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Comment on Dodd-Frank Proposed Interagency Policy Statement

Commissioners Todd Gaziano, Gail Heriot, Peter Kirsanow, and Abigail Thernstrom of the U.S. Commission on Civil Rights have submitted the attached incisive comment regarding an issue that has long been of interest to the Center for Equal Opportunity.  Here’s the background:  Last month, a number of Obama administration agencies with financial-sector regulatory responsibilities jointly published in the Federal Register a proposed “Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies.”  The statement comes as a result of Section 342 of the Dodd-Frank legislation, which requires these agencies each to “establish an Office of Minority and Women Inclusion” that, in turn, is to develop diversity and inclusion standards for workplaces and contracting.  CEO president Roger Clegg wrote a short summary of Section 342 here, and blogged about the recent policy statement here.

 

The proposed statement is even worse than the bill itself, since it aggressively applies not only to the agencies themselves but also to all those regulated by it, and repeatedly insists on the use of “metrics” and “percentage[s]“ (i.e., numerical quotas) to ensure compliance. And while the statute at least cautions that diversity efforts are to be undertaken “in a manner consistent with the applicable law” (like the Constitution and, presumably, federal civil-rights statutes that are colorblind in their protection against discrimination), there is no such nod in the proposed statement, nor is there any mention of stopping or preventing discrimination – the only possible justification for consideration of race, ethnicity, and sex in hiring, promotion, and contracting.  Comments on the proposed statement are due by Christmas Eve, and here’s hoping that the government receives more feedback like the Commissioners’ excellent letter.

Attachments:
Download this file (Comment re Proposed Interagency Policy Statement.pdf)Comment re Dodd-Frank Proposed Interagency Policy Statement[Comment re Dodd-Frank Proposed Interagency Policy Statement]62 Kb

Fact-Checking the New York Times

The Supreme Court’s decision to grant review in Fisher v. University of Texas, a case challenging that school’s use of racial and ethnic preferences in undergraduate admissions, got front-page, next-day treatment in the New York Times. Unfortunately, the article is misleading in some important ways. No surprise: The mainstream media’s efforts to pressure the justices are under way.

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HP Mandates Quotas

Kim M. Rivera, who is chief legal officer and general counsel of HP Inc., is serious in her insistence that law firms doing work for her company meet the racial, ethnic, and gender quotas she has set for them (she calls it “achieving the metric”). She has sent this letter informing them that the company will withhold up to 10 percent of any amount invoiced by the law firms if they “do not meet or exceed our minimal diverse staffing requirements.”

She helpfully appends a description of the program. It spells out, for example, that the definition of “diverse” attorneys is limited to “race/ethnicity, gender, LGBT status, and disability status” — no use trying to sneak in someone because of his or her religion, impoverished background, or heterodox political views. But the good news is that the “twofer” is alive and well: “An attorney who is both a woman and racially/ethnically diverse” counts double.

In her letter, which bears the frank label “Diversity Mandate to Partner Law Firms,” Ms. Rivera says, “I believe we can all do better” and that she is “counting on your courage and vision” to support HP’s diktat.

Well, of course, it takes no “courage” to be politically correct in corporate America, especially when a client is making it worth your while, moneywise.

Courage would be telling Ms. Rivera that, since law firms really ought to follow the law, this law firm won’t be violating Title VII of the 1964 Civil Rights Act and 42 U.S.C. section 1981 by engaging in workplace discrimination on the basis of race, ethnicity, and sex (see this analysis here and my testimony here, appendix B – which is also laid out below).  Courage would be adding that, even if it weren’t illegal, this law firm thinks it is wrong to treat its lawyers differently because of their skin color or what country their ancestors came from or what kind of reproductive organs they have.

Courage would be telling Ms. Rivera to go to hell, and suing her to boot. But I’m not holding my breath.

