Hostile Work Environment Claims – They’re Not Just for Employees Anymore.

In May, 1999, the First Circuit Court of Appeals expanded the statutory basis upon which hostile work environment claims may be asserted by concluding that such claims are not only available to employees under Title VII, but are also available to minority independent contractors under provisions of the original Civil Rights Act of 1866, as amended. While Oklahoma is beyond First Circuit jurisdiction, the position of one federal court is influential in another Court’s consideration of the same subject, especially in matters involving the interpretation of Federal law. Much can be learned from the First Circuit’s analysis in anticipating how the Tenth Circuit and Oklahoma Federal District Court’s will react to similar claims.

Facts

In 1988, Benjamin Guiliani started a parking lot maintenance company. Mr. Guiliani was Mexican-American. He called the company Danco. Danco was incorporated in early 1994, and Mr. Guiliani was the sole shareholder. In September, 1994, Mr. Guiliani, on behalf of Danco, signed the first of several contracts with Wal-Mart. In that contract Danco agreed to maintain the parking lot at a Wal-Mart store in Augusta, Maine. Almost immediately after beginning work Mr. Guiliani felt unwelcome at the Augusta Wal-Mart. First, in early October 1994, he was confronted by two men who were in the Wal-Mart parking lot when he arrived for work. They asked what he was doing, and whether the Wal-Mart maintenance supervisor knew he was there. Soon after, the maintenance supervisor told Mr. Guiliani to leave the premises. Shortly thereafter, the words “White Supremacy” were found spray-painted on the parking lot near the spot where Mr. Guiliani and his son usually unloaded their equipment. Mr. Guiliani reported this to the Wal-Mart store manager and offered to cover over the spray-paint. He was told it would be taken care of and that the matter would be investigated. Though the investigation was conducted, the spray-painted message remained on the parking lot for over a month. The next incident occurred on October 14, 1994, when the Wal-Mart night shift supervisor told Guiliani, “I don’t like your kind – Puerto Ricans.” When Mr. Guiliani explained he was Mexican-American, the supervisor pushed Guiliani and threatened to rip his head off. Guiliani reported this incident to the police and the store manager. The final incident took place in November 1994. This time the night shift supervisor yelled a racial slur at Guiliani from a passing vehicle. Shaken by the incident, Guiliani again reported the matter to the police and to the Wal-Mart store manager. In each instance, an investigation was conducted, but no disciplinary action was taken due to a lack of evidence. When the Wal-Mart store manager was replaced in January 1995, Guiliani reported his history at the store to the new manager. The new manager was infuriated the police had been involved, and later that month gave Danco notice that its contract was being terminated. Though attempts were made to reconcile, Danco’s contract was terminated due to dissatisfaction with Danco’s work.

Both Danco, Inc. and Benjamin Guiliani sued Wal Mart asserting, among other things, claims for breach of contract and hostile work environment/civil rights violation under 42 U.S.C. § 1981. The jury found in favor of Wal-Mart on the breach of contract claims, but found in favor of Plaintiffs on the hostile work environment claim. The jury awarded Plaintiffs $650,000 in actual damages.

The Court’s Analysis and Decision

The Court began its analysis by pointing out that neither Danco nor Mr. Guiliani could have asserted a claim under Title VII, because neither were “employees” of Wal-Mart as required for Title VII coverage. It was for this reason, the Court concluded, that Plaintiffs’ hostile work environment claim was based upon 42 U.S.C. § 1981, a provision of the original Civil Rights Act of 1866 which, among other things, gives all persons equal rights to “make and enforce contracts” free from racial discrimination. It should be noted at this point that the only discrimination Section 1981 applies to is discrimination based on race. More precisely, the statute provides, in part, that

