June 09, 2008

Employees gained an additional federal cause of action for race-based retaliation claims under a decision issued last week by the United States Supreme Court. Section 1981 (42 U.S.C. § 1981)—a civil rights law that grants all persons the right to make and enforce contracts regardless of race—permits a cause of action for retaliation, the Court held. See CBOCS West, Inc. v. Humphries, No. 06-1431 (May 27, 2008) (slip op.).

This decision is significant for employers because, unlike Title VII, Section 1981 does not impose a cap on damages, does not require the filing of an Equal Employment Opportunity Commission (“EEOC”) charge prior to bringing suit, and provides a more generous statute of limitations. For these reasons, employers might begin to see more race-based retaliation claims being brought under Section 1981 in the future.

Successful plaintiffs stand to recover larger damage awards under Section 1981 than under Title VII. While Title VII limits compensatory and punitive damages to $300,000 (or less, depending on the size of the employer), Section 1981 has no such cap. Section 1981 also is far simpler to use. There are no administrative filing requirements, and plaintiffs have up to four years from the date of an alleged violation to file suit. Under Title VII, on the other hand, a plaintiff must file an administrative charge with the EEOC within 180 or 300 days of the violation (depending upon whether the charge also is covered by a state or local anti-discrimination law), and must file suit within 90 days of receiving a right to sue notice from the EEOC. Thus, a plaintiff whose Title VII claim is time-barred might still be able to file a Section 1981 claim.

In Humphries, the plaintiff asserted claims under both Title VII and Section 1981. He alleged that he was fired from his position as an associate manager at one of the defendant’s Cracker Barrel restaurants (1) because he is black, and (2) because he complained that another black employee had been fired for race-based reasons. Due to the case’s procedural history in the lower courts, the Supreme Court’s review was limited to the narrow question of whether Section 1981 covers retaliation claims.

Section 1981 was enacted immediately after the Civil War to grant newly freed slaves the same legal rights to make and enforce contracts that other citizens enjoy. The Civil Rights Act of 1991 further clarified that Section 1981’s protections encompass “the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” Courts have broadly interpreted Section 1981 to prohibit race-based discrimination in at-will employment arrangements.

Due in part to the plain language of Section 1981, however, it remained uncertain whether Section 1981 covered retaliation claims. Unlike Title VII, Section 1981 does not explicitly provide a cause of action for retaliation.

In a 7-2 decision, the Supreme Court rejected the employer’s arguments against allowing the plaintiff to bring a retaliation claim under Section 1981. The Court based its decision on cases in which it had allowed retaliation claims under a similar statute, 42 U.S.C. § 1982, a civil rights law that grants people of all races the same rights to inherit, purchase, lease, sell, hold and convey real and personal property. See Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 90 S. Ct. 400 (1969); see also Jackson v. Birmingham Bd. of Educ., 544 U.S. 167, 125 S. Ct. 1497 (2005). The Humphries Court therefore remanded the plaintiff’s Section 1981 retaliation claim for trial before the district court.

Lower courts will now be faced with the task of determining which actions rise to the level of actionable retaliation under Section 1981.

Employers can expect that any actions they take regarding employees who have voiced complaints about discrimination will face more intense scrutiny. The possibility that an employee’s recovery of compensatory and punitive damages would not be capped under Section 1981 further raises the stakes for race-based retaliation claims and makes it all the more important for employers to review their policies for addressing and responding to complaints of discrimination and retaliation.

Litigation Partner Judith A. O'Brien contributed to this article.