Four-Year
Limitations Period Applies to
Section 1981 Discrimination Claims
On
May 2, 2004 the United States Supreme Court unanimously decided that a
four-year statute of limitations should apply to all claims brought under
the Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991
(42 U.S.C. 1981). This decision changes existing historical precedent that
applied the personal injury statute of limitations for the state where the
1981 was filed. In California,
this meant that the two-year limitations period for personal injury claims
(Code of Civ. Proc. 340) applied. Under this
recent decision, employees will have more time to bring suit. Jones v.
R.R. Donnelley & Sons Co., 541 U.S. __, 124 S.Ct. 1836 (2004).
Background of the Case
The
case involved African-American former employees of the company's
manufacturing division. The former employees filed a class action lawsuit
in 1994 alleging violations of 42 U.S.C. 1981. The employees alleged that
they were subjected to a racially hostile work environment, given an
inferior employee status, and wrongfully terminated or denied a transfer in
connection with the closing to the plant.
The
company sought summary judgment on the ground that the lawsuit was barred
by the statute of limitations. The company claimed that the applicable
state 2-year statute of limitations for personal injury claims barred the
class action. The Seventh Circuit agreed, and the Supreme Court granted
review.
State Statute of Limitations Previously Applied
42
U.S.C. 1981 does not contain a statute of limitations. The Supreme Court
had earlier decided that federal courts should apply "the most
appropriate or analogous state statute of limitations" to claims
arising under 1981. Goodman v. Lukens Steel Co., 482 U.S. 656,
660 (1987). In this case, the company argued that Illinois' two-year statute of
limitations should apply.
However,
in 1990 Congress enacted a catchall 4-year statute of limitations for
actions "arising under" federal statutes enacted after December
1, 1990 (28 U.S.C. 1658). In this situation, 1981 is not a new law; it was
enacted in 1886. However, it was significantly amended in 1991.
The
Seventh Circuit held that the four-year catchall limitations period of 1658
did not apply to a cause of action based on a post-1990 amendment to a
pre-existing statute. The Seventh Circuit found that the 1991 amendments
attached to the original statute enacted in 1886 and thus were not
"arising under" a federal statute enacted after December 1, 1990.
The
question before the Court was whether the employees' claims under 1981 were
governed by the 4-year catchall limitations period of 1658 or by the 2-year
personal injury limitations period of Illinois.
Amendments to Section 1981 Made Claims Possible
The
Supreme Court found that the meaning of "arising under" in 1658
was ambiguous, and therefore examined Congressional intent. The Court found
that the purpose of enacting the 4-year catchall limitations period of 1658
was to eliminate the uncertainty for litigants and courts caused by
borrowing state statutes of limitations. That purpose would be undermined
if 1658 were interpreted to only apply to entirely new sections of the
United States Code. The Court noted that an amendment to an existing
statute is an "Act of Congress" just like an entirely new
statute.
Therefore,
the court held that a cause of action "arises under an Act of
Congress" enacted after December 1, 1990 and is subject to the 4-year
limitations period, "if the plaintiff's claim against the defendant
was made possible by a post-1990 enactment."
In
this case, 1981 was amended in 1991 to clarify that it covered claims for
hostile work environment, wrongful termination, and failure to transfer.
These claims were made possible by the 1991 amendments. The 1991 amendments
to the Civil Rights Act overruled the Supreme Court's holding in Patterson
v. McClean Credit Union, 491 U.S. 164 (1989)
which held that racial harassment in employment was not actionable under
1981. The 1991 amendments clarified that 1981 applies to all aspects of the
contractual relationship, including benefits, privileges, terms and
conditions.
In
this instance, the employees' claims for hostile work environment and
failure to transfer clearly were made possible by, and arose under, the
1991 amendments to the Civil Rights Act. The claims alleged violations of
the post-1990 version of the Act. Accordingly, the 4-year catchall
limitations period applied. The case was remanded to the trial court for
further proceedings.
Practical Effect for California
Employers
The
ultimate result of this decision for California employers is that the
statute of limitations for 1981 claims arising under the 1991 amendments to
the Civil Rights Act has been extended from the two-year state statute of
limitations for personal injury claims to the four-year statute of
limitations under 1658.
This
grants employees a much longer time frame in which to bring racially
hostile work environment and wrongful discharge claims than has previously
been allowed under this Act or other state and federal statutes.
Given
the longer time frame in which lawsuits may be brought, employers are
advised to exercise even more diligence in keeping detailed and accurate
records of employee complaints of harassment or discrimination. Over time,
memories fade, witnesses are lost, and accounts may change.
Employers
should promptly investigate any and all claims of harassment and
discrimination. Employers should interview all witnesses. Remedial actions should
be taken when the investigation reveals harassment or discrimination. Such
remedial action should be aimed at preventing future harassment. The
investigation, interviews, outcome, and action taken should all be
documented in detail. These records should be maintained for a minimum of
four years.
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