Opponents of workplace diversity programs are increasingly banking on a section of the Civil Rights Act of 1866 to challenge equity policies as well as funding to minority-owned businesses.

Section 1981 of the act was originally meant to protect formerly enslaved people — or Black people specifically — from economic exclusion. But now the American Alliance for Equal Rights — a group run by Edward Blum, the conservative activist who challenged affirmative action in higher education and won — is citing the section to go after a venture capital fund called the Fearless Fund, which invests in businesses owned by women of color. A federal appeals court temporarily blocked funding for Fearless Fund’s grant program as the case proceeds.

Conservative activists have brought lawsuits using the 1981 section against other companies and institutions, including insurance company Progressive and pharmaceutical giant Pfizer. The cases are being monitored carefully as the battle over racial considerations shift to the workplace following the U.S. Supreme Court’s June ruling ending affirmative action in college admissions.

While the 1981 section had been used well before the latest affirmative action ruling to prove reverse discrimination, Alphonso David, Fearless Fund’s legal counsel who serves as president & CEO of The Global Black Economic Forum, said that there’s a “coordinated use of Section 1981 now that we did not see before.”

What is Section 1981?

The 1866 Civil Rights Act is a federal law prohibiting discrimination on the basis of race, color, and ethnicity when making and enforcing contracts. Section 1981 specifically grants all individuals within the U.S. jurisdiction the same rights and benefits as “enjoyed by white citizens” regarding contractual relationships.

However, the Supreme Court’s 1976 McDonald v. Santa Fe Trail Transportation decision broadened those protections, ruling Section 1981 prohibits racial discrimination in private employment against white people as well as people of color.

“It’s a very clever game plan,” said Randolph McLaughlin, a civil rights attorney and law professor at Pace University, referring to the use of the 1866 law. “They want to turn civil rights law upside down.”

The standard of proof for the 1981 section is high. That’s because of the Supreme Court’s 2020 decision in Comcast v. National Association of African American-owned Media establishing that the plaintiff who sues for racial discrimination under the section bears the burden of showing that race was the central cause in denying a contract opportunity — as opposed to merely a motivating factor.