Implications for Private Employers of the Supreme Court’s Harvard Decision Banning Race-Based Affirmative Action in College Admissions

On June 29, 2023, the Supreme Court held that it is unconstitutional (under the Constitution’s Equal Protection Clause, as to public institutions) and a violation of Title VI of the Civil Rights Act of 1964 (as applicable to private institutions accepting federal financial assistance) for colleges and universities to consider race as a factor in the admissions process. See Students for Fair Admissions, Inc. v. President & Fellows of Harvard Coll., No. 20-1199, 2023 WL 4239254 (U.S. June 29, 2023) (“Harvard”), a summary of which can be found here. This decision upended decades of precedent and has caused employers in the private sector to ask how the decision will impact diversity, equity, and inclusion (“DE&I”) initiatives and employment decisions. This article addresses the impact of Harvard, eight months later.

As a threshold matter, the Harvard decision did not directly interpret Title VII of the Civil Rights Act of 1964 (“Title VII”), which governs the employment practices of private employers. The decision principally interprets the Equal Protection Clause of the Fourteenth Amendment and secondarily applies that reasoning to claims under Title VI on the basis that “discrimination that violates the Equal Protection Clause of the Fourteenth Amendment committed by an institution that accepts federal funds also constitutes a violation of Title VI.” Harvard at 6 n. 2. While the Equal Protection Clause directly applies only to public institutions (including the University of North Carolina (“UNC”)), Title VI applies to entities that receive “federal financial assistance” (which includes Harvard).

Given its limited scope, the Harvard decision has no direct, legal impact on private employers, including federal contractors. (Federal contractors are not covered by Title VI because their receipt of procurement contracts for fair market value does not constitute receipt of federal financial assistance under 42 U.S.C. § 2000d.) The effect of the Court’s decision on private employers is instead indirect.

As a practical matter, employers that hire directly from competitive undergraduate and graduate programs (or that heavily weigh the academic pedigree of experienced lateral candidates) may experience recruitment challenges specifically related to maintaining a strong pipeline of diverse talent as a result of limited diversity in colleges and universities. Historical precedent supports this hypothesis. In 1996, California’s Proposition 209 banned the state’s public universities from considering race, sex, or ethnicity in selecting students for admission. NPR reports that in the first year after the law went into effect, “enrollment among Black and Latino students at UCLA and UC Berkeley fell by 40%.” Notably, University of California chancellors submitted an amicus brief to the Supreme Court in support of the admissions programs of Harvard and UNC, including considering race as a factor in admission, explaining that alternative race-neutral policies have proven inadequate to address the sharp decline in enrollment of Black and Latino students that followed the passage of Proposition 209.

Employers also may experience an increase in legal challenges to employment decisions and DE&I initiatives, including in the form of “reverse discrimination” lawsuits. The reasoning applied in the Harvard decision, though not directly applicable in this context, may be used by the plaintiffs’ bar in future Title VII lawsuits. Indeed, the “anti-woke” movement already has led to an increase in recent years of “reverse discrimination” lawsuits and activity by activist organizations like America First Legal Foundation, which filed such complaints with the EEOC against private companies before the Harvard decision was issued. At the same time, because the Supreme Court’s decision is viewed by many as a condemnation of employers’ recent focus on social justice and racial equity issues, employers may also see a rise in traditional discrimination lawsuits by racially and ethnically diverse groups asserting that they experienced adverse employment actions on discriminatory bases.

Against this backdrop, employers are wise to evaluate the implications of the Harvard decision on present and future DE&I programs. To help guide this analysis, below are high-level summaries of the potential impact of the Harvard decision on several categories of employment practices and DE&I programs.

Individual employment decisions (e.g. hiring, promotions, terminations): The Harvard decision is likely to have little, if any, impact on the state of the law concerning tangible, individual employment actions, because university admission standards and individual employment decisions are fundamentally distinct. While race was expressly authorized as a factor in admissions decisions at Harvard and UNC, consideration of race in employment decisions has long been prohibited by Title VII and its local- and state-law corollaries. That said, Harvard has emboldened more “reverse discrimination” lawsuits in which non-minority litigants allege that they were not hired, promoted, or otherwise provided a term or benefit of employment in favor of a less qualified racially-diverse employee. In Duvall v. Novant Health, Inc. (which Crowell summarized here), this argument was successful. Employers should continue to ensure that employment decisions are made based on legitimate business reasons, not race or other protected characteristics. Employers should also follow best practices in identifying and documenting their legitimate, non-discriminatory reasons for employment decisions to mitigate the risk of both reverse and traditional discrimination lawsuits. 

