FAQ: Students for Fair Admissions (SFFA) v. Harvard
On June 29, the U.S. Supreme Court issued its ruling on two cases involving the use of race-conscious admissions practices by colleges and universities: Students for Fair Admissions (SFFA) v. Harvard and SFFA v. University of North Carolina (UNC). For more information, the Council has a full page of resources about this ruling.
The majority opinion held that the race-conscious admissions programs implemented by Harvard and UNC violated the Equal Protection Clause of the Fourteenth Amendment and Title VI of the Civil Rights Act of 1964, and therefore these practices constitute unconstitutional discrimination on the basis of race. While the Court’s decision only applied directly to the use of race as a factor in college and university admissions decisions, many Council members have asked about the potential application of Title VI discrimination claims outside of higher education and the possible implications of this decision for the philanthropic sector. The information below is based on our current understanding; this page will be updated as new or additional information arises.
Title VI is a federal law enacted as part of the Civil Right Act of 1964. It states, “No person in the United States shall, on the ground of race, color, or nationals origin, be excluded from participating in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance.” Once an organization receives federal financial assistance, Title VI applies to that organization.
Many private foundations, public charities, and nonprofit organizations do not receive federal financial assistance, and thus they are not subject to Title VI. That said, if your foundation receives federal funds directly or indirectly, as either the primary, secondary, or subrecipient of federal funding, you are likely subject to the nondiscrimination requirements of Title VI – although for many organizations, these obligations will extend only to the specific activities receiving federal funding and not to the organization’s activities as a whole.
“Federal financial assistance” may be monetary or nonmonetary, and it includes federal grants, loans, and contracts (other than contracts for goods or services at fair market value or of insurance or guaranty). It also includes funding provided through federal grants, cooperative agreements, and loans.
Typical tax benefits, tax exemptions, tax deductions, and most tax credits are not considered federal financial assistance, thus they do not subject your foundation to Title VI coverage. It is generally understood that a charitable organization’s tax exemption under section 501(c)(3) likewise does not constitute federal financial assistance.
If your organization’s mission is not based on providing education, health care, housing, social services, or parks and recreation, then only activities associated with the specific programs for which your organization receives federal funds are subject to Title VI. It would not apply to your organization’s activities as a whole.
However, organizations that are principally engaged in providing education, health care, housing, social services, or parks and recreation and receive federal funding are subject to Title VI in all areas of their activities, not just the specific program that received federal funding. Similarly, organizations that receive federal funding to broadly support the entire organization rather than a specific program are subject to Title VI requirements across the entire organization.
Paycheck Protection Program (PPP) loans constitute federal assistance, but only while they remain active. Once the PPP loan is repaid (or, as in most cases, forgiven), your foundation is no longer subject to Title VI jurisdiction through that form of federal assistance.
Collecting and Using Demographic Data
Foundations may still collect demographic data as part of their grantmaking process (provided that no state statutes prohibit such collection). As long as your grants do not constitute contracts, a threshold that most grants fail to reach, then nothing in the SFFA decision impacts demographic data collection or use among grantmakers. If you have grants that meet the definition of contracts, there may be some issues under Section 1981, which we will discuss further in an upcoming FAQ.
Employment Procedures or Diversity, Equity, and Inclusion (DEI) Initiatives
The ruling does not directly affect private employers. Under Title VII of the Civil Rights Act of 1964, the use of protected characteristics such as race or gender in employment decisions is already prohibited in almost all circumstances. This ruling does not change the law governing private employers, although it's possible that courts could choose to examine future Title VII discrimination claims through the lens of the SFFA decision.
Foundations and other employers can review their current HR procedures to ensure they are compliant with existing federal and applicable state or local laws governing employment decisions.
To the extent that those initiatives and policies are intended to foster opportunities for professional success and a supportive workplace for employees of all backgrounds, there is nothing in the SFFA decision that affects such programs, provided they do not confer preferential status upon employees or prospective employees due to protected characteristics like race or gender.
It remains legal for employers to make public commitments to DEI principles in their employment practices so long as those practices are compliant with existing employment law. Because these initiatives and policies are likely to be the subject of increased scrutiny following this ruling, employers should pay close attention to how they discuss the role that race, gender, or other protected characteristics might play in advancing their DEI goals. Those goals should be clearly defined, and the means used to advance them should be carefully structured to avoid the appearance that the employer’s stated commitment to DEI is functioning as a way to engage in unlawful discrimination. Employers should be prepared, if challenged, to articulate how they are able to meet their DEI goals without impermissibly considering a candidate’s race, gender, or any other protected characteristic.
Section 1981 from the Civil Rights Act of 1866 refers to 42 U.S. Code Section 1981, a federal law that prohibits discrimination on the basis of race and ethnicity when making or enforcing contracts. Specifically, it grants “all persons...the same right...to make and enforce contracts...as is enjoyed by white citizens.”
Unlike the anti-discrimination provisions that apply to employment under Title VII of the Civil Rights Act of 1964, Section 1981 only covers discrimination based on race or ethnicity
Section 1981 applies to all people within the United States in the context of making or enforcing contracts and covers non-government/private actors. It does not apply to gifts or other non-contractual agreements between parties.
A contract is an agreement between parties that creates a legally enforceable mutual obligation. For an agreement to rise to the level of a legally enforceable contract there must be agreement between the parties to contract, an offer and acceptance, and consideration (see below).
Consideration is a bargained-for exchange in which a party makes a promise to another party for something else in return (i.e., a quid pro quo). Without adequate consideration, a contract does not exist. For example, a promise to make a gift to someone else is generally not legally enforceable as a contract because a true gift does not include a bargained-for exchange in return.
Although there is a clear definition of a contract, there is no bright line rule for what separates a grant from a contract. The fewer requirements within a grant agreement the more likely it could be viewed by a court as a gift rather than a contract. Agreements that don’t require a grantee to perform specific activities or achieve certain outcomes to receive the funds are more likely to be viewed as grants rather than contracts. Even grant funds that are limited to specific purposes are likely to be viewed as gifts rather than contracts as long as the distribution is made without strings attached and any remedies contained in the grant agreement do not imply a promise to perform by the grantee. If you have questions about how your organization’s grants are structured, it might be a good idea to consult legal counsel.