June 11, 2012Client Alert

Private Sector Employees Can be Held Individually Liable for Employment Retaliation Under Recent Seventh Circuit Decision

If Joe targets co-worker Jane for complaining that she was harassed at work based on her race, and Joe convinces their private-sector employer to fire Jane, can Joe be held liable for his retaliatory intent? The Seventh Circuit federal Court of Appeals recently grappled with that issue and concluded that, under what is referred to as “Section 1981,” the answer is yes.


Section 1981, a Reconstruction Era civil rights law from 1866, prohibits discrimination based upon race in the making and enforcement of contacts. While that might sound completely unrelated to employment relationships, a person’s employment relationship with his or her employer is one of contract. Section 1981, therefore, protects individuals from being deprived of their right to make and keep their contractual employment rights based upon their race.


In 2008, the U.S. Supreme Court held that Section 1981 allows for claims of retaliation. In other words, if an individual like Jane is retaliated against in a term or condition of employment based upon her race, she has a claim under Section 1981 against her private-sector employer. But the Supreme Court has never held that such a retaliation claim can be brought against an individual co-worker under Section 1981. Several other circuit courts have held that another, similar, Reconstruction Era civil rights statute known as Section 1983, which prohibits race discrimination by public employers, allows for individual liability of an employee with an unlawful retaliatory motive. 


In addition, the Supreme Court in 2011 recognized the theory of what is called “cat’s paw liability” under Title VII. That theory owes its name to an Aesop fable in which a monkey maliciously convinces a cat to pull roasted chestnuts from a bed of hot coals. The cat in the fable burns its paws doing so, and the monkey jumps in and gobbles up all the chestnuts. The cat’s paw theory of liability allows courts to find the monkey, who is behind the misconduct, as well as the cat, who executes the misconduct, liable for the misconduct.


In Darrel Smith v. Denise Bray, slip. op., Case No. 11-1935 (7th Cir. March 24, 2012), the Seventh Circuit recently held that an individual with an illegal retaliatory motive under Section 1981 (the “monkey”), who convinces his or her private employer (the “cat”) to take adverse action against a co-worker, can be held liable under Section 1981 for that retaliatory motive and its consequences. The result, according to the court, “makes sense as a matter of basic fairness: Why should the ‘hapless cat’ get burned but not the ‘monkey’?”


The practical result of the Seventh Circuit’s decision in Bray is that, in race retaliation cases in the future, individual defendants, including, but not limited to, managers and supervisors, as well as the employer, are likely to be sued. Employers, therefore, should consider whether they will pay for the defense of any individual employee so named and whether, to avoid attorney conflict of interest, they will need to hire independent counsel to represent any such individual employee if and when the company blames the individual for the retaliatory motive of which it might have been completely unaware. Knowing that the expense of two (or more) lawyers to defend against a single retaliation lawsuit will cost the employer more in most cases, plaintiff’s lawyers are certain to name both the employer and those individual defendants in the suit, if only to increase the likelihood and cost of settlement. Employers with employment practices liability insurance also should review their policies to ensure that retaliation claims brought against individual employees, especially those who are not managerial or supervisory are covered for defense cost and liability purposes.
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