The U.S. Court of Appeals for the Seventh Circuit has determined that employees may be held individually liable under Section 1981 if their discriminatory actions led their employer to terminate another employee. This was a case of first impression involving the so-called “cat’s paw” theory of liability, so-named for a fable involving a monkey that persuades a cat to pull roasting walnuts from a fireplace, only to burn his paw and get no walnuts himself. “Why should the ‘hapless cat’ (or at least his employer) get burned,” the panel asked, “but not the malicious ‘monkey?’”
The case, Smith v. Bray, No. 11-1935 (7th Cir. May 24, 2012), involved an employee who allegedly endured racist harassment from a supervisor, James Bianchetta, while employed at Equistar Chemicals, LP, and who allegedly was fired for complaining about that harassment. Specifically, the employee alleged that the employer’s human resource manager, Denise Bray, persuaded her bosses to terminate the employee in retaliation for his complaints.
The first interesting twist in the case was that both Equistar and its affiliate, Lyondell Chemicals Company, filed for bankruptcy after the claim was filed and were dismissed as defendants. Therefore, recognizing that “[h]is only hope for a damages remedy was to sue the individuals responsible,” the employee brought a claim under §1981 of the Civil Rights Act of 1866. §1981 guarantees racial equality in “the making, performance, modification, and termination of contracts,” including employment contracts. Importantly for this plaintiff, §1981 also permits suits against individuals who violate others’ rights to contractual equality (unlike Title VII, which only permits suits against employers as entities), and therefore provided the plaintiff’s only chance for recovery – from Bianchetta and Bray individually. The second twist, however, was that the plaintiff settled his claim against Bianchetta, the primary harasser. Thus, the only remaining claim was against Bray, who allegedly violated §1981 by feeding negative information regarding the plaintiff to her bosses in retaliation for his complaints of racial harassment, thereby persuading them to terminate him.
The novel question before the Seventh Circuit was therefore “whether the subordinate with a retaliatory motive may be individually liable under § 1981 for causing the employer to retaliate against another employee.” “The answer,” the panel held, “is yes.” The panel’s determination was based upon the fact that §1981, §1983 (which permits similar discrimination claims against public entities), and Title VII all share the same standards for intentional discrimination claims. Thus, recognizing that the cat’s paw theory supports entity liability under Title VII, § 1981, and § 1983 and that other federal circuits had already imposed individual liability upon unlawfully motivated public employees under §1983, the Court reasoned that “[i]t logically follows that an individual can be liable under §1981 for retaliatory conduct that would expose her employer to liability." The Seventh Circuit therefore held what has not before been held in the private arena: “The cat’s paw theory can support individual liability under § 1981 for a subordinate employee who intentionally causes a decision-maker to take adverse action against another employee in retaliation for statutorily protected activity.”
Employers should take note of this decision, which creates a new potential for individual liability based upon discriminatory conduct. Plaintiffs who feel that they have a “cat’s paw” claim against their employer or former employer based upon racial discrimination will likely began adding §1981 claims to their suits, in the hopes of gaining monetary damages from the individual who allegedly motivated the adverse employment action. Managers, supervisors, and human resources staff should be prepared for such claims, and should plan and document their actions accordingly. Hinshaw will follow this case and those that will surely follow, and will update you as this matter develops. With questions, please contact Brett A. Strand or your usual Hinshaw attorney.cat's paw, race discrimination, racial harassment, Seventh Circuit