California Court of Appeal Limits Strict Liability for Supervisor Harassment

Under the Fair Employment and Housing Act (FEHA), employers are strictly liable for sexual harassment by a victim’s supervisor, but are liable for sexual harassment by a coworker only if they were negligent. In Doe v. Wells Fargo Bank, N.A., No. B344642, decided on October 5, 2026, the California Court of Appeal addressed which standard applies when a harasser supervises other employees, but not the plaintiff. The court held that strict liability does not apply, and that the harasser is treated as a coworker.

The Facts

The plaintiff, a wealth advisor in Wells Fargo’s private bank, alleged that Eric Pagel, an investment strategist who worked with many of her clients, sexually harassed and assaulted her during a January 2020 business trip. Pagel maintained the encounter was consensual. He was not the plaintiff’s supervisor and was not classified as a supervisor of anyone, though the plaintiff argued he supervised the support staff who assisted him.

Wells Fargo opened an expedited investigation after the plaintiff reported the conduct to its ethics hotline, and it placed Pagel on paid leave. The investigator did not substantiate the harassment or assault allegations but found Pagel violated the company’s professionalism policy, and Wells Fargo issued him a final notice.

Plaintiff later sued Wells Fargo for, among other things, sexual harassment in violation of FEHA. The trial court ultimately granted summary judgment for Wells Fargo, finding it could not be strictly liable for Pagel’s alleged conduct and had responded appropriately.

The Decision

The Court of Appeal affirmed. The plaintiff conceded that Pagel was not her supervisor, but argued strict liability applies whenever the harasser supervises anyone. The court assumed, without deciding, that Pagel supervised other employees, and still rejected the argument.

The court explained that strict liability exists because of the power a supervisor holds over the victim and because the supervisor acts on the employer’s behalf. A person who supervises other employees, but not the plaintiff, holds no power over them, so the rationale for strict liability does not apply. The court added that the plaintiff’s rule would produce arbitrary results, such as strict liability when a low-level supervisor harasses an executive.

What Employers Should Know

The decision gives employers a meaningful defense where the alleged harasser is outside the plaintiff’s chain of authority. But the holding is limited. The court did not confine strict liability to a plaintiff’s direct supervisor, and the FEHA’s broad definition of “supervisor” may still reach others with authority to direct the plaintiff.

The negligence standard also remains. Employers that fail to respond promptly and appropriately to a complaint can still be liable, so prompt investigation, interim measures, and documented corrective action remain essential. Employers should also make sure that complaints made to coworkers and managers are escalated appropriately.

Contact Payne & Fears LLP if you have questions about this ruling or its application to your workforce.