Working Paper No. 09-52:
The Collision of Employment-At-Will, Section 1981 and Gonzalez: Discharge, Consent, and Contract Sufficiency

Author(s):

Harry Hutchison

Date Posted: October 2009

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Abstract:

While elegant arguments may be available arguing the economic efficiency of at-will employment or castigating such relationships as anachronistic, the focus of this article is not whether at-will employment deserves to be assailed or safeguarded in some normative sense, but whether the post-Civil War anti-discrimination statute, section 1981 applies to or should apply to at-will relationships grounded in the notion of a contract. A related question is whether employment at-will, if a contract, embodies satisfactory contractual sufficiency to sustain section 1981 claims. This issue is most poignantly drawn in the context of a contested discharge. For example, can termination be characterized as a term of the contract (assuming one exists) or is it merely a default rule which cannot logically be sustained as a term of the employment agreement by individuals and courts that are committed to the notion of a contract established on grounds of consent. More specifically, do workers possess adequate knowledge about this asserted default rule and if not, will the absence of knowledge negate the assertion that the term of employment is within the contract and thus alterable by section 1981? Answers to those questions raise ineffably ornery and potentially unresolvable doctrinal issues that may paralyze the application of section 1981 in some at-will situations.

Recently, by virtue of its decision in Gonzalez v. Ingersoll, the Seventh Circuit entered this doctrinal fray with dicta that confronts but did not decide these related questions. While an incipient dispute has developed about the reach and application of section 1981 to at-will employment, the operation of section 1981 should conceptually turn on state law. Accordingly, federal courts will have to decide whether section 1981 applies or should apply within the context of a given jurisdiction. Significantly, Gonzalez v. Ingersoll accepts that, in order to bring a section 1981 claim "there must at least be a contract." And yet, while an at-will relationship can be a contract under pertinent state law, it may nonetheless provide an insufficient contractual relationship to support a section 1981 claim. Since Gonzalez, several other circuits have taken up the gauntlet. Three federal circuits have issued decisions which confirm that at-will employment provides an adequate basis to sustain a section 1981 action.

I hope to show that while the 1991 Civil Rights Statue broadens the reach of section 1981, an important predicate remains-there must be both a contract and a contractual relationship sufficient to support a claim. Without an underlying contract and without a sufficient contractual relationship, section 1981 remains impotent in the face of alleged discriminatory misconduct. Employers thus have one pertinent and potentially devastating defense to employee claims-the absence of a contract or the absence of a contract term that can be altered by section 1981. Despite the incipient debate among the federal courts and despite lingering doctrinal issues concerning the nature and content of employment at-will, I hope to demonstrate that section 1981 applies and should apply to at-will relationships.