In 1975, the United States Supreme Court held that Section 1981 applies to employment contracts. In 1991, the statute was extended to track Title VII’s prohibition of discrimination in the terms and conditions of employment. As a result, Section 1981 now covers all aspects of the employment relationship, including its creation and termination. It even applies in the absence of a written, signed employment contract (i.e. “at will” employment), and further applies to retaliation claims.
While the elements of a Section 1981 claim are virtually the same as those under Title VII, Section 1981 is different in a number of notable ways. First, it has a longer statute of limitations, that is, deadline in which one can commence legal action. Second, it applies to employers with any size workforce, while Title VII applies only to employers with fifteen (15) or more employees. Third, unlike Title VII, there are no limits on the amount of damages an employee can be awarded.
Perhaps most importantly, four federal appeals courts (the First, Third, Seventh and Eleventh) have held that independent contractors have the right to sue under Section 1981for race discrimination occurring within the scope of the independent contractor relationship.
While the Second Circuit Court of Appeals, which covers New York, has not yet ruled on this issue, employers in New York should be aware of the potential liability they face for claims of discrimination based on race by independent contractors.