*          *          *

In the paragraph before last, I link to testimony I gave to the U.S. Equal Employment Opportunity Commission on the general subject of “diversity” discrimination in the workplace, but let me quote some of the relevant parts here:

Wal-Mart has also imposed affirmative discrimination requirements on its outside counsel, demanding that they “submit a slate of at least three, but no more than five, attorneys from your firm to be considered for appointment as the relationship attorney. The slate of attorneys to should include at least one female and one minority attorney.” The June 13, 2005 letter sent to prospective outside counsel includes a demand for other bean-counting “diversity results,” and the company’s general counsel was quoted last summer as already crowing, “We are terminating a firm right now strictly because of their [sic] inability to grasp our diversity expectations.” ….

Wal-Mart is not the only company to use affirmative discrimination in hiring its outside counsel, by the way. The same article that discussed Wal-Mart (Meredith Hobbs, “Wal-Mart Demands Diversity in Law Firms/Outside counsel must comply or lose business, says GC at nation’s biggest retailer,” Fulton County Daily Report, July 6, 2005) also reported that Visa International, Del Monte, Pitney Bowes, and Cox Communications are making similar demands. More than 60 law firms had earlier signed a pact in which they agree to report to their corporate clients the composition by race, sex, ethnicity, and sexual preference of the legal teams doing the clients’ work. Thomas Adcock, “Law Firms Agree to Give Clients Diversity Data on Legal Teams,” New York Law Journal, May 13, 2005. The idea, of course, is to force law firms to meet quotas in each category. And prior to that pact, many companies--notably Shell Oil--had already been unilaterally insisting that this be done. For a discussion of why this is illegal--if such a discussion in necessary--see Appendix B. Not that law firms need a lot of encouragement in this regard; see Association of the Bar of the City of New York’s “Statement of Diversity Principles” (“the opportunity to increase diversity should be one important consideration in the decision-making process”; one goal is “To hire entry-level classes that substantially reflect the diversity of graduating law students. … We also will take diversity goals into consideration within our lateral hiring.”) and “Diversity Practices” (“including minority internships/summer associate positions; participation in minority job fairs”). …

APPENDIX B: THE ILLEGALITY OF LAWYER QUOTAS

More than 60 law firms have signed a pact in which they agree to report to their corporate clients the composition by race, sex, ethnicity, and sexual preference of the legal teams doing the clients’ work.  The corporate clients’ idea, of course, is to force law firms to meet quotas in each category. Many companies--notably Shell Oil--have already been unilaterally insisting that this be done. Quota quotes from the news story:

  • “For law firms, failure to adequately diversify legal teams assigned to client matters could mean the difference between retaining business or being dropped in favor of more socially progressive shops, according to speakers at a press conference announcing the pact this week.”
  • “[Law firms are] going to do what they have to do in order to be retained again and again.”
  • “`And if your numbers don’t add up,” [a corporate general counsel] warned, ‘you’re history.’”

It is illegal “to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin” (Title VII of the 1964 Civil Rights Act), and it is illegal to discriminate on the basis of race in the “making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship” (Title 42, Section 1981 of the U.S. Code).

Yet the violation of these laws appears to be widespread--and at the behest and with the cheerful cooperation of lawyers, no less. There is no denying that corporate general counsel are urging their outside counsel to assign lawyers to the company’s cases with an eye on the lawyers’ race, ethnicity, and sex. Lawyers who are the wrong skin color, whose ancestors came from the wrong countries, or who have the wrong plumbing will not get the work.

There is also no denying that being able to work for prestigious clients in big cases is certainly one of the “terms, conditions, or privileges of employment.” Thus, a law firm that gives in to the company’s threats is violating Title VII. Or, if a law firm refuses to bend to this coercion and is therefore not retained, it has lost the “benefits, privileges, terms, and conditions of the contractual relationship,” and the company has violated Section 1981. It is also inevitable that clients’ preferences will translate not only into assignment discrimination but also into hiring and partnership discrimination, which violates both statutes.

