THOMAS W. KELTY, Chief Counsel,
Illinois Municipal League

AFFIRMATIVE ACTION

The United States Supreme Court has had a busy term from October of 1988 to the term's end on July 3. Of particular interest to municipalities are the cases decided pertaining to affirmative action programs. It appears that the decisions of the court are shifting to stricter standards.

Affirmative action plans have developed to respond to the effects of past racial discrimination. The theory behind the principle is that current adoption and execution of a plan will correct the effects of past discriminatory practices and prevent those practices in the future. Plans to correct imbalances in hiring, promotion, contract letting and educational admissions have been crafted to correct this past discrimination, and these types of plans and others have been considered and approved by the Supreme Court in earlier years.

Prior pronouncements of the Court have defined a broad scope of parameters for affirmative action plans. However, two cases decided this term limit prior decisions of the Court in areas that are of particular interest to municipalities: Public Works Contract Set Aside for Minorities and Job Lay Off Requirements. These decisions are important to all municipalities in judging their needs for affirmative action plans and assessing the legality of existing plans. In this article, the current state of the law with respect to set-aside programs is illustrated by the case of City of Richmond v. JA Croson Co., _ U.S. _, 109 S. Ct. 706, 102 L.Ed 2d 854, 57 U.S.L.W. 4132 (1989), which substantially narrows one area in which units of government have sought to correct past discriminatory practices, the awarding of Public Works Contracts. Voluntary Plans have been adopted to insure that Minority Business Enterprises (MBE) are not excluded from public works by reasons related to discrimination. A variety of plans have been adopted to accomplish this goal. It appears that the most popular method is a contract requirement that a fixed percentage of contracts on sub-contracts be awarded to MBEs. In 1980, the Supreme Court considered and approved such a plan in the case of Fullilove v. Klutznick, 448 U.S. 448 (1980). In Fullilove, the Supreme Court declared that such "set-asides" did not violate the due process component of the Equal Protection clause of the Constitution notwithstanding its effect of excluding certain bidders and creating a preference for certain other bidders (MBEs).

The Croson case clarified and limited the Fullilove holding. The City of Richmond, Virginia created a set-aside program for the City of Richmond patterned after the federal program approved in Fullilove. The program set-aside provided for a 30% MBE participation requirement. Bidders on public works projects could obtain a waiver of the requirement upon a show that sufficient qualified MBEs were unavailable or unwilling to participate. Croson was the sole bidder for a public works contract and was denied a waiver of the 30% requirement, thereby causing loss of the contract. Croson filed suit in federal court alleging that the plan was unconstitutional. The district court rejected these claims. The appellate court initially affirmed the decision. However, the Supreme Court, without opinion, vacated and remanded the case to the appellate court. On the second hearing the appellate court reversed the trial court. The Supreme Court affirmed the second decision of the appellate court and issued the opinion discussed below. In this opinion, the Supreme Court affirmed these appellate court findings and articulated narrower standards that are to be used in judging set-aside programs adopted by states and municipalities. Justice O'Connor wrote the Opinion of the Court of which three parts represent the majority view. Only a plurality could agree on the balance of the opinion.

The Supreme Court has previously pronounced a test for judging claims based upon racial discrimination, the "strict scrutiny" test. This test requires that to be constitutional an action must be (1) justified by a compelling state interest and, (2) narrowly tailored to accomplish that remedial purpose. The Court found that both of these tests were not met and held the plan to be unconstitutional.

July 1989 / Illinois Municipal Review / Page 19

According to Justice O'Connor, the city could not show that the plan was justified because there had been no proof of any specific discrimination in the Richmond, Virginia construction area. Instead, the City of Richmond relied on a generalized notion proven in Fullilove that racial discrimination existed in the construction industry. The Court thus found that there was no actual or specific problem to which the remedy could be tailored.

The second part of the test is failed for similar reasons. In the ordinance, the city council articulated the purpose of the plan as remedial. However, the Court found four reasons that the statements of the council in declaring the ordinance to be remedial are not supported by the facts of the case.

First, the Court rejects the assertions of Richmond that past "societal discrimination" is responsible for the lack of minority contractors and results in discrimination in the bidding process. In support of this argument, Richmond cited factors such as lack of working capital, inability to meet bonding requirements, unfamiliarity with bidding procedures and disability caused by an inadequate track record. The court calls these factors "nonracial" and rejects the use of these factors to demonstrate past racial discrimination.

Second, the Court states that these "facts" cited by Richmond does not make a prima facie case for discrimination by anyone in the local construction industry. In addition to the factors cited above, there was statistical data showing a paucity of contracts awarded to MBEs which the Court held is not persuasive. According to the Court, the proper statistical analysis is the number of MBEs available compared to the number of contracts awarded to MBEs. According to the Court, Congress is entitled to make the type of broad generalizations made by Richmond using its remedial powers. Richmond does not have that power and may not exercise it.

Third, no evidence of any kind existed that warrants a finding that racial minorities other than blacks has suffered as a result of alleged practices in the local construction industry. Therefore, the Plan's inclusion of other racial minorities attempts to be too inclusive and is not narrowly tailored to remedy a specific problem.

Fourth, and finally, the Richmond plan permitted MBEs from anywhere in the country to receive a preference over local non-MBE contractors. According to the Court this focus is unnecessarily broad. This broad geographical scope coupled with the "rigid" 30% guideline created a remedy not tailored to the problem that was to be remedied.

The lessons to municipalities are clear. First, a racial discrimination problem must be locally indentifiable and provable. Broad assertions of a racial inequity justifying the implementation of an affirmative action plan are insufficient. Second, the solution adopted must be narrowly drawn to correct the demonstrated problem. This requirement presents a difficult problem for municipalities considering a plan. If the focus is too narrow, the plan is open to attack by the persons protected by the plan. If too broad, it will be attacked by those excluded by the plan.

Although this decision helps clarify the requirements of a "set-aside" program, the general area is still difficult to navigate through. Careful consideration is still necessary prior to adoption as implementation of such a plan.

The other major area of interest to municipalities with respect to affirmative action and equal protection is in employment of its own workers. During the current term the Court has modified the Standards in that area also. Next month, cases of Martin v.Wilks and City of Canton v. Harris in this equally difficult area will be reviewed. •

Page 20 / Illinois Municipal Review / July 1989