Section 1981(a) provides that:

All persons within the jurisdiction of the United States shall have the same right in every state and territory to make and enforce contracts, to sue, be parties, present evidence, and to the full and equal benefit of all laws and proceedings for security of persons and property.  Additionally all persons shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

In 1989 the Supreme Court limited the application of Section 1981 in Patterson v. McLean Credit Union, 491 U.S. 164 (U.S. 1989).  In Patterson, an employee sought damages for racial harassment and for discrimination under 42 U.S.C.S. § 1981.  The Supreme Court held that racial harassment relating to conditions of employment is not actionable under 42 U.S.C.S. § 1981 because that provision does not apply to conduct which occurs after the formation of a contract and which does not interfere with the right to enforce established contract obligations.

Later, Congress passed the Civil Rights Act of 1991. The Civil Rights Act of 1991 added Section 1981(b), which states:

For purposes of this section, the term “make and enforce contracts” includes the making, performance, modification, and termination of contacts, and the enjoyment of all benefits, privileges, terms, and condition of the contractual relationship.

Accordingly, the 1991 amendments permit employees to sue under Section 1981 for post contract formation/modification conduct, including discriminatory termination.  

Although Section 1981 does not itself use the word “race,” the Supreme Court has construed the section to forbid all “racial” discrimination in the making of private as well as public contracts.  “Racial discrimination” also covers ethnic groups, such as, Hispanics, Asians and Arabs.

The rights protected by section 1981 are protected against impairment by nongovernmental discrimination and impairment under color of state law limitations.  

There is a four-year statute of limitations for Section 1981 claims.  There is no requirement to file with the Equal Employment Opportunity Commission (EEOC) or administrative agencies before instituting a Section 1981 action in court.  State courts and federal courts have concurrent jurisdiction in Section 1981 claims.

Section 1981 permits victims of race-based employment discrimination to obtain a jury trial at which both equitable and legal relief, including compensatory.  In addition, under certain circumstances, punitive damages may also be awarded.  Johnson v. Railway Express Agency, Inc., 421 U.S. 454 (U.S. 1975).  Such damages may include:

Back pay, which can consists of wages, salary and fringebenefits the employee would have earned during the period of discrimination from the date of termination (or failure to promote), to the date of trial.

Compensatory damages are allowed for future loss, emotional distress, pain & suffering, inconvenience, mental anguish & loss of enjoyment of life.

Attorney’s fees may be awarded to the prevailing party.

Punitive damages are limited to cases where the “employer has engaged in intentional discrimination and has done so with malice or reckless indifference to the federally protected rights of an aggrieved individual.”

Injunctive relief is available when there is an intentional discriminatory employment practice. For example, an employee can be reinstated and an employer can be ordered to prevent future discrimination.