More Affirmative-Action Red Tape for Contractors: Sexual Orientation Added in California

Governments impose a cobweb of complicated and confusing affirmative-action mandates on government contractors. That imposes billions of dollars in compliance costs on contractors. It also reduces the pool of contractors competing for government contracts, sometimes massively increasing the cost to taxpayers of transportation projects and government services by weeding out the most efficient contractor.

California provides the latest example: new sexual-orientation-based affirmative-action mandates, imposed for certain subcontracts by California Public Resources Code § 25230. Loan recipients must now provide “outreach” to “LGBT business enterprises” alongside enterprises owned by women, “African Americans, Hispanic Americans, Native Americans, and Asian Pacific Americans.” As I explain at this link, these mandates are of doubtful legality, since the California state constitution subjects sexual-orientation classifications to strict scrutiny, and California appellate precedent applies strict scrutiny even when a classification prefers a minority rather than a majority. UCLA law professor Eugene Volokh raises practical questions about the new mandate, such as how it may be gamed by heterosexual subcontractors who claim to be bisexual.

Government affirmative-action mandates are sometimes duplicative, imposing redundant paperwork that does nothing to advance the underlying goal. They also sometimes impose contradictory obligations, such as when a contractor operates in both jurisdictions that mandate racial preferences for minorities, and those whose state constitutions (like Louisiana’s) forbid them. See, e.g., Louisiana Associated General Contractors v. State, 69 So.2d 1185 (La. 1996).

Race-based affirmative-action mandates for subcontractors can also occasionally lead to legal headaches for contractors in dealing with subcontractors. Many local affirmative-action programs violate the U.S. Supreme Court’s Croson and Adarand decisions interpreting the equal protection clause.  When a subcontractor loses out due to an affirmative-action rule, that can result in litigation by a subcontractor not just against the government unit that enacted the affirmative-action mandate, but also against contractors that used it in subcontracting (a federal law, 42 U.S.C. § 1981, prohibits racial discrimination in contracts). See Bras v. California Public Utility Commission, 59 F.3d 869 (9^th Cir. 1995) (allowing subcontractor to challenge state affirmative-action mandate in lawsuit against utility commission, after it settled its discrimination claim against the contractor).