September 06, 2023

The Impact of the Supreme Court’s Harvard/UNC Decision on the Nonprofit Sector

At a Glance

  • Earlier this summer, the Supreme Court decided the Students for Fair Admissions cases holding that the race-conscious admissions programs used by Harvard and UNC were unconstitutional. While the immediate impact of this decision is confined to higher education, it raises questions as to how follow-up litigation could impact the nonprofit sector, especially as it relates to DEI programs and using race as a consideration in grantmaking, contracting and programs.

Earlier this summer, the U.S. Supreme Court decided Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, No-20-1199, and Students for Fair Admissions Inc. v. University of North Carolina et. al, No. 21-707, holding that the race-conscious admissions programs used by Harvard and UNC violated the Equal Protection Clause of the Fourteenth Amendment. As described below, the immediate impact of this decision is largely confined to higher education. Nevertheless, they raise challenging questions as to how follow-up litigation could impact the nonprofit sector, especially as it relates to diversity, equity and inclusion (DEI) initiatives and the use of race as a consideration in grantmaking, contracting or programs.

The Cases

UNC and Harvard had admissions programs that used race as a plus factor during an extremely competitive admissions process. For some applicants, race was a determinative factor, meaning they needed the extra boost from race to qualify for admission. Both programs were structured in a manner that was consistent with prior Supreme Court guidance on use of race as a factor in college admissions to achieve the benefits of a diverse student body.

Students for Fair Admission (SFFA) is a nonprofit organization that believes race-conscious admissions programs are unconstitutional. It challenged UNC’s race-conscious admissions program on the basis that it violated the Equal Protection Clause (EPC) of the Fourteenth Amendment of the U.S. Constitution. The EPC generally prohibits government actors (like UNC as a public university) from making race-based distinctions, unless doing so is necessary to achieve a compelling governmental interest.

As a private institution, Harvard is not subject to the EPC, so SFFA challenged Harvard’s race-conscious admissions program on the basis that it violated Title VI of the Civil Rights Act of 1964. Title VI prohibits organizations that receive federal funds (like Harvard) from discriminating based on race when undertaking the funded activities, applying the same standards applicable to the EPC.

Upon review, the Supreme Court determined that UNC and Harvard could not establish a sufficiently compelling rationale for incorporating a racial preference during their respective admissions processes. The Court’s majority opinion noted that while the goal of promoting educational diversity among the student body is commendable, it was not compelling enough to justify racial preferences. The majority also determined that the use of race in admissions was not narrowly tailored, in part because the racial preference would be continued indefinitely (there was no required end-date) and the categories of race considered were hard to define and based on stereotyping (i.e., the assumption that students of a particular race think alike because of their race).

While the Court technically did not overturn its prior rulings, for all practical purposes the Court’s rationale prevents colleges and universities from utilizing race-conscious admissions criteria to achieve a diverse student body.

The Court left the door open for institutions to consider race in a few limited circumstances, noting that the ruling does not prohibit colleges and universities from considering an applicant’s discussion of how race affected their life, so long as that discussion is tied to other admissions criteria, and is not a proxy for race. The ruling also noted that race-based remedial actions may still be used to address specific constitutional violations, such as workplace discrimination or school segregation.

Broader Impact on the Nonprofit Sector

The immediate impact of these rulings is limited to race-conscious admissions programs at public universities and other institutions of higher education that receive federal funding. In considering the effect of the Court’s decision on the broader nonprofit sector, the rulings do not change the standard for tax exemption or the laws governing contracting or employment. For the vast majority of nonprofits, the rulings will not require any immediate changes to their mission, activities or commitment to DEI.

This decision, however, presages how future challenges to race-conscious programs and initiatives in other contexts might be brought by litigants and analyzed by courts. We anticipate an increase in litigation on this subject as groups test the scope of the Supreme Court’s rationale. Areas for likely litigation include the use of race as a decision-making factor in contracting, employer DEI programs, and affirmative action in federal contracting. Indeed, several claims already have been filed, including recently against major law firms and a private venture equity group.

New legislation is also possible. Policymakers pursuing anti-affirmative action or anti-DEI agendas may support new legislation that expands or tests the scope of the Court’s rulings.

These legal and political developments will not take definitive shape overnight. Nonprofits need not abandon DEI programs and initiatives; equity is still important and essential. Nevertheless, to the extent your organization uses race as a decision-making factor — for example, in grantmaking, structuring program participation, hiring vendors or in employment — it is important to examine such practices and keep an eye on these developments. These practices could face increased risk of challenges going forward. Your legal team at Faegre Drinker is monitoring these cases and is here to help you navigate this uncertainty and assess how best to structure programs in a way that may mitigate the risk of challenge.

Next Steps

Please contact your legal team at Faegre Drinker if you have any questions about these rulings or how future cases might impact your organization’s programs, activities or commitment to DEI.

In addition, consider joining us for a webinar at 12:00 p.m. ET / 11:00 a.m. CT on September 27 to take a more comprehensive look at the cases and their potential impact on the nonprofit sector. To register, click here.

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