Will the Supreme Court’s Harvard/UNC Affirmative Action Decisions Imperil Corporate Diversity Programs?

The Supreme Court’s anticipated rulings in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College and Students for Fair Admissions, Inc. v. University of North Carolina will be closely watched by colleges and universities. But they may also have dramatic implications for employers across industries. In light of the gravity and potential scope of these implications, O’Melveny has established a DE&I and Affirmative Action Task Force to help clients across all sectors prepare for and respond to the latest developments in this area.

The Harvard and UNC Cases

In the two Supreme Court cases, Students for Fair Admissions argues that Harvard and UNC’s consideration of race in the admissions process violates Title VI of the Civil Rights Act of 1964 and the Fourteenth Amendment, respectively.

In August 2022, O’Melveny submitted a Brief for Major American Business Enterprises—as amicus on behalf of nearly 70 corporations—urging the Supreme Court to reaffirm that diversity in education remains a compelling interest.

Diversity was central to the Harvard/UNC oral arguments in October 2022, with an extensive focus on the relationship between diversity and the schools’ use of race in deciding between admissions candidates. While no conclusions can be reached based on the oral arguments alone, they suggest, at a minimum, that the Harvard/UNC decisions may have implications well beyond the college and university context.

Existing Law for Employers

Employers are already subject to various federal and state laws governing the consideration of race in hiring or other employment practices. At the federal level, for example:

• Title VII of the Civil Rights Act of 1964 makes it unlawful “to discriminate" on the basis of "race" (among other protected categories) with respect to any individual's "compensation, terms, conditions, or privileges of employment” or to “classify” employees or applicants in any way that would “deprive any individual of employment opportunities…because of such individual’s race.”

• Section 1981 of the Civil Rights Act of 1866 provides that in the making and enforcement of “contracts,” a business cannot discriminate based on race. Under Section 1981, a plaintiff must prove that race was a “but for” cause for being denied a contract or contractual right.

Under the burden-shifting approach that has long been applied in Title VII discrimination cases, if a plaintiff establishes a prima facie case of discrimination on the basis of race, the employer must introduce evidence that when taken as true shows a nondiscriminatory justification for its action, and that justification must not be pretextual.

An affirmative race-based employment program may serve as a legitimate non-discriminatory justification in disparate treatment cases if the program satisfies the requirements set forth in a pair of Supreme Court decisions: United Steelworkers of America, AFL-CIO-CLC v. Weber, 443 U.S. 193 (1979) and Johnson v. Transportation Agency, Santa Clara County, California, 480 U.S. 616 (1987).

Under the standard established by Johnson and Weber, a “valid affirmative action plan” may be considered nondiscriminatory and thus satisfy the employer’s burden where: (1) it rests on an “adequate factual predicate” such as a “manifest imbalance in a traditionally segregated job category” and (2) it does not “unnecessarily trammel” the interests of employees who do not qualify for the plan. See Shea v. Kerry, 796 F.3d 42, 57 (D.C. Cir. 2015). As part of this Johnson/Weber analysis, an employer may be required to show, among other things, that “race-neutral efforts failed to bear fruit” and that the challenged plan is a temporary measure designed “for the particular purpose of remedying past discrimination.” Id. at 57-65. Courts generally apply the same Johnson/Weber burden-shifting framework under Section 1981. See, e.g., Doe v. Kamehameha Schools, 470 F.3d 827 (9th Cir. 2006).¹

The design of employment diversity programs, as well as the employer’s asserted interest in those programs, is likely to be central to the inquiry in any circumstance where those programs are challenged under Title VII, Section 1981, or comparable federal or state laws. O’Melveny has long advised clients on their efforts to increase and promote diversity within their ranks, including in circumstances where employers do not rely on voluntary affirmative action programs, as well as best practices to mitigate the risks of litigation. As this area continues to evolve, and with the possibility of forthcoming major developments, our team will be sharply focused on this area of law.

