NEW YORK — Opponents of workplace diversity programs are increasingly relying on sections of the Civil Rights Act of 1866 to challenge equity policies and funding to minority-owned businesses.
Section 1981 of the act was originally intended to protect former slaves — or black people in particular — from economic exclusion.
But now the American Alliance for Equal Rights — a group run by Edward Blum, a conservative activist who challenged affirmative action in higher education and won — cited the division to found a venture capital fund called the Fearless Fund, which invests in owned businesses. by women of color.
A federal appeals court temporarily blocked funding for the Fearless Fund grant program while the case continues.
Conservative activists have brought suits using section 1981 against other companies and institutions, including insurance company Progressive and pharmaceutical giant Pfizer.
The cases are being watched carefully as the battle over racial discrimination shifts to the workplace following a June Supreme Court decision that ended affirmative action in college admissions.
Although the 1981 statute had been used well before the recent affirmative action ruling to prove reverse discrimination, Alphonso David, legal counsel of the Fearless Fund who serves as president & CEO of the Global Black Economic Forum, said that there is “coordinated use of Section 1981 now. we haven’t seen before.”
Edward Blum’s conservative activist group American Alliance for Equal Rights used a section of the Civil Rights Act of 1866 to sue venture capital fund Fearless Fund. AP Photo/Jose Luis Magana
Here’s what happened and the consequences:
What is Section 1981?
The Civil Rights Act of 1866 is a federal law that prohibits discrimination on the basis of race, color and ethnicity when making and enforcing contracts.
Section 1981 specifically grants all individuals within US jurisdiction the same rights and benefits as those “enjoyed by white citizens” regarding contractual relationships.
However, the Supreme Court’s 1976 McDonald v. Santa Fe Trail Transportation decision expanded that protection, a Section 1981 decision prohibiting racial discrimination in private employment against whites as well as people of color.
“It was a very clever game plan,” said Randolph McLaughlin, a civil rights attorney and law professor at Pace University, referring to the use of the 1866 law. “They wanted to change the civil rights laws.”
The standard of proof for the 1981 section is high. That’s because of the 2020 Supreme Court decision in Comcast v. The National Association of African American-owned Media stipulates that plaintiffs suing for racial discrimination under that section bear the burden of showing that race was a primary factor in denying contract opportunities — as opposed to a mere motivating factor.
Why not rely on Title VII instead?
Title VII of the Civil Rights Act of 1964 protects employees and job applicants from employment discrimination based on race, color, religion, sex, and national origin.
If the plaintiff chooses to sue through Title VII, then he or she will need to file charges with the Equal Employment Opportunity Commission.
That’s a process that takes up to 180 days. After that, the plaintiff can file a lawsuit. Choosing the 1981 route is faster.
Section 1981 is also broader than Title VII, which generally applies to employers with 15 or more employees, legal experts said.
Also under Title VII, plaintiffs can recover only up to $300,000 in compensatory and punitive damages amounts. Section 1981 has no limit.
Title VII does have a lower standard of proof than Section 1981. Plaintiffs only need to show that race was a motivating factor, not the primary cause.
Alphonso David, the Fearless Fund’s legal adviser, said there is “a coordinated use of Section 1981 now that we haven’t seen before.” AP Photo/Frank Franklin II, File
Why is the case against the Fear Fund potentially important?
In its lawsuit, the American Alliance For Equal Rights sought relief arguing that the fund’s Fearless Strivers Grant Contest, which awards $20,000 to black women who run businesses, violates Section 1981 by excluding some people from the program because of their race.
Attorneys for the Fear Fund have argued in court filings that the grant is a donation, not a contract, and is protected by the First Amendment.
David, Fearless Fund’s legal advisor, says that if this type of grant is considered a contract, one can make the argument that grants issued in many other forms and contexts can also be considered a contract.
“Think of every foundation out there that gives out grants,” says David. “They issue grants to people from different demographic groups. They issue grants only to women. They issue grants to earthquake victims. Is that all the contract is?”
Angela Reddock-Wright, an employment and Title IX attorney and mediator based in Los Angeles, believes it is “highly possible” that the case could end up in the Supreme Court.
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“At best, the court refuses to hear this matter on the grounds that Section 1981 is not intended to cover matters like this, but this court seems to be operating under different rules and standards,” he said.
What are the effects of similar legal actions?
Some companies have changed their criteria for their diversity fellowship programs.
Law firms Morrison Foerster and Perkins Coie opened their diversity fellowship program to all applicants of all races in October, a change the company said it was working on before Blum filed suit against them.
He then dropped them. Previously, the program for first-year law students targeted students in historically underrepresented groups.
The Morrison Foerster fellowship program now caters to students who demonstrate a commitment to equity and diversity.
Perkins Coie announced that it has opened its fellowship program to all applicants, regardless of their race, gender or LGBTQ identity.
In a statement, Perkins Coie said the changes came as part of an update to its diversity and inclusion policy following the Supreme Court’s ruling on affirmative action.
Last February, Pfizer dropped race-based eligibility requirements for fellowship programs designed for black, Latino and Native American college students.
A judge has dismissed a lawsuit filed by the conservative nonprofit organization Do No Harm, which claimed the Pfizer program violated Section 1981, but Do No Harm is appealing the decision.
“What would benefit (the company) is to lower their profile,” said University of Virginia Distinguished Professor of Law George Rutherglen. “This means that they do not explicitly consider race in making these decisions. Look to other conditions and requirements that may achieve the same objective.”
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