All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

42 U.S.C. § 1981(a) (1991).

The Court then sought to determine whether the provisions of Section 1981 give an independent contractor the same racial discrimination claim based on hostile work environment that would be available to an employee under an ordinary employment contract. After concluding that Section 1981 provides protection from both state-based (public sector) and private (private sector) acts of racial discrimination, the Court turned its attention to the specific language of the statute. First, the Court noted that until 1991 the provisions of Section 1981 could not support a hostile work environment claim because the statute protected only the making and enforcement of contracts. Under the interpretation given the pre-1991 version of Section 1981, the work environment could not result in racial discrimination because both the making and enforcement of contracts occurred outside and without regard to the work environment. In 1991, however, Congress amended Section 1981 to address this problem. By simply modifying the statutory definition of “make and enforce contracts” to include performance of the contract, Congress removed the principal impediment to a racially based hostile work environment claim under Section 1981. As the Court noted, “hostile work environment claims may now be pursued by employees under both Title VII and section 1981”, and there is nothing in the statute or the legislative history to prohibit extension of Section 1981’s coverage to independent contractors.

The Court next turned its attention to whether either Plaintiff could maintain a hostile work environment claim under Section 1981. With respect to this analysis we do well to remember that the Court has already concluded that the employment contracts of employees, as well as the contracts of independent contractors are within the scope of Section 1981’s protection. With this in mind, the Court focused first on whether either of the Plaintiffs had a contract which was covered by the statute. On this issue the Court concluded it was Danco that contracted with Wal-Mart, and that Mr. Guiliani had only executed the contract on behalf of Danco. Thus, the court reasoned, Danco had a potential claim under Section 1981, while Mr. Guiliani did not.

Having concluded that Danco could assert a hostile work environment claim under Section 1981, the Court next considered whether Danco had established the elements of such a claim. A hostile work environment claim under Section 1981 requires not only a contractual relationship, but also a showing “(1) that the plaintiff was exposed to comments, jokes, or acts of a racial nature by the defendant’s employees, and (2) that the conduct had the purpose or effect of interfering with the plaintiff’s work performance or created an intimidating, hostile or offensive working environment.” By way of further limitation, the Court noted that a “defendant will ordinarily only be liable for harassment by low-level employees if management-level employees knew or should have known about it.” Finally, of course, in order to complete the hostile work environment claim, there must be some evidence that the plaintiff suffered damages. Like other hostile work environment claims, the court acknowledged that such a claim under Section 1981 must be measured by a consideration of all the circumstances, including the frequency of the discriminatory conduct, its severity, whether it is physically threatening or humiliating, and whether it unreasonably interferes with the contractor’s work performance.

In this case, the Court pointed to the three race-related incidents, and explained that while plaintiff must show “more than a few isolated incidents of racial enmity . . . there is no absolute numerical standard” which establishes whether or not a hostile working environment has been created. On this score the Court deferred to the findings of the jury that the three incidents in questions were sufficient to satisfy the requirements of a hostile work environment claim.

What more can we learn from this case?

While the Court did not address the issue, it should be noted that Section 1981’s protection is apparently available only to minorities. Though the Court cited legislative history to the effect that the provisions of Section 1981 were intended “to bar all race discrimination in contractual relations”, the clear and explicit language of the statute provides protection only to the extent of the rights “enjoyed by white citizens.” Thus, a hostile work environment claim based on reverse discrimination could apparently not be maintained under Section 1981.

How does this case apply to you?

As an initial proposition, this case exposes every contracting party to the possibility of a Section 1981 claim of racially based hostile working environment. No longer are businesses exposed only to the racial discrimination claims of their employees. Now any person or entity in contract with another must concern itself with how its managers and employees interact with independent contractors. Failure to control such interaction, both from a policy, investigation, and enforcement standpoint, may subject the violating party to devastating consequences. Which leads to the second point – review your policy on racial discrimination. Make certain it clearly and explicitly explains that racial discrimination of any sort, whether as between employees or otherwise, including with respect ot independent contractors, will not be tolerated. Finally, investigate reports of racial discrimination and consistently enforce your policy where evidence of discrimination appears.

Steven K. Metcalf