Supreme Court makes it harder to win Section 1981 contract discrimination cases

The Supreme Court has ruled that the federal statute prohibiting racial discrimination in the making of contracts requires the plaintiff to prove that racial discrimination was the "but-for" cause of the contract breach. This ruling rejects the "motivating factor" test in the Second Circuit. This case continues the trend that began more than 10 years ago when the Court began interpreting various employment discrimination statutes to require "but-for" causation. That includes the Age Discrimination in Employment Act and Title VII's anti-retaliation provisions. 

The case is Comcast Corp. v. National Assn. of African American-owned Media, issued on March 23. That's right, in the midst of a global pandemic, the Supreme Court is forging ahead. Section 1981 was enacted in 1866, post-Civil War. It makes it unlawful to discriminate in the making and enforcement of contracts. This statute applies to employment cases, including at-will employment relationships, as the Second Circuit held in Lauture v. International Business Machines, 216 F.3d 258 (2d Cir. 2000), a case that I briefed.

Section 1981 does not provide for a causation standard. That means the Supreme Court will apply the common-law causation test, which is the but-for standard. Writing for a unanimous Court, Justice Gorsuch states that "it is textbook tort law that a plaintiff seeking redress for a defendant's legal wrong typically must prove but-for causation." The Court explains how this works:

Under this standard, a plaintiff must demonstrate that, but for the defendant’s unlawful conduct, its alleged injury would not have occurred. This ancient and simple “but for” common law causation test, we have held, supplies the “default” or “background” rule against which Congress is normally presumed to have legislated when creating its own new causes of action.

While the statute does not expressly allow for private lawsuits to enforce its provisions, the Supreme Court in 1976 said the statute implies such a claim. The Court notes that it interpreted the statute this way when it was routinely implying causes of action in federal statutes (something the Court is no longer included to do). It was a different Court in the 1970s, more hospitable to civil rights. But the current Court is not going to upend those decisions. Instead, it says that even when it was holding that statutes implied that private lawsuits can enforce the statute, the Court "usually insisted on legal elements at least as demanding as those Congress specified for analogous causes of action actually found in the statutory text." Looking to the statutes that Congress enacted at the time it passed Section 1981, the Court says that the criminal enforcement provisions for this kind of racial discrimination (and related statutes prohibiting racial discrimination in the sale of real estate) required the "but-for"causation test. The Court rejects the "motivating factor" test even though Title VII of the Civil Rights Act of 1964 (which also prohibits racial discrimination in employment) applies that test in disparate treatment cases. In the end, the Court says, these are separate statutes with different wording. If we want Section 1981 to impose a more lenient burden of proof on plaintiffs, Congress is going to have to amend the statute.

What this means for plaintiffs is that it is now a little harder to win Section 1981 lawsuits. The motivating factor test under Title VII's disparate treatment provision does not require the plaintiff to show that racial (or gender, religious or national origin discrimination) is the determining or 51% percent reason for the discrimination. But that heightened burden applies under Section 1981. As recently as November 2019, the Second Circuit applied the motivating factor test to Section 1981 cases. See Khanna v. MUFG Union Bank, 785 Fed. Appx. 15 (2d Cir. 2019). So, under this ruling, should the jury decide to thread the needle that way, a racial discrimination plaintiff can win her claim under Title VII but lose under Section 1981.

pplicable to claim

Khanna v. MUFG Union Bank, N.A., 785 F. App'x 15 (2d Cir. 2019)

pplicable to claim

Khanna v. MUFG Union Bank, N.A., 785 F. App'x 15 (2d Cir. 2019)