## Facts

- The EEOC sued under Title VII on behalf of two teenage servers at a Racine, Wisconsin IHOP, Katrina Shisler and Michelle Powell, and similarly situated employees.
- The servers alleged severe and pervasive sex-based harassment by an assistant manager, including repeated sexually explicit comments, gestures, and humiliating conduct in front of coworkers.
- The servers complained to management-level employees, including an assistant manager and the general manager, but their complaints were disregarded and no effective corrective action was taken.
- The restaurant was owned and operated by Management Hospitality of Racine, Inc. (MHR), a corporation controlled by Salauddin Janmohammed.
- Flipmeastack, Inc., a related company, provided management services and exercised operational control at the Racine location and other IHOP locations connected to Janmohammed.
- A jury found the servers were sexually harassed and found the defendants liable; the parties had tried the case treating defendants collectively as the “employer,” with allocation and equitable relief to be addressed post-trial.
- Post-trial, the district court determined Flipmeastack also qualified as an employer and entered injunctive relief extending to other IHOP locations under Flipmeastack’s management; later, the court held Flipmeastack and Janmohammed in civil contempt for violating notice-posting requirements and imposed coercive sanctions.

## Issues

1. Whether the assistant manager’s conduct created a sex-based hostile work environment under Title VII.
2. Whether MHR could avoid vicarious liability under the Faragher–Ellerth affirmative defense by showing reasonable preventive/corrective measures and unreasonable failure by the employees to use them.
3. Whether a management-services entity exercising workplace control could be treated as an “employer” subject to Title VII injunctive relief beyond the single restaurant where the harassment occurred.
4. Whether civil contempt and coercive sanctions were proper to enforce compliance with court-ordered notice-posting and related injunction obligations.

## Decision

- The Seventh Circuit affirmed the judgment holding MHR liable for the hostile work environment.
- The court rejected MHR’s reliance on a written anti-harassment policy and video-based training as sufficient to establish the Faragher–Ellerth defense on the facts presented.
- The district court concluded Flipmeastack was an employer because it exercised control over the workplace and entered injunctions reaching other locations under its management to prevent recurrence.
- The district court found Flipmeastack and Janmohammed in civil contempt for noncompliance with posting requirements and imposed coercive measures, including daily fines and monitoring obligations.

## Legal Principles

- A Title VII hostile work environment may be established by severe or pervasive sex-based harassment that alters the conditions of employment.
- Under Faragher–Ellerth, an employer may avoid vicarious liability for supervisor harassment only if it proves (1) reasonable care to prevent and correct harassment and (2) the employee unreasonably failed to use the employer’s preventive or corrective procedures.
- The existence of a written anti-harassment policy and nominal training is not enough if the employer does not implement the policy effectively or management disregards complaints.
- Employees’ reports of harassment to management-level personnel can establish employer notice; failure to respond can defeat a claim of reasonable corrective action.
- An entity that exercises substantial operational control over working conditions may be treated as an “employer” for Title VII purposes and may be subject to injunctive relief designed to prevent similar violations at other controlled workplaces.
- Courts may enforce Title VII injunctions through civil contempt and coercive sanctions to secure compliance with notice and posting obligations.

## Conclusion

The case affirmed that employer liability for supervisor harassment cannot be avoided through paper compliance alone where management ignores complaints, and it supported treating a related management-services company with workplace control as an employer subject to broad injunctive relief and enforceable contempt remedies.


EEOC v. Mgmt. Hosp. of Racine, Inc., 666 F.3d 422 (7th Cir. 2012)