Employers are responsible for the sexual misconduct of supervisors, even if they knew nothing about the behavior, the Supreme Court ruled yesterday. The decision sets a strict new standard for harassment on the job and raises the stakes for companies accused of permitting it in their workplaces.

By 7-to-2 votes in a pair of cases on the last day of the term, the justices made clear that workers need no longer prove that an employer knew or should have known about the sexual harassment and failed to stop it. And victims do not necessarily have to show that they lost out on a promotion or were fired because they spurned a boss's sexual advances; if the boss's threats and other abuse were severe or pervasive, that's enough basis for a lawsuit.

Yesterday's twin rulings were among the most awaited in a term full of controversial decisions, from one making clear the balance of spending power between Congress and the president to another ensuring that people with the AIDS virus are protected by disabilities law.

Yet no other term in history has produced so many rulings on the topic of sexual harassment. And the combined effect of those decisions yielded an unequivocal message to American business: Sexual misconduct is to be taken seriously and any company that doesn't can expect to pay a price.

"It is by now well recognized that . . . sexual harassment by supervisors (and, for that matter, co-employees) is a persistent problem in the workplace," Justice David H. Souter wrote in one of the rulings, adding that an employer's burden of preventing harassment is "one of the costs of doing business." Justices Clarence Thomas and Antonin Scalia joined in a strong dissent.

The high court's focus on sexual harassment comes at a time when the subject is at the forefront of public awareness, ignited most recently by the charges of President Clinton accuser Paula Jones and reinforced by record court settlements, such as the $34 million Mitsubishi Motors payment to female workers at its Illinois factory.

The number of sexual harassment claims has been soaring for nearly a decade, since 1991, when Anita Hill charged that she had been harassed by Justice Thomas while he was chairman of the agency that investigates harassment claims. That same year, Congress first allowed money damages for harassment victims.

In the intervening years, the financial stakes have risen significantly for companies, and yesterday's rulings could prove to be another benchmark.

Women's rights advocates praised the decisions for giving employers the responsibility for eliminating harassment. "The court said the hear no evil, see no evil' defense won't work," said Kathy Rodgers, executive director for the NOW Legal Defense and Education Fund, which represented a former lifeguard who sued the city of Boca Raton, Fla., for the harassment she endured.

Business groups, while protesting portions of the decisions, said they were gratified -- after years of conflicting lower court standards -- to get clear guidelines.

Ann Elizabeth Reesman of the Equal Employment Advisory Council, which sided with Boca Raton, said the court decisions "support the employer who takes proactive steps to fight sexual harassment, such as with an accessible complaint procedure."

The court ruled that employers can be held outright responsible for any harassment by a supervisor that leads to a tangible job consequence. But the justices established a two-part test for determining liability when the harasser warned a victim of job consequences for refusing to submit, but then never carried out the threat.

In those cases, the majority said an employer would have to show that it used "reasonable care" to prevent and promptly correct any sexually harassing behavior. And second, it must show that the worker unreasonably failed to prevent or correct the harm, for example, by complaining to officials.

In the Boca Raton case, Beth Ann Faragher was a lifeguard who said two of her supervisors harassed her by slapping her on the rear, tackling her to the ground and making vulgar comments. She never complained to management, but sued for harassment.

A federal district court ruled that the harassment was sufficiently serious and met the test for discrimination under Title VII of the 1964 Civil Rights Act. But a federal appeals court reversed the ruling, saying an employer was liable only if it had given the supervisor authority to harass. Other appeals courts had ruled that employers would be liable if they were negligent in permitting the supervisor's conduct to occur.

Yesterday, in setting a new national standard, the Supreme Court lowered the bar for workers and said an employer is responsible for supervisors' misconduct in situations such as Faragher's that constitute what is known as a "hostile work environment," or for misconduct carried out by co-workers and supervisors that is severe or pervasive.

Lower courts already had been in virtual agreement that employers are automatically liable for supervisor harassment known as "quid pro quo," in which a boss typically links requests for sexual favors with some job consequence. Yesterday, the justices said employer liability should be the same for the two kinds of cases, partly because employers should anticipate such misconduct and try to prevent it.

