In the closing days of his tenure as Michigan’s Attorney General, Bill Schuette released an opinion related to the Michigan State Housing Development Authority’s (“Authority”) Equal Employment Opportunity policy (“EEO Policy”). OAG, 2018, No. 7308 (December 21, 2018). The Authority’s EEO Policy applies to direct loans and pass-through loans approved for the benefit of contractors and developers, and it requires developers constructing Authority‑financed developments to implement an EEO plan approved by the Authority. Specifically, an EEO plan must, at a minimum, take “all feasible steps” or make a “good‑faith effort” to achieve the Authority’s goal percentage for total project hours worked by minorities and women. If the contractor fails to meet the Authority’s goals or make a good‑faith effort to do so, the contractor is deemed “non‑awardable” for up to six years, meaning contracts for work on Authority financed projects would be unavailable to the contractor.
Schuette opined that the Authority’s EEO Policy, as it exists now, is unconstitutional. He noted that the Michigan Constitution prohibits discrimination or preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. Const. 1963, art 1, § 26(2). Thus, the EEO Policy, which threatens to disqualify contractors from Authority‑approved loans unless the contractors give preference to minorities and women, violates the Michigan Constitution.
Schuette concluded that finding holds even in cases of direct loans, where the only parties to the loan agreement are the developer and the Authority, with the contractor merely receiving the benefit of the loan granted to the developer (in pass‑through loans, all three parties are involved in a single contract). From a technical standpoint, the contract between the developer and contractor is not a public contract, as it does not involve the Authority. So, an argument could be made that the EEO Policy is constitutional because it impacts a private contract rather than a public contract. But Schuette emphasized that the Michigan Constitution’s prohibition on race‑based and sex‑based discrimination or preferential treatment applies to the operation of public contracting. In Schuette’s view, the “operation of” a public contract has influence beyond the public contract itself, as the Authority’s agreement with the developer – a public contract – requires the developer to force contractors to favorably advantage minorities and women. The key takeaway from Schuette’s opinion is this: it is not only unconstitutional for the government to, through its public contracts, discriminate against or give preference to individuals or groups on the basis of certain classifications; it is also unconstitutional for the government to use its public contracts to require private parties to grant preferential treatment to individuals or groups on the basis of race, sex, color, ethnicity, or national origin. Because of the constitutional provision in question, that position logically extends to public employment and public education. Lusk Albertson recommends speaking to legal counsel if you have any questions regarding the impact of the Attorney General’s opinion on school operations and policies.