The Expansion of the New York State Harassment Statute: Third-Party Claims Against General Contractors

Recently, Governor Cuomo signed Bill S. 6577/A. 8421 (the “Harassment Statute”) into law. The Harassment Statute will significantly expand potential liability for all New York employers for any form of unlawful harassment—not just sexual harassment. If you are an employer in New York, it is strongly recommended that you thoroughly review the Harassment Statute in detail.

In the construction context, upstream contractors generally do not have extensive control over their subcontractors’ means and methods of construction, nor direct control over their subcontractors’ employees. As is inherent in the name itself, subcontractors are not employees, but independent contractors. Now, with the passing of the newly expanded Harassment Statute, upstream contractors will have increased exposure to liability because they can now be held liable for third-party harassment claims for any form of unlawful harassment whatsoever—despite having very little control over their subcontractors.

The Harassment Statute

First, it is important to note that the Harassment Statute is now applicable to all employers; previously, it generally only applied to employers with four or more employees. Further,  unlawful harassment is now considered harassment based on any protected characteristic, such as age, race, creed, color, national origin, sexual orientation, military status, sex, disability, marital status, domestic violence victim status, gender identity, and even criminal history. Lastly, and most importantly, the Harassment Statute permits non-employees, such as the employees of a subcontractor or supplier, to bring a claim for any unlawful discriminatory practice against non-employers, such as an upstream contractor on a construction project, as long as the upstream contractor, its agents or supervisors knew or should have known that the non-employee was being subjected to an unlawful discriminatory practice in the workplace, and the defendant failed to take immediate and appropriate corrective action.

This significant expansion of the Harassment Statute will have a significant impact on the amount of harassment claims filed against employers in New York. We can anticipate that this will include upstream contractors on construction projects.

An Example: Third-Party Claims Against General Contractors

Previously, the Harassment Statute was only applicable to sexual harassment. Accordingly, such claims on a construction site were few-and-far-between. Now, with the expansion of the Harassment Statute to any form of unlawful discrimination, it substantially increases an upstream contractor’s potential exposure to third-party liability on construction projects in New York. For example, the following hypothetical set of facts and circumstances could now subject an upstream contractor to a third-party harassment claim:

1. An upstream contractor is working on the construction of a large project, with many different subcontractors simultaneously working on the project at any given time;
2. The upstream contractor and the subcontractor enter into a lump sum contract whereby the subcontractor agrees to lay the foundation for the project;
3. The subcontractor, in turn, enters into a lump sum contract with a supplier to deliver the concrete to the project;
4. For one month, the supplier’s employee delivers concrete to the project for the subcontractor. The supplier’s employee, a disabled veteran, is continuously subjected to anti-war rhetoric from an employee of the subcontractor when he is onsite delivering the concrete;
5. At the food truck during the lunch break, the supplier’s employee verbally complains to the subcontractor in the presence of the upstream contractor’s superintendent, but the upstream contractor took no action against subcontractor; and
6. After the supplier completes its work, its employee makes a claim against the supplier, the subcontractor and the upstream contractor for unlawful discrimination based on his protected status as a disabled veteran.

Unlike many other industries, there can be several degrees of separation between an upstream contractor and a supplier on a construction project. An upstream contractor cannot possibly be responsible for the subcontractor’s hiring, firing and workforce; this would make the subcontractor an employee, not a contractor. However, under the newly expanded Harassment Statute, this type of harassment claim would likely survive as long as the supplier alleges that the upstream contractor knew or should have known about the subcontractor’s unlawful harassment. While the Harassment Statute has not yet been construed by the courts, it would appear that this type of claim, even when the alleged notice is verbal, would survive a pre-answer motion to dismiss.

Very importantly, even if the upstream contractor took timely action against the subcontractor, the question remains as to what would be appropriate? The subcontractor in this example is laying the foundation on the project. Terminating the subcontractor in the middle of its work would cause extensive delays to the critical path, resulting in additional costs and expenses related to retaining a replacement contractor.

However, despite the significant expansion of the Harassment Statute, there was some attempt to scale back some of the issues described above by including the following language in the law:

“In reviewing such cases involving non-employees, the extent of the employer's control and any other legal responsibility which the employer may have with respect to the conduct of the person who engaged in the unlawful discriminatory practice shall be considered.”

Of course, this language may help to shield an upstream contractor from liability from to the supplier’s employee in our example. However, until this language is construed by a court, it is anyone’s guess as to how much protection this actually affords. Notably, even if a harassment claim is bogus, the upstream contractor would still have to defend against the claim.

It is absolutely vital for all employers, not just contractors, to review the newly expanded Harassment Statute in detail. Contractors should be cognizant of statutory requirements and amend their construction contracts accordingly.  Reliable legal advice from experienced construction litigators can help contractors avoid these potential pitfalls and exposure to liability stemming from the Harassment Statute.

If you would like more information regarding this topic please contact Austin S. Brown at abrown@wbgllp.com or call (914) 607-6435