                    IN THE SUPREME COURT OF TENNESSEE
                                AT JACKSON




                                          FOR PUBLICATION

                                          Filed:   March 2, 1998



SANDRA SANDERS,             )
                            )             DYER CHANCERY
     PLAINTIFF-APPELLEE,    )
                            )             Hon. William H. Inman,
v.                          )             Senior Judge
                            )             Sitting by Designation
DAVID W. LANIER AND         )
STATE OF TENNESSEE,         )
                            )             No. 02S01-9706-CH-00060
     DEFENDANTS-APPELLANTS. )

                                                        FILED
                                                          March 2, 1998

                                                        Cecil Crowson, Jr.
FOR APPELLANT STATE OF:             FOR APPELLEE        Appellate C ourt Clerk
TENNESSEE:
                                    Jerrold L. Becker
John Knox Walkup                    Scarlett A. Beaty
Attorney General & Reporter         Lockridge, Becker & Valone, P.C.
                                    Knoxville
Michael E. Moore
Solicitor General

Elizabeth Martin
Assistant Attorney General




                              OPINION



COURT OF APPEALS AFFIRMED AS MODIFIED                          HOLDER, J.
                                               OPINION



        The issue with which we are confronted is whether the State may be liable

to a county employee for employment discrimination under the Tennessee

Human Rights Act ("THRA") when the county employee is under the supervision

of a state judge who commits quid pro quo sexual harassment against the county

employee. The trial court answered the question in the negative holding that the

State was not the plaintiff's employer under the THRA. The Court of Appeals

reversed and held that the THRA imposed liability on the State under an

economic realities test. For the reasons set forth in this opinion, we affirm as

modified the appellate court's reversal of the trial court's judgment.



                                                FACTS



         The plaintiff alleges that she was employed as a Youth Services Officer

with the Dyer County Juvenile Court. Youth Services Officers receive their

compensation from the County. 1 The plaintiff, however, maintains that

Chancellor David Lanier possessed the authority to hire, discipline, promote, and

terminate her and all other juvenile court employees. Judge Lanier was a state

judge and presided over both the chancery and juvenile courts in Dyer County. 2



        The plaintiff contends that Judge Lanier sexually harassed her. Her

allegations include both sexual assault ("grabbing her breast and buttocks") and

unwelcome sexual advances. She alleges that she repeatedly rejected Judge

Lanier's unwelcome sexual advances and that Judge Lanier demoted her from

her supervisory position in retaliation for rejecting his sexual advances. She


        1
            Tenn. Code Ann. § 37-1-106.

        2
         The 1972 Pub lic Ac ts 16 76-1 680 , Ch. 8 63 cr eate d a law and e quity c ourt in Dyer C oun ty,
Tennessee, and conferred Judge Lanier's jurisdictional authority over the juvenile court of Dyer
Cou nty.

                                                    2
further alleges that Judge Lanier denied her an increase in salary and

"unilaterally" altered her job requirements on a weekly basis.



         The plaintiff filed suit against the State of Tennessee ("State") alleging

violations of the THRA. The defendant filed a motion to dismiss for failure to

state a claim for which relief can be granted. Tenn. R. Civ. P., Rule 12.02(6).

The trial court found that the State was not the plaintiff's employer for purposes

of THRA liability and dismissed the plaintiff's claim for failure to state a cause of

action. The appellate court adopted the federal courts' economic realities test 3

and the common law test of control and reversed the trial court.



                                              DISCUSSION



         The plaintiff alleges that Judge Lanier conditioned her employment

benefits on sexual favors. The plaintiff further alleges that Judge Lanier

possessed supervisory powers over her position and had the actual or apparent

authority to alter the terms and conditions of her employment.



         The plaintiff's claim against Judge Lanier can best be classified as quid

pro quo harassment.4 Quid pro quo harassment occurs when a supervisor

conditions employment benefits on sexual favors. Kelly Carr v. U.P.S., ___ S.W.

___ (Tenn. 1997). To prevail under a quid pro quo theory of sexual harassment,

a plaintiff must show:



         3
        The economic realities test focuses on one's ability to control a plaintiff's job performance
and em ployme nt oppor tunities. Eyerman v. Mary Kay Cosmetics, 967 F.2d 213, 219 (6th Cir.
1992).

         4
           The plaintiff's complaint also sets forth a claim which could be properly classified as a
supervisor-created hostile environment. Whether the employer is liable for its supervisor's actions
in hostile work environment claims depends on: "(1) whether the supervisor's harassing actions
were foreseeable or fell within the scope of employment; and (2) even if they were, whether the
emp loyer respo nded a dequa tely and effe ctively to nega te liability." Carr v. U.P.S., ___ S.W.2d
___ (Te nn. 1 997 ). For the re aso ns s tated in this o pinion , we fin d tha t Jud ge La nier's actio ns fe ll
within th e sco pe of e mp loyme nt. W hethe r the Sta te resp onde d ade quate ly to Judg e Lan ier's
harassment shall be decided on remand.

