellerth explicitly waived negligence as a ground for Burlington 's liability, and so it is not available as a basis for reversing the judgment in Burlington's favor. In her reply to the petition for rehearing, repeating what she had said earlier in her brief on appeal, Ellerth states, "Appellant [Ellerth], in fact, agrees with Burlington that § 219(2)(b) does not apply to this case" (emphases in original). The reference is to section 219(2)(b) of the Restatement--the section that makes an employer liable for the torts of his employee if the employer is negligent.

   COFFEY, Circuit Judge, concurring in part and dissenting in part. I concur with the majority view, set forth in the Court's per curiam opinion, that the district judge properly dismissed Jansen's retaliation and intentional infliction of emotional distress claims. Per Curiam Op. at p. 3. I also agree with the majority that in Jansen the district judge's grant of summary judgment in favor of PCA should be reversed and remanded in order that a jury might address the limited question of whether PCA was negligent with respect to the alleged hostile work environment sexual harassment by Jansen's supervisor. Per Curiam at pp. 4-5. I write separately because I do not agree that an employer who lacks knowledge of harassment by one of its supervisors should be held strictly liable under "agency principles," in spite of the fact that the employer may have had every intention of eliminating such conduct from the workplace, and may even have formulated and publicized a complete sexual harassment policy. I am unable to join with Judges Posner, Flaum, and Diane Wood,^[1] each of whom, in differing degrees, urges that we use the cases before us as a vehicle for announcing bold and unprecedented Seventh Circuit law that will make employers strictly liable in Title VII cases involving allegations of sexual harassment by a supervisor. I am convinced that the creation of a strict liability standard is contrary to the Supreme Court's decision in Meritor Savings Bank v. Vinson, 477 U.S. 57, (1986), and is at odds with the "agency principles" that the High Court has instructed us to consider in Title VII cases.

   Strict liability for quid pro quo harassment by supervisors amounts to almost "guilt by association," a concept that is fundamentally unfair as well as being inconsistent with "agency principles." Under a regime of strict liability, the employer--similar to the taxpayer who is assessed a tax deficiency by the IRS--would be presumed guilty, and the traditional presumption of innocence cast aside; thus, the employer would be required to bear the burden of proving his innocence.^[2] Because the employer saddled with strict liability would not be permitted to argue that it lacked knowledge of the harassment or that it had in place measures to prevent the same, it would have only a limited opportunity to rebut this judicially-created presumption of guilt. In a quid pro quo case, for example, the employer could avoid liability by proving that the alleged harassment did not occur, but the many factors that can and should weigh against a finding of negligence on the part of the employer (i.e., knowledge, preventive measures, sexual harassment policy) become irrelevant once strict liability is adopted. Judicially legislating a strict liability standard will also serve to increase the volume of Title VII litigation and impose a costly burden on American business that will obviously be passed on to taxpayers, workers, and consumers (as with judicial decisions that have continuously expanded tort liability in the products liability and professional malpractice areas).

    518 With due respect for my fellow judges, the approaches advocated by Judges Posner, Flaum, Easterbrook and Wood disregard the need for judicial restraint and faithfulness to precedent in this highly-charged area of the law, and dramatically tip the very delicate balance of the scales of justice in favor of Title VII plaintiffs.^[3] As the Supreme Court noted in Meritor, the Congress when it enacted Title VII provided little guidance as to how the statute was to be applied in cases of sexual harassment:

The prohibition against discrimination based on sex was added to Title VII at the last minute on the floor of the House of Representatives. . . . The principal argument in opposition to the amendment was that 'sex discrimination' was sufficiently different from other types of discrimination that it ought to receive separate legislative treatment. . . . This argument was defeated, the bill quickly passed as amended, and we are left with little legislative history to guide us in interpreting the Act's prohibition against discrimination based on 'sex.'

