Many people have heard of workplace discrimination laws like Title VII of the Civil Rights Act. But far fewer people know about another federal civil rights law that can be just as powerful: 42 U.S.C. § 1981.
Section 1981 is built on a simple principle: everyone has the same right to make and enforce contracts regardless of race. This law protects individuals from racial discrimination in contracts, business relationships, and professional opportunities.
For many people facing discrimination outside traditional employment, Section 1981 may provide the strongest legal remedy available. In many situations, Section 1981 fills critical gaps that other civil rights laws do not cover.
Below are some of the most common ways the law is used.
Discrimination in Business Relationships
Section 1981 frequently arises when racial discrimination affects contracts between businesses or professional service providers. In practice, many § 1981 cases involve minority-owned businesses or vendors who are denied contracts or removed from business relationships because of race. Unlike many employment statutes, § 1981 protects entrepreneurs, vendors, contractors, and business owners.
Examples may include:
- A company refusing to contract with a qualified minority-owned vendor while working with similarly situated non-minority vendors.
- A company terminating an existing subcontractor or vendor agreement after racial bias emerges.
- A minority-owned subcontractor being removed from a project while non-minority subcontractors remain.
- A company refusing to negotiate or continue negotiations after learning the race of the business owner.
- A company offers a minority-owned vendor worse pricing or contract conditions than similarly situated vendors.
Because these relationships are contractual in nature, courts have consistently held they fall within the core protections of § 1981.
For business owners and independent professionals, this statute may be one of the most important legal protections against race discrimination in the marketplace.
Discrimination Against Independent Contractors and Consultants
Section 1981 also protects individuals whose ability to pursue contract-based work relationships is limited by race discrimination.
Many professionals work as consultants, freelancers, and independent contractors, rather than employees. Because these relationships are contractual, § 1981 often applies even when traditional employment discrimination laws, such as Title VII of the Civil Rights Act, do not.
These cases sometimes involve situations where:
- A consulting agreement is terminated after discriminatory comments.
- A company refuses to renew or extend an independent contractor agreement for discriminatory reasons.
- A contractor is treated differently (such as hourly rate or other contract terms) from similarly situated contractors of another race.
Additionally, in some industries, participation in professional networks or trade organizations is an important gateway to obtaining contracts and referrals. When race discrimination interferes with access to those opportunities, § 1981 may apply because it affects the individual’s ability to enter into business relationships.
Discrimination in Customer or Consumer Transactions
Section 1981 can also apply to discriminatory treatment in consumer-facing businesses. For example, courts have allowed claims where businesses:
- Refuse service because of a customer’s race.
- Provide services on worse terms, or subject customers to more burdensome conditions because of their race.
- Cancel or deny contracts for housing, services, or membership opportunities based on race.
These cases often arise in situations where a business relationship already exists, such as when a customer has purchased a product or service and the business refuses to honor the transaction because of racial stereotypes.
For example, one scenario recognized by courts is where a passenger purchases an airline or train ticket – a contract for transportation – but is removed from the flight or train based on racially-biased assumptions about the passenger’s behavior or safety risk. In a similar vein, courts have allowed § 1981 claims where retail stores refuse to complete a purchase or eject customers from the premises after they attempt to buy goods or services because of racial stereotypes.
Retail stores, banks, financial services companies, and other businesses that enter contractual relationships with customers may all be subject to § 1981.
If Race Discrimination Has Affected Your Business or Career
Race discrimination does not only occur in traditional workplaces. It can appear in contracts, partnerships, business opportunities, and professional relationships.
If you are a business owner, contractor, or professional who believes race discrimination affected a contract or business opportunity, you may have legal protections under federal civil rights law.
An experienced civil rights attorney can evaluate whether your situation may fall within federal civil rights laws such as 42 U.S.C. § 1981.
