On June 24, 2013, a divided bench for the US Supreme Court issued an opinion in Vance v. Ball State University, defining supervisor for purposes of Title VII as an employee empowered by the employer to take tangible employment action against the victim. This case effectively narrows the Title VII cases in which an employer may be vicariously liable for the harassment of an employee.

Maetta Vance was an African-American catering assistant employed at Ball State University (BSU). During the tenure of her employment, Ms. Vance was allegedly harassed at length by a fellow employee, Ms. Davis. In late 2005, Ms. Vance filed charges with the EEOC, alleging racial harassment and discrimination. After the harassment persisted, Ms. Vance filed suit in the US District Court for the Southern District of Indiana in 2006, claiming BSU was vicariously liable for Davis's creation of a racially hostile work environment under Title VII.

The District Court granted summary judgment to BSU, holding that BSU could not be vicariously liable for Davis's harassment because Davis was not a supervisor under Title VII. Specifically, the District Court found that Ms. Davis was not a supervisor because she lacked the power to "hire, fire demote, promote, transfer or discipline."

On January 22, 2013, the US Court of Appeals for the Seventh Circuit affirmed. The Seventh Circuit held that supervisors must possess the power to take tangible employment actions against an alleged victim if the employer is to be held vicariously liable for the supervisor's conduct. Ms. Vance appealed, and the US Supreme Court granted certiorari.

In a 5-4 opinion, the US Supreme Court affirmed the Seventh Circuit, ruling that an employer may be held vicariously liable for the harassment of an employee under Title VII only if the harassing employee is empowered by the employer to take tangible employment actions against the victim. The Court reasoned that although the term "supervisor" in the applicable section of Title VII may be ambiguous, it must be read to possess the power to commence employment actions to be reconciled with prior precedent. The Court relied heavily on Burlington Industries, Inc. v. Ellerth and Faragher v. City of Boca Raton, two prior Title VII vicarious liability cases where the employer never disputed that the plaintiffs' harassers were supervisors. The Court held that the rationale in Ellerth and Faragher was to create a framework which appropriately accounted for the interest of employers and employees while considering the objectives of Title VII. Echoing those objectives, the Court held that the position of "supervisor" under Title VII must be construed to possess the powers to commence employment actions because the definition is:

The dissent argued that the definition of supervisor adopted by the majority provides too little protection for employees facing workplace harassment. Instead, the four-member dissent argued the Court should have adopted the EEOC's definition of supervisor, which was based on the ability to take employment action against the victim or to direct the victim's daily work activities. The dissent felt the EEOC's definition better serves the intent of Title VII and the goals of Faragher and Ellerth.

The Court's holding restricts the group of plaintiffs able to allege their employer is vicariously liable for a co-worker's harassment. However, as the majority notes, plaintiffs subject to workplace harassment may still bring a Title VII action alleging their employer negligently failed to purge workplace harassment. The main difference is that the Supreme Court has now precluded an employer from being found strictly liable for an employee's harassing behavior if that employee cannot take tangible employment action against the alleged victim.