Suppose Shell were to tell Kelley, Drye & Warren--one of the first large Manhattan firms to sign the recent pact--“We would prefer it if you would not assign any Negroes, Puerto Ricans, or girls to our cases”--and suppose that the law firm meekly complied. If this were exposed, would anyone bother to argue that neither Title VII nor Section 1981 had been violated? Of course not.

There is no credible claim that clients want these statistics in order to ensure that the law firms are not discriminating against minorities and women. Law firms compete frantically today for well-qualified women and, especially, minorities, and everyone knows it.

No, today it’s all about “diversity” and equal results, rather than “nondiscrimination” and equal opportunity. Frequently the claim is made that diversity of backgrounds and viewpoints is essential for a successful legal team. But white males do not all think alike; nor do all Latinas, many of whom probably think like white males, whatever that means. Nor can one deduce a person’s background and experiences simply by looking at her. There is no reason to use melanin content and genitalia as a proxy for true diversity of thought and experience.

The only plausible argument for diversity is jury appeal--the need to play to a multiracial jury by having a multiracial legal team. Of course, if attorneys are being selected partly on the basis of race rather than purely on the basis of merit, the competence of the team will suffer, but let’s pretend for the sake of argument that the diminution in quality is offset by much greater jury appeal. The legal response is that the drafters of Title VII allowed no exception for this kind of “customer preference”; the moral response is to ask, So would it be okay to exclude members of unpopular minority groups from a legal team if they might rub a bigoted jury the wrong way?

One article about Shell ended by noting, “Not long ago, clients wanted their attorneys to look a certain way”--and, apparently, they still do.

I updated that testimony — I was delayed in delivering it because the EEOC got cold feet about inviting me — here:

Another article early this year reports that that Santa Clara County Bar Association “has also encouraged law firms to provide incentives, such as financial bonuses, for partners to work to improve diversity”; yet another article the same week focused on how the law firm Fenwick & West in Mountain View, California, “closely ties diversity goals to partners’ compensation” (partners at the firm are “to make sure the staff assigned to cases is diverse, to make sure staffers of both genders and all races and sexual orientations have significant client contacts, to take part in minority recruiting fairs, to foster good networking opportunities for minority attorneys and to do pro bono work that deals with issues of diversity”).

One of the issues I raised in my original testimony was affirmative discrimination in law firms, especially at the behest of corporate clients. This topic has been much in the news. I would cite, in particular, a New York Times story about the important work done by UCLA law professor Richard Sander, who has concluded that such discrimination actually hurts the supposed beneficiaries. See Richard H. Sander, “The Racial Paradox of the Corporate Law Firm, 84 N.C. L. Rev. 1755 (2006). Another article early this year reports that business members of the Santa Clara County Bar Association’s “commission on diversity, such as Intel, Google, and Yahoo, have openly requested their outside counsel better reflect the diversity of the global and local markets ….” There have also been news stories about the pressure that McKesson Corp. and Wal-Mart have put on their law firms to get their numbers right, including in particular how McKesson cut Gibson, Dunn & Crutcher from its list of firms that would be considered for doing the company’s legal work. I mentioned earlier the news story highlighting the diversity efforts of the firm Fenwick & West, the chairman of which acknowledged: “It’s also just plain good for business. Our clients care about diversity.” That article also reported that “Other large Bay Area firms, for their part, are putting work into meeting diversity goals.”

*          *          *

One last point:  It is sometimes objected that, for private companies, if they want to engage in “diversity” discrimination then they should be allowed to.  My answer to this has always been that, sure, one can make a libertarian argument in favor of allowing such private-sector discrimination, just as one can also make an argument that even in the private sector all individuals should be free from racial discrimination.  What cannot be defended, however, is a legal regime where some groups are protected from racial discrimination but others are not.  Since it is politically unthinkable to suppose that politically incorrect racial discrimination is going to be re-allowed by the repeal of Title VII, then in the real world the only choice is between all groups being protected from racial discrimination versus only some groups.  That choice is, it seems to me, an easy one.

