Suppose you are a female employe in a bank and you apply for a promotion; the branch manager tells you he isn't "ready" to hire a woman for that job. You sue the bank, claiming you have been a victim of sex discrimination and that the bank and its manager violated Title VII of the Civil Rights Act of 1964. If you can prove your facts, chances are you win.

Suppose, on the other hand, you are a female employe in a bank and you apply for a promotion and get it; the branch manager later on requests sexual favors in return for the promotion. You refuse and before long you lose your job. Can you sue the bank under Title VII or merely the manager? Is the employer responsible for sexual harassment by its supervisors even if top management knew nothing about it?

The answer handed down last week from the U.S. Court of Appeals for the District of Columbia is a resounding yes, and lawyers say it is a precedent that is certain to be used in similar cases around the country. The appeals court ruling, which reversed a lower court finding, firmly establishes that sexual harassment falls into the same category as any other form of job discrimination and that employers are as responsible when it occurs on the part of supervisors as they are when any other form of discrimination occurs.

"The notion that sexual harassment is some private thing has been rejected," says Ronald Schechter, the attorney who argued the case on appeal on behalf of a number of women's organizations. "It's a work-related illegal act."

The ruling, similar to one made by the 9th U.S. Circuit Court of Appeals in California four years ago, came in a case involving a Capital City Federal Savings and Loan Association employe who contended that her branch manager sought sexual favors in return for a promotion. She testified that she initially declined, and then ultimately yielded because she feared that she would lose her job. Both the branch manager and the employer disputed the woman's claims and the employer further contended it knew nothing of the harassment -- if it did occur -- and had not authorized it. The lower court found the savings and loan was not accountable, and it further refused to allow other women to testify about sexual advances they had received.

The appeals court found that the lower court erred on this count as well, and said such evidence "is directly relevant to the question whether he created an environment violative of Title VII. Even a woman who was never herself the object of harassment might have a Title VII claim if she were forced to work in an atmosphere in which such harassment was pervasive." The appeals court remanded the case for trial.

Had the lower court ruling been upheld, employes who have been victims of sexual harassment would have had little recourse other than to file private tort suits against the supervisor for "something like battery, assault, intentional infliction of emotional distress," said Schechter, "which are not employment-related damages. It doesn't get you your job back if you're fired, or the promotion you didn't get for failing to comply."

The ruling does not mean that employers are going to be hit with big financial damage suits. "Damages under Title VII are limited. You are entitled to employment-related damages," said Schechter. "You are entitled to be put back into the position you were in with back pay and an order prohibiting the continued discrimination. You are not entitled to pain and suffering under Title VII. The seven-figure punitive damages award is not what Title VII is about."

Employers can also heed guidelines issued in 1980 by the Equal Employment Opportunity Commission and avoid the problem by raising the issue, expressing strong disapproval of such activities, developing appropriate sanctions and informing employes of their legal rights to complain and how to pursue such complaints within the company.

Attorney Donna Lenhoff of the Women's Legal Defense Fund points out that companies can avoid lawsuits by voluntarily restoring any damage the woman may have suffered, such as loss of job, pay, or promotion, which is what she would have received from a successful lawsuit. "The employer can remedy the discrimination and moot the lawsuit. The company can protect itself by good management practices."

And with the Appeals Court ruling, companies across America have more incentive than ever to do that.