On March 5, 2024, a federal judge in Texas revoked federally sponsored racial incentives for minority groups seeking access to capital and government contracts. Nuziard vs. Minority Business Development Agency (“NuziarPlaintiffs, non-minority business owners, challenge preferential treatment provided to “socially or economically disadvantaged individuals” by the Minority Business Development Administration (“MBDA”), a division of the Department of Commerce. chanted.[s]” is defined to include African Americans, Hasidic Jews, Hispanic Americans, Native Americans, and Pacific Islanders. The court reversed the MBDA's presumption that such racial minorities were socially disadvantaged, finding that the preferential treatment violated the Equal Protection Clause. Nuziaras in a recent ruling by a federal court in Tennessee. Ultima Services Corp. v. U.S. Department of Agriculture (“altima), in accordance with the Supreme Court's decision. Student for Fair Admissions, Inc. v. Harvard University Pres & Fellows; 600 US 181 (2023) (“SFFA”) and Altima, This advances the mission of activist groups across the country seeking to override race-based presumptions in federally funded and sponsored eligibility programs.
Nuziar Summary of decisions
MBDA serves “socially or economically disadvantaged individuals.”[s]” Pursuant to 15 USC § 9501(9)(A). The law states that the term “socially or economically disadvantaged individual” includes individuals who are Black or African American, Hispanic or Latino, American Indian or Alaska Native, Asian, and Native Hawaiian or other. There is a presumption that Pacific Islanders are included (the “Presumptive Rule”).of Nuziar Plaintiffs, who do not fit into any of the prescribed racial categories, challenged presumptions under the Equal Protection Clause and the Administrative Procedure Act. In reversing the presumptive rule, the court applied the “strict scrutiny” test commonly used to evaluate race-based classifications under the Equal Protection Clause and asked: (1) Whether the racial classification furthers a compelling government interest. (2) If so, whether the classification is narrowly tailored to achieve those interests;
The government presented two compelling interests to justify the presumption favoring minorities under the MBDA program. (1) Reducing discrimination in access to credit. (2) address discrimination in the private contract market;Applying the considerations set out in the Supreme Court decision SFFA In this case, the court considered whether a particular act of historical discrimination gave rise to the proposed compelling interest and whether the government “actively participated” in or contributed to the discrimination. The court rejected the government's “access to credit” interest, stating that although there was evidence of historical discrimination against minorities in access to credit, the record showed that such discrimination could not be traced to specific disparities. It was determined that there was no such thing. today. The court further determined that the record contained the following: “There is no concrete evidence that the government 'induced, encouraged, or facilitated' credit discrimination.” It found that the proposed benefit was a compelling government interest and necessarily implied that the government was participating in such discrimination.
Despite finding that the government had a compelling interest in correcting past discrimination in government contracts, the court held that the MBDA's presumptive rules were narrowly tailored to further the government's compelling interests. I decided that it was not. The court found that the MBDA's race-based presumption excludes many MBEs owned by individuals from similarly disadvantaged countries, while also including individuals from “wealthier” countries. He said it was both too small and too much. Furthermore, to quote again: SFFA With this decision, the court held that the MBDA's presumption is based on racial stereotypes and has no logical endpoint. As a result, the court has issued a nationwide law prohibiting the MBDA from using presumptive rules or considering or using an applicant's race or ethnicity in determining whether the MBDA is eligible for the MBDA program. A permanent injunction was issued.
what do you mean Nuziar What about government contractors and private companies?
Judge Pittman stated: Nuziar Decision, “[t]This suggests that presumptively race-conscious laws and policies may be vulnerable to legal challenges.under SFFA, altimaand now Nuziar, a program sponsored by the Small Business Administration, and the U.S. Department of Transportation's Disadvantaged Business Enterprises program are just two examples of federal programs that could be challenged and transformed. The legal issues extend further and could involve state and local programs that rely on including race- and gender-based estimates. In either case, eligibility applications and government reviews and approvals are likely to be more restrictive and burdensome.
While neither altima or Nuziar has direct legal implications for private employers, but the indirect effects are potentially serious. First, as government contractors, MBEs will no longer be able to benefit from the presumption that certain racial groups are socially and economically disadvantaged and therefore eligible for the MBDA program. Masu. Government contractors are moving beyond race-based presumptions to require companies to submit explanatory statements that address a series of “who,” “where,” “when,” and “what” questions to support social rights claims. is likely to revamp the MBDA application process until required. Or economic disadvantage, much like what the Small Business Administration did after the war. altima decision. Crowell & Moring detailed these changes in a previous alert.
Private employers must remain vigilant and well-prepared to defend their DEI efforts and employment decisions against claims that they are unfairly favoring or favoring minorities.Judge Pittman's recommendation Nuziar there's nothing inside SSFA That this decision should be “limited” to the context of university admissions portends continued scrutiny and challenges to employers' efforts to promote diversity in the workplace and in business relationships with subcontractors and vendors. be. Considerations previously identified by Crowell & Moring here include: SFFA This decision will become even more relevant thereafter. Nuziar decision. Because plaintiffs will likely continue to assert challenges to race-conscious policies, employers should continue to evaluate their DEI policies and initiatives and update them to provide flexibility in this changing landscape. Consideration should be given to whether to adjust the wording of the policy.
