Legal actions are increasingly targeting workplace diversity programs, leveraging Section 1981 of the Civil Rights Act of 1866, which was originally intended to protect formerly enslaved individuals from economic exclusion. This shift in legal strategy is spearheaded by the American Alliance for Equal Rights, led by conservative activist Edward Blum. The organization recently challenged the Fearless Fund, a venture capital fund investing in businesses owned by women of color, resulting in a temporary block on its funding by a federal appeals court.
The use of Section 1981 in such cases is gaining momentum, with lawsuits against companies like Progressive and Pfizer. These cases follow the U.S. Supreme Court’s decision to end affirmative action in college admissions, redirecting the focus to racial considerations in the workplace. Alphonso David, legal counsel for the Fearless Fund, notes a coordinated effort in utilizing Section 1981 that was not previously evident.
Section 1981 prohibits discrimination in contractual relationships based on race, color, and ethnicity. The Supreme Court’s 1976 decision in McDonald v. Santa Fe Trail Transportation expanded these protections to include white people. The standard of proof under Section 1981 is high, requiring plaintiffs to demonstrate that race was the central cause in denying a contract opportunity, as established by the 2020 Comcast v. National Association of African American-owned Media decision.
Title VII of the 1964 Civil Rights Act, another legal avenue, requires plaintiffs to file a charge with the Equal Employment Opportunity Commission, a process taking up to 180 days. However, Section 1981 offers a quicker route and broader application than Title VII, which applies to employers with 15 or more employees and caps compensatory and punitive damages at $300,000. In contrast, Section 1981 imposes no such limitations.
The case against the Fearless Fund is significant as it challenges the fund’s grant program for Black women business owners, arguing it violates Section 1981 by excluding individuals based on race. The Fearless Fund contends that these grants are donations protected by the First Amendment, not contracts.
Similar lawsuits have prompted changes in diversity fellowship programs at law firms and companies. Firms like Morrison Foerster and Perkins Coie have opened their programs to all races, and Pfizer dropped race-based eligibility requirements for a fellowship program after a legal challenge.
The trend of these lawsuits and their potential to reach the Supreme Court is closely watched, as they could impact the future of workplace diversity initiatives.
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