Ongoing Litigation Over Corporate Diversity Programs

Our Task Force is monitoring a series of lawsuits over corporate diversity programs that are already percolating in federal courts. These lawsuits allege that corporations violated federal or state laws by considering race in employment or other contracting decisions. For example:

• In Do No Harm v. Pfizer Inc, an organization of medical professionals and students alleges that Pfizer’s “Breakthrough Fellowship Program” impermissibly discriminates on the basis of race by requiring that “applicants be Black/African American, Latino/Hispanic, or Native American” and by excluding “white and Asian-American applicants.” (S.D.N.Y. Sept. 15, 2022) (No. 22-07908). The complaint alleges that Pfizer violated Section 1981, Title VI (based on federal financial assistance), Section 1557 of the Affordable Care Act, and multiple provisions of the New York State Human Rights Law. The complaint was filed by Consovoy McCarthy PLLC, the same law firm that represents Students for Fair Admissions in the UNC and Harvard cases. On December 12, 2022, the district court dismissed the action for lack of subject-matter jurisdiction, holding that the organization failed to establish standing for its federal claims. In January 2023, Do No Harm filed a notice of appeal to the Second Circuit.

• In Bolduc v. Amazon, an individual who “wishes to become an Amazon delivery service partner” alleges on behalf of a putative class that Amazon’s Diversity Grant Program for Delivery Service Partners violates Section 1981 “by providing a $10,000 bonus to ‘Black/African American, Latinx, and Native American entrepreneurs’ who act as its delivery service partners, while withholding this stipend from Asian-American and whites who deliver Amazon packages.” (E.D. Tex. July 20, 2022) (No. 4:22-cv-615). The complaint was filed by the America First Legal Foundation, which argued as amici in the Harvard case that “Title VI makes no allowance for racial considerations in university admissions.” On February 3, 2023, Bolduc filed an amended complaint on behalf of a putative class of prospective Delivery Service Partners who are not eligible for the $10,000 bonus.

• In National Center for Public Policy Research (NCPPR) v. Howard Schultz, et al, NCPPR sued Starbucks, its senior officers (including the CEO and General Counsel among others), and members of the Starbucks Board of Directors, alleging that Starbucks adopted policies that discriminate on the basis of race in employment decisions (including hiring, firing, and promotions), compensation of officers, and contracting with suppliers and media companies. Among the policies that are alleged to be unlawful are “race-based ‘goals’ for Starbucks’ allocation of jobs by 2025 at all corporate levels.” The complaint alleges that Starbucks has violated Section 1981, Title VII, various state laws (including Washington’s Law Against Discrimination and California’s Unruh Civil Rights Act), the fiduciary obligations of Starbucks’ Directors & Officers, and the Starbucks Articles of Incorporation. The complaint alleges that “the Starbucks D&O’s actions and inactions have threatened to open Starbucks and its shareholders to a pandora’s box of potential, nationwide litigation.” The complaint was filed in the Spokane Superior Court but then removed to federal court in the Eastern District of Washington (2:22-cv-00267-SAB). Starbucks has filed a pending motion to change venue to the Western District of Washington and its deadline to respond to the complaint is stayed pending that transfer motion.

Litigants in these cases will likely be scrutinizing the Harvard/UNC decisions for any discussion of voluntary affirmative action plans or diversity efforts outside of the educational context. Our Task Force will be closely following these cases and the employment litigation landscape more broadly as we await the Supreme Court’s rulings in the Harvard/UNC cases.

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Our O’Melveny Team

Our interdisciplinary team of lawyers—based in our Labor & Employment, White Collar Defense & Corporate Investigations, Colleges & Universities, and Supreme Court and Appellate Litigation practices—has established a DE&I and Affirmative Action Task Force to support clients in all sectors as they prepare for and respond to the latest developments in this area. O’Melveny brings a deep commitment to diversity, equity, and inclusion, as well as extensive experience on multiple issues relevant to corporate diversity counseling and the employment litigation landscape. We are a law firm of choice for clients facing hot-button issues, defending them against high-stakes class actions or conducting sensitive internal investigations, and offering strategic advice on the full range of issues clients encounter as employers. If you are interested in learning more about our work, or have questions about navigating the potential impacts of these decisions, please contact one of the lawyers listed here.