At-Will Employment: Contractual Claim under Section 1981

At Will Employment Contractual claim under § 1981

In Domino’s Pizza, Inc. et al., v. McDonald (2006) the United States Supreme Court reports “consistent with this Court's case law, and as required by the statute's plain text, a plaintiff cannot state a §1981 claim unless he has (or would have) rights under the existing (or proposed) contract that he wishes "to make and enforce." The statute, originally enacted as §1 of the Civil Rights Act of 1866, now protects the equal right of "all persons" to "make and enforce contracts" without respect to race, §1981(a), and defines "make and enforce contracts" to "include the making, performance, modification, and termination of contracts, and the enjoyment of all benefits ... of the contractual relationship," §1981(b).”

Personal liability for actions taken on behalf of the corporation attaches only when the officer or director is alleged to have taken part in the wrongful act initially giving rise to the corporation's liability. See Musikiwamba v. Essi, Inc., 760 F.2d 740, 753 (7th Cir. 1985) (discussing principles of officer and director liability in context of employment discrimination case); see also National Acceptance Co., 94 Ill. App. 3d at 707, 418 N.E.2d at 1117 ("Although a corporate officer is not generally liable for breach of contract, his status does not shield him from liability for tortious acts from which the breach proxi­mately resulted.”))

In McKnight v. GMC this court took the view that “employment at-will is not a state of nature but a continuing contractual relationship . . . A contract for employment at-will may end abruptly but it is a real and continuing contract nonetheless.” 908 F.2d 104, 109 (7th Cir. 1990) In Walker v. Abbott Laboratories (7th Cir. 2003) the court acknowledges that two other circuits had ruled that at-will employees could state claims under § 1981, see Spriggs v. Diamond Auto Glass, 165 F.3d 1015, 1018-19 (4th Cir. 1999); Fadeyi v. Planned Parenthood Ass’n of Lubbock, Inc., 160 F.3d 1048, 1049-50 (5th Cir. 1998) Since, three more circuits decided that at-will employees could bring claims under § 1981. See Skinner v. Maritz, 253 F.3d 337, 342 (8th Cir. 2001); Lauture v. Int’l Bus. Machs., 216 F.3d 258, 260 (2d Cir. 2000); Perry v. Woodward, 199 F.3d 1126, 1133 (10th Cir. 1999). These courts have found that at-will employment, though capable of being terminated by either party at any time, is nonetheless a contractual relationship.

The Court’s review of § 1981’s statutory language reveals no intent by Congress to give the word “contract” in § 1981 any specialized meaning; thus, they must assume that the ordinary meaning was intended. See Lauture, 216 F.3d at 261; Spriggs, 165 F.3d at 1018. According to the Second Restatement of Contracts, a contract is “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” RESTATEMENT (SECOND) OF CONTRACTS § 1(1981). Several courts have recognized that under this definition, at-will employment creates a contract because the employer promises to pay the employee for certain work and the employee accepts the offer by beginning work. See, e.g., Skinner, 253 F.3d at 340 “Employer offered, either implicitly or explicitly, to pay plaintiff for performance of services. Plaintiff accepted that offer by performance.”; Lauture, 216 F.3d at 261 “Plaintiff’s promise to work for employer, as consideration for employer’s promise to pay her, was a contract.”; Spriggs, 165 F.3d at 1018 “Plaintiff’s performance of the assigned job duties was consideration exchanged for employer’s promise to pay. The parties’ actions thus created a contractual relationship.”

The lack of a fixed duration of employment does not make the relationship any less contractual. As we noted in McKnight, at-will employees, though capable of losing or quitting their employment at any time, are not totally without enforceable contractual rights: “Wages, benefits, duties, working conditions, and all (but one) of the other terms are specified and a breach of any of them will give the employee a cause of action for breach of contract.” 908 F.2d at 109. As another court noted, in all at-will employment relationships, employees maintain “the right to treat the employer’s failure to pay for work done by the employee prior to termination of the employment relationship as a breach of contract.” Skinner, 253 F.3d at 341-42.

Moreover, the Restatement contemplates that at-will employment relationships are contractual even though they lack a term of duration. See RESTATEMENT (SECOND) OF CONTRACTS § 33 cmt. d, illus. 6 (1981); see also Spriggs, 165 F.3d at 1018.

Some federal courts have looked to the state-law definition of “contract” to cast further light on whether at-will employees have sufficient contractual rights to maintain § 1981 claims. See, e.g., Skinner, 253 F.3d at 340 (finding that under Missouri law the plaintiff’s at-will employment “had all the essential elements of a valid contract”); Fadeyi, 160 F.3d at 1050 (same under Texas law). Walker contends that Illinois law recognizes at-will employment relationships as contractual, and Abbott makes no argument to the contrary.

From our review of the case law, it does appear that Illinois courts generally treat at-will employment relationships as contractual in nature. See, e.g., Fellhaver v. Geneva, 568 N.E. 2d 870, 878 (Ill. 1991) (recognizing employment at will as a contract for employment with an indefinite duration); cf. Callis, Papa, Jackstadt, and Halloran. P.C. v. Norfolk & W. Ry., 748 N.E. 2d 153, 161 (Ill. 2001) (“The relationship between the law firm and [employee] is a contractual, at-will relationship. Until such a relationship is terminated, the at-will contract is of value to the law firm.”).

Finally, a finding that at-will employees cannot state a § 1981 claim would appear to contravene Congress’s intention in the Civil Rights Act of 1991 to “restore the broad scope of Section 1981 to ensure that all Americans may not be harassed, fired or otherwise discriminated against in contracts because of their race.” H.R. REP. NO. 102-40 (II), at 2 (1991). Congress’s intent to secure protection of all employees is further evident in its explicit disapproval of the way in which the Supreme Court in Patterson limited § 1981’s application. See S. Rep. No. 101-315, at 14 (1990) (finding “a compelling need for legislation to overrule the Patterson decision and ensure that federal law prohibits all race discrimination in contracts”).

Given these inclusive intentions, we find it difficult to believe that Congress would have sought to exclude from § 1981’s protections the large portion of the employees in this country who work under at will employment contracts. As other courts have noted, excluding at-will employees from § 1981 protection “would be to allow use of the ubiquitous at-will doctrine as leverage to incite violations of our state and federal laws.” Fadeyi, 160 F.3d at 1052 (quotation omitted); see also Skinner, 253 F.3d at 340 n.1; Lauture, 216 F.3d at 264.