477 U.S. at 63-65 (citations omitted). However, "the fact that Congress might have acted with greater clarity or foresight does not give courts a carte blanche to redraft statutes in an effort to achieve that which Congress is perceived to have failed to do." United States v. Locke, 471 U.S. 84, 95, 1793, (1985). The Court recognized this in Meritor when it advocated "agency principles" and concluded "that the Court of Appeals was wrong to ... impose absolute [strict] liability on employers for the acts of their supervisors." Meritor, 477 U.S. at 73 (emphasis added).

   We should take our cue from the Supreme Court's Meritor decision and, in an exercise of judicial restraint, hold that an employer is liable for a supervisor 's acts of sexual harassment under the negligence standard only if and when the plaintiff can demonstrate that the employer knew or should have known of the alleged harassment and failed to take appropriate measures. Juarez v. Ameritech Mobile Communications, Inc., 957 F.2d 317, 320 (7th Cir. 1992). Additionally, the imposition of vicarious liability might conceivably be proper in that rare situation (not presented in either Jansen or Ellerth) where a plaintiff is able to establish that the supervisor acted with actual or apparent authority to engage in such conduct. Restatement (2d) Agency § 219(2)(a) & (d).

   A strict liability standard, in contrast with the more flexible and reasonable negligence standard, will preclude us from accounting for "the circumstances of [each] particular case," Meritor, 477 U.S. at 73, including the disparate corporate structures in modern business life. As Judge Wood explains, Title VII runs the ambit in its application, reaching small firms with as few as fifteen employees, as well as large entities such as General Motors, with some 692,800 workers. Wood Op. at p. 183. For Judge Wood to suggest, however, that a supervisor who stands on the second lowest (the 692,799th) rung of the corporate ladder at General Motors "stands in the place of [his] principal," Wood Op. at p. 184, to the same extent that the lowliest supervisor (the fourteenth employee) does at a fifteen person firm is untenable and reaches beyond reasonableness. To impose strict liability merely because an employee is designated as a "supervisor" in my view disregards the realities and complexities of modern corporate America.

   I. EMPLOYER LIABILITY UNDER TITLE VII

   A. Title VII Is Not A Strict Liability Statute

   When called upon to determine when an employer may be held liable under Title VII for sexual harassment by one of its supervisors, we must start with the Supreme Court's clear and unambiguous mandate in Meritor that we "look to agency principles." 477 U.S. 57, 77, 519 (1986). The High Court in Meritor, far from endorsing an all-expansive interpretation of "agency principles," specifically rejected strict liability and made clear that agency principles provide a limitation on employer liability rather than a blank check for expanding liability. Id. Specifically, the Meritor Court stated:

We . . . decline the parties' invitation to issue a definitive rule on employer liability, but we do agree . . . that Congress wanted courts to look to agency principles for guidance in this area. While such common-law principles may not be transferable in all their particulars to Title VII, Congress' decision to define 'employer' to include any 'agent' of an employer, 42 U.S.C. § 2000e(b) surely evinces an intent to place some limits on the acts of employees for which employers under Title VII are to be held responsible. For this reason, we hold that the Court of Appeals erred in concluding that employers are always automatically liable for sexual harassment by their supervisors. See generally Restatement (Second) of Agency §§ 219 -237 (1958).

Id. (emphasis added). Meritor's rejection of strict liability remains the law, and has not been superseded by any precedent from the Nation's highest court, although some courts, in attempting to apply "agency principles," have improperly concluded that strict liability is mandated in sexual harassment cases. Curiously, even Judge Wood, who champions a sweeping strict liability standard, concedes that "the Meritor Court viewed agency principles as limiting, not expansive, factors in determining liability." Wood Op. at p. 177.

   The political winds of change have apparently affected the views of the EEOC regarding employer liability, for while the EEOC, as amicus curiae, argued for a negligence standard in Meritor, it now urges us to adopt a "strict liability" rule in cases where a supervisor has allegedly harassed a subordinate. The EEOC's former position was that:

If the employer has an expressed policy against sexual harassment and has implemented a procedure specifically designed to resolve sexual harassment claims, and if the victim does not take advantage of that procedure, the employer should be shielded from liability absent actual knowledge of the sexually hostile environment. . . . In all other cases, the employer will be liable if it has actual knowledge of the harassment or if, considering all the facts of this case, the victim in question had no reasonably available avenue for making his or her complaint known to appropriate management officials.

