Section 1981 race discrimination claims pose unlimited liability risk for TX employers

Race discrimination and retaliation claims under Section 1981 of the Civil Rights Act of 1866 have no cap on the damages that can be awarded. In a recent case from the U.S. 5th Circuit Court of Appeals (whose rulings apply to all Texas employers), an employee was awarded $366 million in damages, made possible by Section 1981. On appeal, however, the court determined the Section 1981 claims were barred by a six-month limitations provision in the employment contract. This reduced the employer’s damages to no more than the $300,000 cap on the alternative claims filed under Title VII of the Civil Rights Act of 1964.

No cap on damages for claims under Section 1981

The employment-related claims that subject employers to the most potential exposure are those that carry prolonged limitation periods and no damages caps. Section 1981, which prohibits race discrimination and retaliation, poses a risk of double exposure to employers. You should be aware that, unlike discrimination claims filed under Title VII, Section 1981 claims have no cap on compensatory or punitive damages.

Jennifer Harris, an African American woman, worked as a sales executive for FedEx. She was fired in 2020 and filed race discrimination and retaliation claims under Section 1981 in May 2021, 16 months later.