Brown v. J. Kaz, Inc., No. 08-2713 (3d Cir. Sept. 11, 2009)

By Paul Mollica

The Third Circuit issues the first published federal court of appeals decision holding that the Gross v. FBL Fin. Servs., Inc., 129 S.Ct. 2343 (2009), decision did not do away with the Price Waterhouse method of proof under section 1981, citing differences in language between that statute and the ADEA.

Brown v. J. Kaz, Inc., No. 08-2713 (3d Cir. Sept. 11, 2009): The issue comes up in this case because the plaintiff, who attended training and applied to be a sales representative, lost her Title VII and Pennsylvania Human Rights Act claims on the ground that the position was for an “independent contractor” rather than an employee.

At training, the plaintiff (according to the summary judgment record) was snubbed by the recruiting manager (named Morris), who refused to shake her hand.  As the opinion summarized:

“According to Brown, after she refused to shake his hand, Morris stated, ‘Well, you ain’t nothing but a black person anyway’ and ‘Well, you ain’t nothing but the N word.’ App. at 329. Brown states that, after she asked, ‘Are you calling me a nigga,’ Morris ‘smirked and shook his head.’ App. at 329-30. Morris, on the other hand, testified at his deposition that he told Brown that ‘not shaking a man’s hand is like calling a black person a derogatory name’ and that ‘it’s like calling a black person the N-word.’ App. at 157-58. After this exchange, as summarized by the District Court, ‘the two engaged in some discussion about slapping or hitting people, although it is unclear, but irrelevant, as to who initiated this topic of discussion.’ App. at 4.”

Brown was not retrained as a sales representative, suffice it to say.

In the district court and on appeal, the defendant contended that the sales representative position was not an “employee.” Citing Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), the Third Circuit agreed:

“[T]he Darden factors in their totality suggest that Brown was not an employee of Craftmatic. Brown had to provide her own equipment for sales appointments (except for a massage demonstration tool and a DVD for which she was required to pay a deposit), her own office supplies, and her own means of transportation to appointments. Craftmatic provided Brown with no office space and paid her on a commission basis only. Brown was also required to pay for her own expenses, including liability insurance, and was responsible for payment of all taxes arising from her work. Brown was permitted to negotiate price on her sales (within certain limits) and to solicit customers on her own. Finally, Craftmatic could only assign Brown sales appointments and no other work.”

This left only section 1981, which provides that “all persons . . . shall have the same right . . . to make and enforce contracts . . . as is enjoyed by white citizens.” 42 U.S.C. § 1981(a). The Third Circuit faced two novel issues in applying section 1981 to these facts.  First, it held (citing the case law from the First, Seventh and Eleventh Circuits) that this section applied to independent contractors.  Second, in light of the fairly “direct” evidence of racial motivation that tainted the decision not to retain the plaintiff, it had to decide whether the plaintiff might proceed under the Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), method of proof.

As we know, the Price Waterhouse method took quite a cuffing from the five-justice majority in Gross, who held that the 1989 Title VII authority did not extend to the differently-configured ADEA statute. Lawyers have speculated that there would soon be attacks on other, decades’ old precedents form the courts of appeals holding that a mixed-motive analysis may be used outside of the Title VII context.

The Third Circuit comes down in favor of mixed-motives under section 1981.

“In their written responses and at oral argument, the parties agreed that Gross, which rejected the application of the Price Waterhouse framework to claims under the Age Discrimination in Employment Act (‘ADEA’), has no impact on this case. Accordingly, we need not decide the impact, if any, of Gross on section 1981 here. We note only that Gross focused on the statutory text of the ADEA and concluded that Congress’ use of the phrase ‘because of . . . age’ meant that “the plaintiff retains the burden of persuasion to establish that age was the ‘but-for’ cause of the employer’s adverse action.’ 129 S.Ct. at 2350-51. Section 1981, however, does not include the ‘because of’ language used in the ADEA. Instead, section 1981 more broadly provides that ‘all persons . . . shall have the same right . . . to make and enforce contracts . . . as is enjoyed by white citizens.’ 42 U.S.C. § 1981(a) (emphasis added). Indeed, use of the Price Waterhouse framework makes sense in light of section 1981’s text. If race plays any role in a challenged decision by a defendant, the plain terms of the statutory text suggest the plaintiff has made out a prima facie case that section 1981 was violated because the plaintiff has not enjoyed ‘the same right’ as other similarly situated persons. However, if the defendant then proves that the same decision would have been made regardless of the plaintiff’s race, then the plaintiff has, in effect, enjoyed ‘the same right’ as similarly situated persons.”

A concurring opinion by Judge Jordan expresses disquiet about this conclusion:

“In the present case, the Majority concludes that, despite the foregoing instruction from Gross, Title VII-style burden shifting naturally controls in § 1981 cases. As the Majority sees it, because § 1981 does not contain the same ‘because of’ clause found in the ADEA, Gross is simply inapposite. There is an irony here. While recognizing a textual distinction between the ADEA and § 1981, the Majority’s approach ignores the textual distinctions between Title VII and § 1981. Moreover, it ignores the fundamental instruction in Gross that analytical constructs are not to be simply transposed from one statute to another without a thorough and thoughtful analysis. Even when there has been such analysis, later arising Supreme Court precedent may require reevaluation.”