"When a person with supervisory authority discriminates . . . , his actions necessarily draw upon his superior position over the people who report to him," Souter wrote for the majority in Faragher v. City of Boca Raton, adding that "an employee generally cannot check a supervisor's abusive conduct the same way that she might deal with abuse from a co-worker. When a fellow employee harasses, the victim can walk away or tell the offender where to go, but it may be difficult to offer such responses to a supervisor. . . . "

In their dissent, Thomas and Scalia said employers should be liable only if the employer was negligent in letting the harassment occur. They complained that the new rule was "a whole-cloth creation."

The companion case was first filed by Kimberly Ellerth, a marketing representative for Burlington Industries in Chicago. A boss told her suggestively, "I could make your job very hard or very easy," asked her to wear shorter skirts and touched her inappropriately. Ellerth did not submit and did not lose her job or a promotion. But after she quit she sued.

In an opinion by Anthony M. Kennedy, the court ruled that harassment victims need not show an obvious job consequence. But it said in Burlington Industries v. Ellerth that if there is no clear job loss, the employer can overcome liability by showing that it took reasonable care to prevent and correct harassment and that the employee herself failed to take reasonable steps to either prevent or stop the harassment.

Although the abuse both women endured was similar in some respects -- both said bosses touched them inappropriately, for example, and neither complained -- each came to the court by different avenues and presented separate legal questions. In the end, the justices set aside the differences to broadly address an employer liability.

To many women's rights advocates, the decisions combined with a ruling on Monday set up an unfair double-standard, allowing adult workers to sue for harassment more readily than students -- who presumably would need more protection.

The court said a school district could not be liable for harassment unless it knew of the abuse and was deliberately indifferent to it. That narrow majority justified the standard by noting that, unlike Title VII's outright prohibition on harassment, the law forbidding sex discrimination at schools that receive federal funds (known as Title IX) is based on the idea that school officials will be notified of problems and allowed to try to correct them. From the Court's Decisions In a pair of decisions on sexual harassment, the Supreme Court made clear that employers can be held responsible for supervisors' misconduct even if they knew nothing about it. The Majority

William H. Rehnquist John Paul Stevens Sandra Day O'Connor Anthony M. Kennedy David H. Souter Ruth Bader Ginsburg Stephen G. Breyer "When a person with super-visory authority discriminates in the terms and conditions of subordinates' employment, his actions necessarily draw upon his superior position over the people who report to him."

-- Souter

The Dissent

Clarence Thomas Antonin Scalia "The court today manufactures a rule that employers are vicariously liable if supervisors create a sexually hostile work environment, subject to an affirmative defense that the court barely attempts to define." -- Thomas MAJOR HARASSMENT RULINGS

Title VII of the Civil Rights Act of 1964 prohibits sex discrimination in the workplace. It does not say anything explicit about sexual harassment, but the Supreme Court in 1986 said the law was intended to broadly cover any disparate treatment of men and women on the job, including cases of harassment. Following are the Supreme Court's major rulings on that subject:

Meritor Savings Bank v. Vinson, 1986 -- Sexual harassment in the workplace is a form of sex discrimination covered by Title VII.

Harris v. Forklift Systems, 1993 -- Employees who sue a company for sexual harassment, contending that the work environment was hostile, need not show that they suffered serious psychological injury. It is enough to show that the workplace was reasonably seen as hostile or abusive.

Oncale v. Sundowner Offshore Services, 1998 -- Sexual harassment claims can be filed even when the victim and harasser are the same sex.

Gebser v. Lago Vista Independent School District, 1998 -- A student may not sue a school district for a teacher's sexual harassment unless the district actually knew about the harassment and was deliberately indifferent to it. Because it involves a school, this case relies on Title IX, which forbids sex discrimination in schools that accept federal funding.

Faragher v. City of Boca Raton, Burlington Industries v. Ellerth, 1998 -- An employer is liable for its supervisors' sexual harassment, even it if didn't know about the misconduct; in some cases, an employer can defend itself by saying it took reasonable steps to prevent harassment on the job. CAPTION: Justice David H. Souter delivered the opinion in one of two key cases. "It is by now well recognized that . . . sexual harassment. . . is a persistent problem in the workplace," he wrote.