Sane Stern, Crazy Cuomo

The sports section of Monday’s New York Times has a long puff piece  on Richard Lapchick and how he pushes for “diversity” (that is, race-based hiring practices) in professional and amateur sports. But in the middle of the predictable pabulum is a bracing dissenting note from NBA commissioner David Stern:

Lapchick said he began receiving more cooperation in the years after Bud Selig and Roger Goodell became commissioners of M.L.B. and the N.F.L. But Commissioner David Stern, whose N.B.A. has historically received higher grades than the other leagues, argued that Lapchick’s good intentions—when carried to routine—missed the essential aim of fair-minded employment.

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Unkingly Discrimination

As  Americans honor the memory and legacy of Dr. Martin Luther King Jr., it is sobering to see how far many of our public entities have strayed from Dr. King’s important message about equality. A case in which the Center for Equal Opportunity joined and helped write an amicus brief this month makes that sad point very well.

So entrenched have racial preferences become that, last March, a federal judge tossed out a case against government-mandated discrimination, Midwest Fence v. United States Department of Transportation. Last week, the U.S. Court of Appeals for the Seventh Circuit heard oral argument in an appeal of that decision, which involves a federal contracting program that requires bidders to discriminate against subcontractors on the basis of skin color and national origin.

A small guardrail-installation subcontractor, Midwest Fence, submitted the lowest bids on a multiple-highway construction project in Illinois. But the government pressured prime contractors to reject those bids and favor other subcontractors on the basis of their race. And without even holding a hearing, the judge granted summary judgment in favor of three government agencies and approved the racial preferences.

Racial preferences should never be approved. To favor one race means to disfavor another, and discrimination in contracting violates the Constitution’s guarantee of equal protection of the laws. The Fourteenth Amendment guarantees every person the right to be treated equally by state governments, and the Fifth Amendment provides a similar guarantee with respect to the federal government.

There’s more at stake than money. It’s flatly unfair and needlessly divisive to use race and ethnicity to decide who gets awarded contracts. As Alexander Bickel wrote in The Morality of Consent: “The lesson of the great decisions of the Supreme Court and the lesson of contemporary history have been the same for at least a generation: discrimination on the basis of race is illegal, immoral, unconstitutional, inherently wrong, and destructive of democratic society.”

The Seventh Circuit’s ultimate decision will have national implications, because the case concerns a federal program implemented in all 50 states. To receive federal highway funds, states must follow federal regulations that require a two-step goal-setting process that almost always leads to race-conscious goals for hiring subcontractors. Whenever Congress authorizes a highway-spending bill, alas, the race-based program is automatically extended.

Racial preferences in government contracting can be justified only if they are “narrowly tailored” to remedy racial discrimination. In Fisher v. University of Texas(2013), the Supreme Court held that, as part of the narrow-tailoring analysis, the government has “the ultimate burden of demonstrating, before turning to racial classifications, that available, workable race-neutral alternatives do not suffice.” The Court’s evolving jurisprudence makes clear that it demands that this burden be taken seriously.

And today, there are always workable race-neutral alternatives to racial preferences, in the contracting area in particular. That is, it is an area where there are always better ways to stop and remedy racial discrimination (the only justification for such policies) than by requiring more racial discrimination.

First, as the Supreme Court noted in City of Richmond v. J. A. Croson Co. (1989), if the government has evidence that non-minority contractors are systematically excluding minority businesses from subcontracting opportunities, it can and should take action to end the discriminatory exclusion. The appropriate response is to take measures against those who discriminate on the basis of race or other illegitimate criteria and provide relief to the victims of such discrimination. It should be noted that Illinois has not taken action against any prime contractors for engaging in racial discrimination — if only because it has not identified any prime contractors as engaging in discrimination.

