The Court of Appeals reversed the ruling of the District Court. With respect to the harassment claim, the Court held that a claim could be made where an employee is “subjected to a hostile work environment in which there was discrimination that was ‘severe or pervasive.’” The Court acknowledged that its precedent has been inconsistent and that it had used a “severe or pervasive” standard as well as “pervasive and regular” and “severe and pervasive” standards. The “severe or pervasive” standard adopted by the Court follows the standard set forth by the United States Supreme Court.

The adoption of this standard means that in certain cases an isolated act of discrimination (including the use of a racial epithet) could create a hostile work environment and support a claim of harassment. In other words, an isolated act might be deemed severe even if not pervasive.
Analyzing the allegations of the case before it, the Court of Appeals determined that the lower court was incorrect in dismissing outright the harassment claim (as well as the discrimination and retaliation claims) and sent the matter back to the lower court for further proceedings.
 
Employers must therefore note that even a single isolated incident could create liability for a claim of harassment or discrimination.  This case highlights the importance of enforcing a civil tone in the workplace, and enforcing policies against such language.  It also demonstrates  that sensitivity on the part of managers and HR employees to the impact of certain slurs & epithets is a key risk management tool.