Sponsorship and mentoring programs focused on diverse employees: These programs may be targets for future litigation. Plaintiffs and federal courts may attempt to expand the scope of what constitutes an actionable adverse employment decision to include any term or condition of employment, including any program that can be connected to future tangible employment decisions, such as promotions. That path of attack may become more attractive to plaintiffs, depending on how the Supreme Court decides the pending Muldrow v. City of St. Louis, Missouri case. In Muldrow the plaintiff claims that her job transfer should constitute an “adverse employment action” even though the transfer involved no change in pay or rank, significant change in responsibilities, or impact on her future career prospects. The district and appellate courts both held that the transfer did not constitute an adverse employment action because the plaintiff did not suffer a material employment disadvantage. The Supreme Court heard oral argument in Muldrow on December 6, 2023, and a decision will issue before the Court recess in June.

Although the ruling in Harvard is not applicable to employer sponsorship or mentorship programs, we anticipate that future litigants will urge courts to expand the rationale to Title VII cases, arguing that race should not be considered when establishing selection criteria for such programs. Employers who condition selection for mentorship or sponsorship programs on race or other protected characteristics, such as gender, may be at greater risk for legal claims after the Harvard decision. Employers should, therefore, monitor legal developments in this area and make reasoned legal and business judgments on these issues that are consistent with their organization’s culture and goals.

Affinity groups: These employee resource groups generally function to provide community, support, mentorship, promote the development and retention of talent, and host trainings and events that are of interest to the group. Because employers typically provide these groups ear-marked funding and targeted training and sponsorship opportunities, employers should be mindful of the caveats discussed above.

To reduce potential risk, employers may consider opening membership in these groups and/or participation in certain affinity group trainings or events to all employees.

Diversity requirements for interview slates: The use of diversity requirements for interview slates – akin to the Rooney Rule in the National Football League – does not constitute an actionable employment decision and is not facially unlawful, as such rules only operate to combat unconscious bias and ensure that qualified diverse candidates are considered. These requirements accordingly should remain low risk as the subject of successful future reverse discrimination attacks by applicants who were ultimately not hired. Given the benefits they provide and the low risk they pose, employers should maintain these programs unless they are definitively found to be unlawful in the future.

Affirmative Action Program (“AAP”) requirements for government contractors: Federal contractors and subcontractors are required to maintain compliance with Executive Order (“EO”) 11246 and its implementing regulations, which require the development and maintenance of AAPs. While EO 11246 may yet face legal challenge, it is not immediately impacted by the Harvard decision. The OFCCP has emphasized in recent years that AAP goals are different from “quotas” and neither EO 11246 nor the regulations require employers to achieve or maintain the goals. The EO and the regulations require employers to identify (based on prescribed analyses) areas where their utilization of minorities or women is “less than would reasonably be expected.” Where this underutilization is found, the regulations require employers to implement action-oriented programs to try to enhance the representation of women and minorities. The OFCCP will likely not change its approach to underutilization, and contractors should continue to conduct the required analyses, but should ensure that they can defend any hiring or promotion decisions made to try to increase the representation of minorities or women. It is important to note that OFCCP audits primarily focus not on utilization rates, but on potential discrimination in such selection decisions and compensation, and these continue to be the areas of the greatest legal risk during an audit.

Vendor/supplier diversity programs: While little caselaw exists in which business entity plaintiffs – whether vendors, subcontractors, or suppliers – have lodged claims against business partners under Section 1981 alleging race discrimination, the reasoning articulated in a decision issued shortly after the Harvard decision in a related context could be used in future cases to challenge private companies’ efforts to diversify their supply chains. Section 8(a) of the Small Business Act extends contracting preference to economically and socially disadvantaged businesses, and defines “socially disadvantaged individuals” as persons “who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.” On July 19, 2023 a federal district court held in Ultima Servs. Corp. v. United States Dep’t. of Agriculture, No. 2:20-CV-00041 (E.D. Tenn.) that certain racial preferences in government contracting violate constitutional guarantees of equal protection.

The Ultima decision has no precedential effect and does not address the legality of private entities’ use of racial preferences in procurement decisions or otherwise, and we are aware of no reported decision directly addressing a supplier diversity program with accountability features such as vendor workforce diversity metrics. We nonetheless expect that the Harvard decision may have ramifications in the supplier diversity space, in that plaintiffs may object to contractual or policy preferences for minority-owned or minority-dominated businesses. Employers should monitor legal developments in this area and make reasoned legal and business judgments on these issues that are consistent with their organization’s culture and goals.