Meritor, 477 U.S. at 71 (quoting Brief for United States and EEOC as Amici Curiae). At oral argument, Judge Wood attempted to explain away this patent inconsistency between the EEOC's previous and current positions on the grounds that "Meritor is ten years old. . . . We have come, you know, a very long way in ten years." Meritor should be dispositive of the issues before us, and I disagree with the suggestion that we as judges on a United States Circuit Court of Appeals have a license to take the law beyond Meritor simply because that decision may not comport with our individual notions of social progress in 1997.

   The Supreme Court in Meritor also recognized that the "existence of a grievance procedure and a policy against discrimination," while not necessarily dispositive, is "plainly relevant" and definitely a fact that should be considered in determining the extent of an employer's Title VII liability. Id. at 72-73. The Court's willingness to acknowledge the liability-mitigating effect of an antidiscrimination policy, even when the harasser is a supervisor, makes clear that in the interest of justice and fairness, we are bound by a negligence standard in all sexual harassment cases, regardless of the perpetrator's rank vis-a-vis his victim.

   Because Meritor was a hostile work environment case,^[4] the Court did not definitively 520 reach the question of an employer's liability for quid pro quo harassment by a supervisor. Nevertheless, there are courts which purport to follow Meritor and have "looked to agency principles" as a vehicle to expand Meritor's holding and conclude that strict liability is the proper standard in supervisory quid pro quo cases. See, e.g., Nichols v. Frank, 42 F.3d 503, 513-14 (9th Cir. 1994) (collecting cases); but see Nash v. Electrospace System, Inc., 9 F.3d 401 (5th Cir. 1993) (Title VII is not a "strict liability statute for employers"). Our own post-Meritor decisions to date have not specifically addressed the issue of whether an employer is strictly liable for quid pro quo harassment by a supervisor, except to state in clear and unambiguous language that this remains an open question in light of Meritor. As Chief Judge Posner, writing for this court, explained just two years ago:

An employer is not strictly liable for sexual harassment of one worker by another unless, perhaps, the harassment takes the form ... of an abuse of authority, as where a supervisor threatens to fire a subordinate if she refuses to have sex with him. In such cases, a number of courts treat the supervisor as the employer, whether correctly or not we need not decide. (Neither the Supreme Court nor our court has had occasion to decide the question.) In all other cases, it is clear, the criterion for when an employer is liable for sexual harassment is negligence.

Baskerville v. Culligan International Co., 50 F.3d 428, 431-32 (7th Cir. 1995) (emphasis added) (citations omitted).

   Prior to Meritor, this circuit for a brief period adhered to a rule of strict liability, as set forth in Horn v. Duke, 755 F.2d 599 (7th Cir. 1985). Although my respected colleague Judge Flaum relies to an extent upon the reasoning in Horn (see Flaum Op. at pp. 10-11, 13), this reliance is at best confusing, for the Horn case was decided one year before the Supreme Court's Meritor decision, and Horn has since been called into question by this court. In North v. Madison Area Ass'n for Retarded Citizens, for example, we addressed the proper scope of employer liability in the context of a race-discrimination claim under Title VII, and, in light of Meritor, we disavowed Horn's rule of strict liability. North, 844 F.2d 401, 407 (7th Cir. 1988). Our post-Meritor decision in North, though it concerned race discrimination and not sexual harassment, nonetheless addressed the proper scope of an employer's liability for the discriminatory acts of a supervisor. In North, we stated unequivocally that "in light of the decision in Meritor . . . employers are no longer to be held to. . . a strict standard in every case in which the actions of a supervisory employee are in question." Id. (emphasis added). This court's North decision held that in the absence of evidence that the supervisor acted with actual or apparent authority,^[5] the employer "could be held liable for discriminatory actions which were attributable to [the supervisor] only if it knew or should have know