Employer Liability for Sexual Harassment by Customers and Clients in Minnesota

Across Minnesota's service, healthcare, hospitality, and professional sectors-from restaurant servers and hotel staff in downtown Minneapolis and Bloomington to nurses in Rochester hospitals, home health aides in St. Cloud, and B2B account executives in Saint Paul-some of the worst workplace sexual harassment comes not from coworkers, but from customers, patients, vendors, and high-value clients. A persistent myth among business managers is that a company cannot be held legally responsible for the behavior of outsiders who are not on the company payroll.

In Minnesota, that myth can cost an employer hundreds of thousands of dollars in damages. Under the Minnesota Human Rights Act (MHRA), Minn. Stat. § 363A.08, employers have a non-delegable statutory duty to maintain a workplace free from sex discrimination. When management knows-or reasonably should know-that a customer, client, patient, or contractor is sexually harassing an employee and fails to take timely, corrective action, the employer itself violates Minnesota law. Speaking with a dedicated Minnesota employment attorney from our directory can help you hold your employer accountable when they prioritize customer revenue over your safety.

When Is a Minnesota Employer Liable for a Customer's Actions?

Minnesota's legal framework for third-party sexual harassment was cemented in the landmark decision Costilla v. State, 571 N.W.2d 587 (MN Court of Appeals 1997). Aligning the Minnesota Human Rights Act with federal Equal Employment Opportunity Commission guidelines codified at 29 C.F.R. § 1604.11, subsection (e), the Minnesota Court of Appeals held that an employer may be held directly liable for sexual harassment committed by non-employees when two primary conditions are met:

• Actual or Constructive Knowledge: The employer knew or should have known that the employee was being subjected to unwelcome sexual advances, physical touching, or sexually derogatory remarks by a customer, client, vendor, or independent contractor.
• Failure to Take Timely and Appropriate Remedial Action: Despite knowing of the harassment, the employer failed to take prompt and reasonable steps within its control to protect the employee and prevent further abuse.

When evaluating an employer's liability under Costilla v. State, 571 N.W.2d 587 (MN Court of Appeals 1997), Minnesota courts examine the degree of control and legal responsibility the employer exercises over the non-employee's access to the premises or relationship with the staff. A bar owner in Duluth or a retail manager in Maple Grove has complete authority to eject and trespass an abusive patron, just as a consulting firm in Minneapolis has complete control over which account manager handles a corporate client.

Furthermore, the underlying customer conduct is measured under the modernized standard of Kenneh v. Homeward Bound, Inc., 944 N.W.2d 222 (MN Supreme Court 2020). A single severe incident-such as a restaurant patron groping a server or a home-care patient exposing himself and physically grabbing a nurse-or a pervasive pattern of lewd propositions by a repeat vendor is sufficient to trigger the employer's duty to intervene.

Steps HR Must Take to Protect Employees

Once an employee reports third-party sexual harassment to a shift lead, supervisor, or Human Resources representative, Minnesota law requires more than a sympathetic shrug or advice to 'just ignore him' or 'take it as a compliment.' To satisfy the timely and appropriate action standard under Costilla v. State, 571 N.W.2d 587 (MN Court of Appeals 1997) and Minn. Stat. § 363A.08, HR and management must implement concrete protective measures:

1. Immediate Separation from the Harasser: Immediately remove the employee from serving the table, treating the patient, or attending meetings with the client without reducing the employee's tips, commissions, or hours.
2. Prompt Investigation and Direct Confrontation: Interview witnesses, review security camera footage or client emails, and formally notify the customer, client organization, or vendor management that sexual harassment of staff will not be tolerated.
3. Banning, Trespassing, or Terminating the Customer Relationship: In retail, hospitality, and service settings, revoking the patron's membership or banning them from the premises is often the only effective remedy for severe misconduct. In healthcare settings where patient abandonment laws apply, hospitals and clinics must assign two-person care teams, security escorts, or behavioral contracts.
4. Zero Economic Penalty to the Victim: Reassigning an employee away from a harassing client by cutting the employee's shifts, moving them to a lower-tipping section, or taking away their commission without compensation constitutes unlawful retaliation under Minn. Stat. § 363A.15.

