I’ve been practicing law for over 20 years, and I must concede that I did not know this.
Here’s how it works.
Let’s say two companies bid for a public contract. One is minority-owned; the other is not.
The minority-owned company submits the lowest bid by a million dollars. However, the consulting company that vets the bidders recommends that the municipality accept the higher bid from the white-owned business, which it does.
So, minority-owned company sues for race discrimination, citing Section 1981 of the Civil Rights Act of 1866, a federal law that makes it unlawful to discriminate on the basis of race, color, and ethnicity when making and enforcing contracts.
Many employees have relied on Section 1981 to pursue race discrimination claims against employers. But can a company rely on it too?
Indeed, almost every federal court of appeals has allowed corporations to allege racial discrimination, and none have established a contrary rule. The most recent is the Sixth Circuit Court of Appeals, which concurred with the other federal courts. It adopted reasoning from the DC Circuit, which concluded that “if a corporation can suffer harm from discrimination, it has standing to litigate that harm.”
Where a corporation alleges that it was not awarded a contract on the basis of race, it clearly falls within the zone of interests protected by the statute.
So, how does a corporation plead race discrimination?
By alleging facts that make plausible their allegations. In the § 1981 context, this means alleging sufficient facts to show that (1) the plaintiff belonged to a protected class; (2) the defendant intended to discriminate against him on the basis of race; and (3) the defendant’s discriminatory conduct abridged a right enumerated in the statute.
In this instance: (1) a minority-owned business; (2) claimed that the consultant treated them unfairly by not recommending them for a contract for which they underbid a white-owned business by $1 million; and (3) this conduct was discriminatory. That’s a potential cause of action under Section 1981.
The business can pursue its race discrimination claims.