Investment Decisions and Commitments: Many companies, in the wake of the murder of George Floyd, announced enhanced commitments to supporting Black communities through their investment activities, including broadening relationships with Black-owned banks and lending organizations that partner directly with Black-owned businesses. Such efforts have proven subject to legal challenge from the “anti-woke” movement. For example, in August 2023 the American Alliance for Equal Rights (“AAER”), a conservative activist group that initiated the Harvard litigation, filed suit (including a motion for a preliminary injunction) against the Fearless Fund, an early-stage venture capital firm that provides funding solely to women founders of color. The suit alleges that the Fund engages in race discrimination under Section 1981 by sponsoring a $20,000 grant program open only to Black women who are small-business owners. In September 2023, the Northern District of Georgia denied the AAER’s motion for preliminary injunction seeking to bar Fearless from enforcing the racial eligibility criteria for the grants. However, the decision was temporarily reversed in a 2-1 decision by the Eleventh Circuit Court of Appeals, granting AAER’s emergency motion for a temporary injunction pending appeal. The court treated with skepticism the Fearless Fund’s argument that the First Amendment protected its funding activities and noted that AAER’s Section 1981 claim does not fail simply because it is brought on behalf of white business owners. The appellate court heard the full appeal in January 2024 and a decision is pending.

Statements setting diversity goals: Statements by organizational leaders identifying goals for increasing the representation of diverse talent are not facially unlawful. However, to minimize litigation risk, employers must ensure that they can defend their subsequent selection decisions, both statistically (for class action cases) and based on the qualifications and skills of an individual employee or applicant (as implicated in single plaintiff cases).

Courts have allowed plaintiffs in “reverse discrimination” lawsuits to proceed with their claims in part by relying on alleged organizational statements setting goals for the representation of diverse talent. For example, in Walton v. Medtronic USA, Inc., the plaintiff alleged that he was terminated because he was white. He alleged that his former employer’s stated a “goal of having women in 40% of its leadership positions and people of color in 20% of its leadership positions by the year 2020 was the real reason for his termination.” Walton v. Medtronic USA, Inc., No. 22-CV-50 (PJS/JFD), 2023 WL 3144320, at *1 (D. Minn. Apr. 28, 2023). The District Court of Minnesota granted him leave to file his amended complaint and found that “[a]ssuming all these facts are true, Mr. Walton’s proposed amended complaint plausibly suggests that if he had been a person of color, he would not have been terminated.” Id. at *8.

Conversely, a federal court recently rejected a reverse discrimination argument challenging similar company-wide representation goals where there was no specific individual employment decision at issue. In National Center for Public Policy Research (NCPPR) v. Howard Schultz, et al, NCPPR sued Starbucks, alleging, among other things, that “race-based ‘goals’ for Starbucks’ allocation of jobs by 2025 at all corporate levels” constituted discrimination on the basis of race in employment decisions (including hiring, firing, and promotions). On September 11, 2023, the U.S. District Court for the Eastern District of Washington dismissed the case on Defendants’ motion and rebuked NCPPR, writing that the Court is not “a political attaché. Courts of law have no business involving themselves with reasonable and legal decisions made by the board of directors of public corporations[,]” and “[t]his Complaint has no business being before this Court and resembles nothing more than a political platform.”

Employers should ensure that employment decisions do not become focused on race or any other protected characteristic, even as employers continue to work toward achieving previously announced diversity commitments. Instead, employers can take tangible action toward achieving their diversity goals by, for example, expanding college and university recruitment across a broader range of schools, opening or expanding employment opportunities in new geographic areas, training managers and Human Resources departments on inclusive hiring practices, and investing in the inclusion, development, and retention of current employees.

Internal anti-bias/allyship/upstander/awareness trainings: Typically, these types of trainings are available to all employees and generally function to educate and provide professional development skills. They are not connected to any employment decision and are neither unlawful nor impacted by the Harvard decision. Employers should continue to provide and encourage attendance at these trainings.

Other Title VII and ADA protected categories: The Harvard decision specifically evaluated race-based policies, which subjected the policies to “strict scrutiny.” Strict scrutiny is the highest standard of review that a federal court will use to evaluate the constitutionality of race-based laws and government policies, and it also applies to laws and policies that involve national origin, religion, and alienage. Gender-based policies are subject to the lesser, “intermediate scrutiny,” while other categories such as disability are subject to the most permissive standard known as “rational basis” review.

Because national origin, religion, and alienage are subject to the same level of scrutiny as race, it would be prudent to equally apply any implications of the Harvard decision on race-based policies to policies based on those other classifications. Courts have not (yet) assessed a similar gender-based policy as a matter of constitutional review, but employers should approach policies impacting all Title VII and ADA protected categories (race, color, religion, sex, national origin, and disability) in the same manner, since the standard of review under these statutes do not vary within each respective statutory scheme.

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Overall, the Harvard decision has injected a new element of uncertainty into the future of Title VII and Section 1981 litigation, as well as best practices for employers in achieving workplace diversity equity and inclusion goals. However, employers should be confident that they can remain committed to their diversity values and goals while ensuring that they pursue such values and goals using thoughtful and fair methods. Crowell’s Employment Practice Group is available to assist as employers navigate these challenging issues.