Second, to stop such discrimination, federal and state governments could make public contracting completely transparent — at both the prime-contracting and subcontracting levels. States typically award prime contracts in a process that has been designed to eliminate discrimination and favoritism. Prime contractors must submit sealed bids, which are then publicly opened on a certain date and made available for inspection. The contractor who wins the contract is the one who was able to put together the lowest bid, period. Courts should ask why a similar race-neutral process has not been designed for subcontracts on public-highway projects. Such a process would allow state governments to do what everyone expects them to do when tax dollars may be funding the evils of discrimination: identify the discrimination and eradicate it.

What’s more, to the extent that the real concern is that minority-owned companies may be at a disadvantage because many of them are small or new, the appropriate policy is to define the businesses that should receive preferences — the disadvantaged businesses — by the size of the firm and the income of the owner, or the fact that the firm is new, instead of the race or ethnicity of the owner, as is done now. Why use skin color and national origin as proxies for disadvantage in 2016? There are plenty of disadvantaged whites and advantaged non-whites.

In sum, contracting programs should be open to all, bidding opportunities should be widely publicized beforehand, and no one should be discriminated against because of skin color, national origin, or sex. That means no preferences for one group, whether labeled as “set-asides,” “quotas,” or “goals,” since they all end up amounting to discrimination against other groups.

Remedial discrimination makes less and less sense with every tick of the clock, as the days when black companies were not allowed to compete fade into the past, and as America becomes increasingly multiethnic and multiracial.

Regarding that last point, consider: It is widely known that Asians (along with whites) are discriminated against in university admissions, but what is less widely known is that it is more and more common for Hispanics (again, along with whites) to be discriminated against in government contracting.

As an example, Milwaukee enacted an affirmative-action ordinance in 2012, requiring the city and its prime contractors to grant preferences to businesses owned by African Americans, Asian Americans, and women of all races, but not to Hispanic males, Native American males, and white males. The city was promptly sued by the Hispanic Chamber of Commerce and forced to abandon its discriminatory program.

Congress should put an end to this nonsense. If a bill could not get through the Oval Office, a senator or representative could at least ask the Government Accountability Office to calculate how much these programs are costing the taxpayers. The GAO could also help document how widespread discrimination is at the state and local levels.

In 2016, contracting preferences are never the “narrowly tailored” remedy. This is clearly an area where a dictum of Chief Justice John G. Roberts Jr. applies: “The way to stop to stop discrimination on the basis of race is to stop discriminating on the basis of race.”

Here’s hoping that the Court of Appeals keeps in mind that point, and Dr. King’s dream, when it rules in the Midwest Fence case.

Obama Issues Executive Order on Diversity

President Obama issued an executive order  last week titled, “Establishing a Coordinated Government-Wide Initiative to Promote Diversity and Inclusion in the Federal Workforce.” It’s quite vague, extolling the value of diversity without defining it, and setting up a “government-wide initiative” for “all agencies” that will “develop and issue a Government-wide Diversity and Inclusion Strategic Plan.” Details later, and the devil, of course, will be in the details.

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Surprise result when city ends preferences in contracting

Supporters of racial and gender preferences in public contracting claim that preferences are needed because, without them, few contracts would go to minority- or women-owned firms. But a study recently done for Charlotte, N.C., reached exactly the opposite conclusion. After race and gender preferences ended, work awarded to minority- and women-owned businesses increased.

How can that be?

A bit of history is needed: Not long ago, Charlotte had a Minority- and Women-owned Business Enterprise (MWBE) program with preferential goals in its public contracts. The goals were suspended in 2002 as the result of a court challenge. The following year the city started its Small Business Opportunity program.

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Wal-Mart Case Is a Victory for Consumers

The Supreme Court handed down a big win for American consumers this week, though the case had nothing to do with consumer protection. The court's decision involved the rules for determining what constitutes a proper class of plaintiffs, representing not just those individuals who have come forward to allege illegal behavior but others who have been similarly harmed.

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