In this paper I incorporate group behaviour into a model of the labour market and show that discrimination can be the result of competition between coalitions of workers and bosses for jobs. If the probability of correctly assessing the productivity of individual workers decreases, coalition-formation on the basis of recognisable characteristics becomes relatively more rewarding than coalition forming on the basis of productivity. The conditions are under which each individual in the endogeneously defined group actively discriminates persons with different recognisable characteristics, independent of productivity.