Independent Contractor May Bring Section 1981 Race Discrimination Claim

Courts typically have dismissed discrimination claims under Title VII if those claims were made by an independent contractor, rather than by an “employee” of the company.  However, 42 U.S.C. §1981 (“Section 1981”), which prohibits racial discrimination in the formation of contracts, states that “all persons” shall have the same right “to make and enforce contracts as is enjoyed by white citizens.”  In a case of first impression for the 3d U.S. Circuit Court of Appeals, that court has followed prior decisions of three sister-appellate courts in holding that an independent contractor may sue for race discrimination under Section 1981.  Brown v. J. Kaz, Inc. d/b/a Craftmatic of Pittsburgh, 3d Circ., No. 08-2713, Sept. 11, 2009.

Craftmatic is a distributor of adjustable beds that sells its product through sales representatives.  Those representatives schedule their own appointments to visit potential customers’ homes, provide their own equipment and means of transportation for those sales calls, and are paid on commission.  Each sales person signs an “independent contractor” agreement with Craftmatic. 

In 2006, Kimberly Brown, an African-American female, responded to an ad in which Craftmatic was seeking sales representatives, and then registered for a three-day training and an interview session in Pittsburgh with the company.  Brown traveled by bus to Pittsburgh from her home in Cleveland for the session – she testified that the reason was that she preferred not to drive in unfamiliar places.  She attended the training with two male applicants, neither of whom was African-American.  Regarding his initial meeting with Brown, Craftmatic’s recruiting manager, Jay Morris, later stated that he knew that she was “going to be a headache” because she “asks a lot of questions.”

On the final day of training, Morris approached the applicants, and extended his hand to all three.  He shook hands with the two men and exchanged pleasantries with them.  For unexplained reasons, Brown refused to shake Morris’ hand.  Morris responded with a remark, the content of which is disputed.  Brown states that the remark was a racial slur, while Morris says that he was expressing his disappointment that Brown refused to shake hands, equating it to a racial rebuff.  This exchange was followed by some heated words, during which Morris stated that if he had any voice in the decision, Brown would not work for Craftmatic.  With input from Morris, the company ultimately decided not to use Brown as a sales representative.  

Brown ultimately sued Craftmatic, claiming race discrimination under Title VII, the Pennsylvania Human Relations Act, and Section 1981.  The district court dismissed the Title VII and PHRA claims on the basis that Brown was not an employee.  That court also ruled that while Brown’s independent contractor status did not preclude her from bringing claims under Section 1981, Brown did not provide evidence sufficient to support her claims under that statute.  The Third Circuit disagreed, taking issue with the lower court’s conclusion that Craftmatic would have been equally concerned with Brown’s behavior, even if no racial slurs were made.  The appeals court said that instead, the real question was whether the same decision would have been made if Brown’s race was “taken out of the equation” altogether.  The Third Circuit then reversed the summary judgment on the Section 1981 claim, allowing that claim to go forward.

The Third Circuit’s decision does not mean that Brown has proven her case of discrimination.  What it means, however, is that there are disputed issues of fact, and that those issues should be decided by a jury.  The primary take-away from this case is that an independent contractor can bring a racial discrimination claim under Section 1981 against a company that allegedly discriminates in the formation of its contracts, even without an actual employee/employer relationship.  Companies that regularly rely on such contractors should be sure that hiring, training, and terminations are done consistently and in a non-discriminatory manner, in order to avoid the issues presented in this case.