Opinion ID: 158562
Heading Depth: 4
Heading Rank: 1

Heading: At-Will Employment Relationship

Text: The parties agree that Perry had no written employment contract and was an at-will employee under New Mexico law. See Sanchez v. The New Mexican, 738 P.2d 1321, 1323 (N.M. 1987) (recounting that, under New Mexico law, unless there is an explicit contract of employment stating otherwise, employment is terminable “at will”). Because no material factual dispute exists with respect to Perry’s employment status, this court will reverse the grant of summary judgment only if the district court misapplied substantive law when it concluded that an atwill employee cannot maintain a cause of action under section 1981. See Kaul, 83 F.3d at 1212. Section 1981(a) provides, in part: “All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens . . . .” In 1989, the Supreme Court held that section 1981’s prohibition against discriminatory conduct did not extend beyond the formation of a contract to conduct occurring after the establishment of the contractual relationship. See Patterson v. McLean Credit Union, 491 U.S. 164, 171 (1989) (holding that section 1981 “does not apply to -7- conduct which occurs after the formation of a contract and which does not interfere with the right to enforce established contract obligations”). In response to Patterson and other cases, Congress enacted the Civil Rights Act of 1991. See Pub. L. No. 102-166, 105 Stat. 1071; see also H.R. Rep. No. 102-40(II), at 2 (1991) (stating that one of the purposes of the Civil Rights Act of 1991 was to “respond to recent Supreme Court decisions by restoring the civil rights protections that were dramatically limited by those decisions”). Pursuant to the Civil Rights Act of 1991, the existing text of section 1981 was redesignated as section 1981(a) and subsections (b) and (c) were added. See Pub. L. No. 102-166, § 101, 105 Stat. 1071, 1071-72. Section 1981(b) reads: “For purposes of this section, the term ‘make and enforce contracts’ includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” 42 U.S.C. § 1981(b). Section 1981 now clearly prohibits discriminatory conduct that occurs both before and after the establishment of the contractual relationship. See id.; see also Hopkins v. Seagate, 30 F.3d 104, 105 (10th Cir. 1994) (stating that the termination of contracts is included in the protections afforded by section 1981, as amended by the Civil Rights Act of 1991). Even as amended, section 1981 continues to center on the protection of contractual rights. See 42 U.S.C. § 1981(a). Although an employee can now seek -8- redress for discriminatory conduct engaged in by her employer either before or after the formation of the employment relationship, any claim brought pursuant to section 1981 must still be supported by an underlying right of the employee to “make and enforce contracts.” Id. Defendants interpret section 1981 to require the existence of a contractual relationship between an employee and her employer and argue that this contractual relationship can only arise if an employee and her employer have entered into a written employment contract. Defendants argue that the absence of a written employment contract is fatal to an employee’s section 1981 claim. Defendants claim Perry cannot maintain a cause of action under section 1981 because she was an at-will employee without a written employment contract. This court has never directly addressed the question of whether an at-will employee can bring a cause of action under section 1981. 3 For the reasons articulated below, this court declines to adopt the narrow interpretation of section 1981 promoted by Defendants. Perry’s relationship with her employer consisted of Perry’s rendition of services in exchange for her employer’s payment of wages. Under New Mexico 3 In at least one instance, the United States District Court for the District of New Mexico has held that an at-will employee can maintain a cause of action for retaliation under section 1981. See O’Neal v. Ferguson Constr. Co., 35 F. Supp.2d 832, 837-38 (D.N.M. 1999). -9- law, this is a contractual relationship. See Melnick v. State Farm Mut. Auto. Ins. Co., 749 P.2d 1105, 1109 (N.M. 1988) (“When an employment contract is not supported by any consideration other than performance of duties and payment of wages, and there is no explicit contract provision stating otherwise, it is an employment contract for an indefinite period and terminable-at-will by either party.” (emphasis added)). Although Perry was an at-will employee, her relationship with her employer was contractual. See id. Resolution that a contractual relationship existed only begs the question of whether the contractual relationship between Perry and her employer embodied sufficient contractual rights to support a cause of action for wrongful termination under section 1981. The Seventh Circuit Court of Appeals, for example, has suggested that, because an at-will employment contract does not encompass termination terms, an at-will employee cannot bring an action for wrongful termination against her employer under section 1981. See, e.g., Gonzalez v. Ingersoll Milling Mach. Co., 133 F.3d 1025, 1035 (7th Cir. 1998) (dicta); see also Gandy v. Gateway Found., 1999 WL 102777, - (N.D. Ill. Feb. 22, 1999) (magistrate judge’s report and recommendation) (discussing Gonzalez and implying that an at-will employment relationship would only be sufficient to support a section 1981 claim for demotion or reduction in pay). Those who advance or embrace this argument reason that because an at-will employee may be -10- discharged at any time, the terms of an at-will employment contract extend only to wages, benefits, duties, and working conditions, but do not encompass the time or manner of termination. Consequently, they conclude that because terminations for any reason or no reason are permissible under the terms of an at-will employment contract, employees cannot bring claims under section 1981 alleging wrongful termination. This position has been explicitly rejected by both the Fourth and Fifth Circuit Courts of Appeal. See Spriggs v. Diamond Auto Glass, 165 F.3d 1015, 1020 (4th Cir. 1999); Fadeyi v. Planned Parenthood Ass'n, 160 F.3d 1048, 1052 (5th Cir. 1998). The amendment of section 1981 to include a prohibition against racially discriminatory conduct in the termination of contracts has effectively altered the at-will employment relationship. Although the general rule that an employer can discharge an at-will employee for any reason or no reason is still valid, an employer can no longer terminate an at-will employment relationship for a racially discriminatory reason. See 42 U.S.C. § 1981(b); see also Hopkins, 30 F.3d at 105 (stating that the protections of section 1981 now encompass the termination of the employment relationship). The great weight of well-reasoned authority supports this court’s conclusion that the employment-at-will relationship encompasses sufficient contractual rights to support section 1981 claims for wrongful termination. See, -11- e.g., Spriggs, 165 F.3d at 1018-20; Faydei, 160 F.3d at 1049-52; LaRocca v. Precision Motorcars, Inc., No. 4:98CV3195, 1999 WL 191568, at - (D. Neb. Mar. 26, 1999); O’Neal v. Ferguson Constr. Co., 35 F. Supp.2d 832, 837-38 (D.N.M. 1999); Williams v. United Diary Farmers, 20 F.Supp.2d 1193, 1201-02 (S.D. Ohio 1998); Lane v. Ogden Entertainment, Inc., 13 F.Supp.2d 1261, 1272 (M.D. Ala. 1998); Harris v. New York Times, No. 90 CIV. 5235, 1993 WL 42773, at - (S.D.N.Y. Feb. 11, 1993). The district court erred as a matter of law when it dismissed Perry’s claims arising under section 1981 because she was an at-will employee.