Handling High-Paying Clients Who Cross the Line

The hardest test of corporate compliance occurs when the harasser is a rainmaker client, a wealthy donor, or a key commercial account generating millions in annual revenue. In professional services, medical device sales, real estate, and advertising firms across the Twin Cities, managers are often tempted to protect the revenue stream at the expense of the employee.

Under the Minnesota Human Rights Act, customer preference or financial value is never a legal defense to sex discrimination. If a company forces a female sales representative to endure sexual propositions from a key buyer to close a contract, or removes her from a lucrative account after she complains-causing her to lose tens of thousands of dollars in commissions-the employer commits two separate violations: hostile work environment discrimination under Minn. Stat. § 363A.08 and unlawful reprisal under Minn. Stat. § 363A.15.

Thanks to legislative reforms to Minn. Stat. § 363A.29 and Minn. Stat. § 363A.33, Minnesota employers that sacrifice an employee to appease a wealthy client face severe financial exposure: up to 3x (treble) compensatory damages (including tripled lost commissions and tripled emotional distress damages), uncapped punitive damages, mandatory civil penalties to the State of Minnesota, and full payment of the employee's attorney fees.

Step-by-Step Process in Minnesota

Step 1: Document the Customer's Conduct and Management's Notice

Because employer liability under Costilla v. State, 571 N.W.2d 587 (MN Court of Appeals 1997) hinges on proving the employer knew or should have known, immediately save texts, emails, client voicemails, or reservation notes, and write down the names of any managers or coworkers who witnessed the customer's behavior.

Step 2: Deliver a Written Complaint to Management or HR

Verbally telling a shift supervisor is easily denied later in litigation. Send an email or text message to your manager and Human Resources detailing the customer's or client's exact actions and requesting specific protection. Also request your personnel file under Minn. Stat. § 181.961 (due within 7 working days) to protect your employment record.

Step 3: Document Any Inadequate Response or Retaliatory Schedule Cut

If management tells you to 'deal with it,' forces you back into contact with the client, or retaliates by cutting your hours, tips, or territory, document every lost dollar. Under Minn. Stat. § 363A.15, retaliation for reporting third-party harassment is independently actionable.

Step 4: File Timely Administrative Charges With MDHR and EEOC

Under Minn. Stat. § 363A.28, subdivision 3, you must file a state charge with the Minnesota Department of Human Rights, Saint Paul using Form Report Discrimination Online, Minnesota, Department of Human Rights, Charge of Discrimination Intake Form or file a direct civil lawsuit within 1 year (365 days). Remember that as of October 1, 2025, MDHR and the U.S. Equal Employment Opportunity Commission, Minneapolis Area Office, Minneapolis no longer automatically cross-file charges; file Form 5, Federal, EEOC, Charge of Discrimination separately within 300 days to preserve federal rights.

Step 5: Pursue Civil Litigation in Minnesota District Court

Your employment lawyer can file suit directly in state court under Minn. Stat. § 363A.33 along with Form CIV102, Minnesota, Judicial Branch, Certificate of Representation and Parties in venues such as Hennepin County District Court, Minneapolis, Ramsey County District Court, Saint Paul, Olmsted County District Court, Rochester, or St. Louis County District Court, Duluth.

How Much Does it Cost in Minnesota?

• Filing a Charge With MDHR or EEOC: $0 (Free).
• Minnesota District Court Civil Filing Fee: $320 to $325 ($310 base statutory fee under Minn. Stat. § 357.021 plus $10 to $15 county law library fee), plus a $100 jury demand fee. Indigent filers may submit Form FEE102, Minnesota, Judicial Branch, Affidavit to Request Fee Waiver.
• Legal Representation Costs: Minnesota plaintiff employment attorneys typically work on a contingency fee basis (33% to 40% of the recovery), meaning you pay nothing out of pocket unless you win or settle, and Minn. Stat. § 363A.33, subdivision 7 shifts attorney fees onto the losing employer.

How Long Does the Process Take?

Resolving a third-party sexual harassment claim in Minnesota generally takes 4 to 16 months. Many employers prefer to settle customer-harassment claims quickly in pre-litigation mediation within 3 to 6 months to avoid subpoenaing their own high-paying clients or patients for depositions. If a lawsuit is filed in Minnesota District Court, litigation typically takes 12 to 18 months to reach trial.

Frequently Asked Questions (FAQ)