Employers and Section 1981 lawsuits — new cause for concern

Filed under: Contributed Columns |

Many of you sitting here reading this article are subject to federal workplace laws and, as a result, you should be concerned about the ruling in CBOCS West Inc. v. Humphries, a case handed down by the U.S. Supreme Court last month.
In Humphries, the court ruled that employees may pursue retaliation claims under Section 1981 of the Civil Rights Act of 1866. In so ruling, the Supreme Court gave employees a potent weapon to use against employers to prosecute claims based on unlawful retaliation against employees who blow the whistle on race-based discrimination.
The Civil Rights Act of 1866 gives all people the same right as white people to make and enforce contracts. Plaintiffs’ lawyers began to use this Reconstruction-era statute to prosecute racial discrimination in the workplace during the 1970s. Section 1981 claims were more appealing than claims under Title VII because even though both statutes prohibit discrimination they: have a longer statute of limitations; did not require the employee to go through the Equal Employment Opportunity Commission conciliation process; and had unlimited punitive damages.
Until 1989, the lower courts repeatedly held that Section 1981 prohibited not just outright race discrimination in employment, but also race-based harassment and retaliation for complaining about race discrimination or harassment. During 1989, however, the Supreme Court held in Patterson v. McLean Credit Union that the protection provided by Section 1981 was limited to the right to make contracts and to the legal process used to enforce them, without any discussion of retaliation claims.
The majority of federal appellate courts, following Patterson, held that such retaliation cases were indeed actionable under Section 1981. Because there was a split in the circuits, however, the case was ripe for a decision by the Supreme Court.

The Humphries case

Hedrick Humphries was an African-American manager for a Cracker Barrel restaurant. Humphries complained that the firing of a black employee was racially motivated. A few days later, Humphries was terminated.
Humphries sued, alleging, among other things, that his firing was unlawful retaliation under Section 1981 for his complaint about the black employee’s termination. The trial court granted judgment in Cracker Barrel’s favor on Humphries’ Section 1981 claim. Humphries appealed to the Seventh Circuit Court of Appeals which affirmed that such a right did in fact exist under Section 1981.
Cracker Barrel appealed to the Supreme Court.
The Supreme Court agreed to hear the issue of whether Section 1981 protects an individual from discharge in retaliation for complaining about a co-worker who is being discriminated or harassed. The Supreme Court held that Section 1981 does provide such protection.
The majority relied on its 1969 decision in Sullivan v. Little Hunting Park Inc. and the principle of stare decisis, or the precedential effect of prior holdings.
Sullivan involved a white property owner who was prevented from assigning his right to use a private park controlled by a homeowners’ association to a black man. The Supreme Court upheld Sullivan’s claim, finding that Sullivan had standing to maintain the action against the homeowners’ association under Section 1982 — a sister statute to Section 1981.
Also persuasive to the Supreme Court was the fact that Congress passed the Civil Rights Act of 1991 after the Patterson case, in which it added the definition of “make and enforce contracts” to include “the making, performance, modification and termination of contracts, and the enjoyment of all benefits, privileges, terms and conditions of the contractual relationship.”
In addition, the Senate Report accompanying the legislation indicated expressly and indirectly that it was the intent to restore the right to sue for retaliation under Section 1981.
In short, finding that Section 1981 and Section 1982 are sister statutes that should be construed similarly, the majority in Humphries held that if the Supreme Court ruled in Sullivan that Section 1982 encompasses retaliation claims, then the court in Humphries must similarly hold that Section 1981 includes claims for retaliation.

Impact of Humphries

Why should you care about the Humphries case? The answer is simple: damages.
Title VII compensatory and punitive damages for racial harassment and retaliation are capped at $300,000 (plus attorneys’ fees), while Section 1981 has no caps to damages. In other words, the sky’s the limit on damages.
Gentlemen, start your checkbooks.
Kerri J. Atencio is a lawyer at Holland & Hart LLP. She can be reached at kjatencio@hollandhart.com.