I recently learned of a clause that a large general contractor has put in its contracts’ terms and conditions that make certain types of behavior a breach of contract.
The clause states, in part: “XV. It is the goal of Contractor to promote a work environment at the Project that is free from harassment of any kind. Contractor has ZERO TOLERANCE for harassment, including harassment on the basis of race, sex, gender, gender identity, gender expression, transgender status, sexual orientation, pregnancy, childbirth and other pregnancy-related conditions, color, national origin, ancestry, age, religious creed, citizenship, marital status (including registered domestic partners), parental status, physical disability, mental disability, medical condition, genetic information, military or veteran status (including protected veteran status) or any other characteristic or status protected by law. Subcontractor agrees to be bound by the Policy Statement on Harassment … and any violation or suspected violation of such policy by Subcontractor or … its employees, subcontractors or suppliers … shall be considered adequate and justifiable grounds [for a default termination].”
After reading this clause, one electrical contractor told me, “These lawyers who write this stuff have not been on an actual job before.” Another asked me, “How am I supposed to police my subcontractors and vendors?” They seemed to be implying that the policing of the zero tolerance policy placed a social aspiration above the realities and economics of construction projects. With so many types of harassment that the clause addresses, regular violations—including suspected violations—are predictable.
Under this clause, the concept of illegal discrimination was expanded to claims of “harassment,” which may or may not be illegal activities. It is difficult, from a legal perspective, to define harassment. Where legal definitions have been developed, they are different among the states. The term “harassment” used to involve the idea of intimidation. In this sense, there are a number of legally supported types of harassment, including pickets, demonstrations, strikes, etc. However, the quoted clause seems to cover acts other than those that intimidate. In any event, under this contract clause, a violation of this condition of the contract can lead to a default termination.
In many ways, this seemingly expansive listing is a further development of language currently used in many construction contracts. There has been a long development in efforts to eliminate artificial boundaries to equality under the law. Through federal and state statutes and regulations, major steps have been taken toward this goal, primarily to confront and dismantle “discriminatory” activities.
One of the cornerstones of these laws has been in the creation of “protected classes” based on race, creed, national origin and religion, among other defined groups in our society. Violation of these laws can subject a person to sanctions by governmental authorities, and, in many instances, can give rise to an individual’s right to sue.
It is not uncommon for these laws to be referenced in contracts, but I have not seen any cases where discriminatory conduct exposed a company to a claim of breach of contract. That environment may be changing. The clause quoted above is only one example of what may be an emerging trend in contracts.
With federal government contracts, for example, there already exists the Office of Federal Contract Compliance Programs, which issued the Federal Contract Compliance Manual aimed at employment practices. VEVRAA (the Vietnam Era Veterans’ Readjustment Assistance Act) and Executive Order 11246, among others, also are directed at equal opportunity hiring and employment practices. None of these laws or directives directly concerns the concept of harassment, a term which appears to be related more to a personal level of interaction between personnel than to some objective standard.
Let the master answer
What takes the clause beyond these types of federal laws is the concept of “respondeat superior,” which means “Let the master answer.” Under this old legal doctrine, an employer may be liable for the actions of its employees. Here, the clause makes the subcontractor liable also for the actions of its sub-subcontractors and suppliers, a wide net. How is the subcontractor, for example, to monitor the speech or acts of its vendors or material suppliers?
Whatever else may be accomplished by these new approaches to using contracts to effectuate social policy, there will be a compliance cost yet to be determined. At a minimum, such clauses may require more training and possibly the hiring of a person assigned to monitor for potential job site harassment. In addition, it is not predictable how a court would view this type of clause if there were a default termination under it.