Public Entity DEI Programs Under Scrutiny


Public Entities with DEI Programs


March 5, 2024


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Quick Look

  • Diversity, equity, and inclusion programs by public entities must be narrowly tailored to achieve the agency’s legitimate, compelling interest.


On March 5, 2024, a judge in the Northern District of Texas issued a decision finding that the Minority Business Development Agency’s (MBDA) policies that provide financial assistance to minority-owned businesses are unconstitutional. MBDA is a federal agency that provides financial assistance to business owners who are considered “socially or economically disadvantaged.”


Under the MBDA’s policies, there is an established presumption of social or economic disadvantage based on race and ethnicity. Because of this, certain business owners were denied or deemed ineligible for MBDA benefits because they did not identify as members of disadvantaged races or ethnicities. These businesses filed suit against the MBDA alleging that the MBDA’s presumption violated the equal protection guarantees of the Fifth Amendment’s Due Process Clause.


In deciding the case, the court found that, although the agency had a compelling interest in remedying past discrimination in government contracts, the agency’s policies were not narrowly tailored enough to achieve that interest. As a result, the court permanently enjoined the MBDA from using race as a factor in determining whether to provide financial assistance to businesses.


Although the court’s decision does not affect private businesses, employers should be aware of this decision and future developments as DEI programs are analyzed following the Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College. In the SFA case, the Supreme Court ruled certain race-conscious college admissions policies violate the Equal Protection Clause of the 14th Amendment. This current case illustrates how the Supreme Court’s reasoning may be applied in the workplace.

Action Items

  1. Review any DEI initiatives and qualifications.
  2. Adopt objectives, business-related criteria for DEI decision-making.
  3. Consult with legal counsel about minimizing risks for DEI practices.


Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2024 ManagEase