                                                       3
      (1) that the employee was a member of a protected class; (2) that
      the employee was subjected to unwelcome sexual harassment in
      the form of sexual advances or requests for sexual favors; (3) that
      the harassment complained of was based on sex; (4) that the
      employee's submission to the unwelcome advances was an
      express or implied condition for receiving job benefits or that the
      employee's refusal to submit to the supervisor's demands resulted
      in a tangible job detriment; and (5) the existence of respondeat
      superior liability.



Kauffman v. Allied Signal, Inc., 970 F.2d 178, 186 (6th Cir. 1992).



      In Carr, we held that an employer is strictly liable for a supervisor's quid

pro quo harassment under the doctrine of respondeat superior. Carr, ___

S.W.2d at ___. Strict liability is imposed because: (1) a supervisor is the alter

ego of the employer; and (2) a supervisor has the actual or apparent authority to

alter an employee's terms or conditions of employment. "Under this alter ego

theory of liability, a supervisor's acts within the scope of employment are imputed

to the employer." Id.



      As to the first four elements, the plaintiff is a member of a protected class.

She has alleged that she was subject to unwelcome sexual advances and that

the harassment was based on sex. She has further alleged that she suffered

adverse job consequences as a result of her rejecting Judge Lanier's sexual

advances.



      Our last inquiry is whether Judge Lanier was acting within the scope of his

employment. We believe that, when an employer empowers a supervisor with

the ability to take actions that affect the employment status of subordinates, the

supervisor's acts taken or threats made within the actual or apparent scope of

authority are imputed to the employer. Ellerth v. Burlington Industries, Inc., 102

F.3d 848, 860 (7th Cir. 1996). Accordingly, respondeat superior is applicable

under a quid pro quo theory when: (1) an employer empowers a supervisor with


                                         4
the ability to alter job benefits; (2) the supervisor abuses the empowerment by

making a subordinate's job benefits contingent upon receipt of sexual favors; and

(3) the subordinate reasonably believes that the supervisor has the actual or

apparent authority to alter the subordinate's job benefits.



       The State, either directly or indirectly, empowered Judge Lanier with the

authority to alter the plaintiff's job benefits. The plaintiff alleges that Judge

Lanier conditioned her job benefits upon the receipt of sexual favors and that she

sustained adverse job consequences as a result of her rejection of the sexual

advances. The plaintiff's complaint further indicates that she believed that Judge

Lanier had the actual or apparent authority to hire, discipline, promote, demote,

or terminate her and all other juvenile court employees. The plaintiff's

allegations, if true, would support a finding of respondeat superior liability.



       The THRA prohibits an employer from discriminating against a person or

an individual. See Tenn. Code Ann. § 4-21-401(1) (stating "[i]t is a discriminatory

practice for an employer to . . . discriminate against an individual with respect to

compensation, terms, conditions or privileges of employment."). "Employer" is

defined as including "the state, or any political or civil subdivision thereof, . . . or

any person acting as an agent of an employer, directly or indirectly." Tenn. Code

Ann. § 4-21-102(4). A "person" is defined as including "one (1) or more

individuals." By these terms, the definition does not require that the person or

individual be an employee of the employer.



       The State falls within the THRA's definition of an employer. Judge Lanier

allegedly acted, directly or indirectly, as an agent of the State. Judge Lanier's

alleged actions against the plaintiff constitute quid pro quo sexual harassment.

In Carr, we held that an employer is strictly liable for its supervisor's quid pro quo

harassment. Carr, ___ S.W.2d at ___. Accordingly, Judge Lanier's actions, if


                                            5
proven, may be imputed to the State because the State empowered Judge

Lanier with the authority he allegedly abused in an attempt to gain sexual favors.



       The State's argument that sovereign immunity insulates the State from

liability for Judge Lanier's alleged discriminatory acts is without merit. The THRA

explicitly provides that the State may be liable for employment-related

discrimination against an individual. Tenn. Code Ann. § 4-21-102(4) & 401. The

plaintiff's allegations, therefore, satisfy the legislative requirements for imposition

of State liability under the THRA.



       The Court of Appeals' reversal of the trial court's decision is affirmed as

modified, and the case is remanded to the trial court for proceedings consistent

with this opinion. Costs of this appeal are taxed to the appellant, State of

Tennessee, for which execution may issue if necessary.




                                     Janice M. Holder, Justice


CONCURRING:

Anderson, C.J.
Drowota and Reid, J.J.

Birch, J., Not Participating




                                           6
