Diversity and inclusion experts say the legal backlash is already having a chilling effect over corporate efforts to address workplace inequality at a time when investment and interest in such initiatives have slowed following the post-Floyd surge.
Job openings for diversity officers and similar positions have declined in recent months. The combined share of venture capital funding for businesses owned by Black and Latina women has dipped back to less than 1% after briefly surpassing that threshold — at 1.05% — in 2021 following a jump in 2020, according to the nonprofit advocacy group digitalundivided.
The case against the Fearless Fund, which provides early-stage funding to businesses led by women of color, exemplifies the unpredictable legal landscape.
In late September, a federal judge in Atlanta refused to block a Fearless Fund grant contest for Black women business owners, saying they are donations protected by the First Amendment and the lawsuit was likely to fail. But days later, a three-judge federal appeals panel suspended the contest, calling it “racially exclusionary” and saying the suit was likely to succeed.
“Am I going to be able to apply to grants like these? Are they even going to exist?” said Danner-Okotie, who received $10,000 from a separate Fearless Fund grant. “With this last ruling, it seems like no.”
Danner-Okotie first saw the potential for scaling her clothing brand when the COVID-19 pandemic shut down the boutiques and fairs that carried her designs. Searching for ways to increase her online sales, she landed a contract with subscriber-based retailer Stitch Fix and used a government pandemic relief loan to fulfill the order. But when she tried to build on that success, she ran into roadblocks as banks declined her loan applications, deeming her business model risky since her clothes are handmade by Nigerian tailors.
The Fearless Fund, Danner-Okotie said, grasped her mission of designing clothes for American women looking to celebrate their African heritage. The grant was a game changer, allowing her to contract a factory in India to make uniquely designed fabrics for her team of tailors in Nigeria.
But now, future funding from the program is in jeopardy. The lawsuit against the Fearless Fund is being brought by the American Alliance for Equal Rights, a nonprofit founded by anti-affirmative action activist Edward Blum, the man behind the college admissions cases the Supreme Court ruled on in June. The outcome of the case could be a bellwether for similar diversity programs.
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