In the past several months, various challenges have been made to federal programs and policies including tribal gaming support, the Small Business Administration (SBA) 8(a) program, the Minority Business Development Program (MBDP), and President Biden’s Executive Order 14026 raising the minimum wage for federal government contractors. For those businesses and individuals that may be affected by potential changes to these programs, here is an update as of August 2, 2023:
Tribal Support from the Government
This case was filed by Maverick Gaming LLC (“Maverick Gaming”). Maverick Gaming claimed the authorization Tribal gaming operations have under the Indian Gaming Regulatory Act (IGRA) to provide gambling options—like sports betting—that other commercial card venues cannot amount to unconstitutional racial classification. Maverick Gaming challenges the Shoalwater Bay Indian Tribe’s gaming operations, but the Tribe could not be joined due to its sovereign immunity.
At its core, Maverick Gaming’s argument is that benefits provided to Tribes by the federal government should be viewed as a benefit provided due to a racial classification, as opposed to a political one. If Maverick Gaming’s argument wins, federal benefits provided to Tribes, and not available to non-tribal members, would be subject to strict scrutiny (the highest tier and most difficult burden for the federal government to overcome) as opposed to rational-basis scrutiny (the lowest tier, and much easier for the federal government to overcome). The case was dismissed by the federal district court because the Shoalwater Bay Tribe was deemed a necessary party that could not be joined.
For a more detailed summary of the case (dated March 2, 2023), see here.
- What is the Current Status?
Maverick Gaming is appealing the dismissal to the 9th Circuit. Maverick Gaming has filed its opening brief. Appellees’ (United States of America, Department of the Interior, Shoalwater Bay Tribe, etc.) answering brief is due September 1, 2023.
The SBA 8(a) Program
As previously discussed, Ultima Services Corporation filed suit challenging the constitutionality of the Small Business Association’s 8(a) Business Development Program. The 8(a) Program allows participants to receive business development assistance and compete for exclusive federal contracts. To be a participant, the business must be owned by a socially or economically disadvantaged individual – defined as someone who has been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities or whose ability to compete in the free enterprise system has been impaired.
On July 19, 2023, the District Court for the Eastern District of Tennessee found that the rebuttable presumption of social disadvantages that determine participant eligibility is unconstitutional racial discrimination. However, this ruling does not completely set aside the 8(a) program. It only prohibits the SBA from applying the current rebuttable presumption of social disadvantage applicable to certain individual-owned entities applying for entry into the 8(a) program.
- What is the Current Status?
The SBA is currently enjoined from using its current rebuttable presumption of social disadvantage when admitting entities owned by individuals to the 8(a) program. The Court has scheduled a hearing regarding further remedies for August 31, 2023. We are currently waiting to see if the SBA will appeal the district court’s decision.
The Minority Business Development Program
As previously reported, the U.S. District Court for the Northern District of Texas (Fort Worth Division) granted a motion for a preliminary injunction enjoining the Wisconsin, Orlando, and Dallas-Fort Worth Minority Business Development Agency (MBDA) Business Centers from imposing racial classifications or using Plaintiff’s race or ethnicity to determine whether they can receive access to the Center’s services and benefits.
The MBDA is designed to support businesses that are 51% owned by socially or economically disadvantaged individuals: individuals subjected to racial or ethnic prejudice or cultural bias. The plaintiffs successfully challenged the MBDA’s presumption that certain minority groups are socially or economically disadvantaged—which could affect similar presumptions in other federal programs such as the Small Business Administration’s 8(a) program.
- What is the Current Status?
The federal government has filed an answer to the complaint. The court has also filed a status report regarding the scheduling order for the next steps in the case. The federal government has not yet appealed the preliminary injunction issued by the district court.
The Federal Government Contractor Minimum Wage
As highlighted last year, the States of Arizona, Idaho, Indiana, Nebraska, and South Carolina filed a motion for a preliminary injunction challenging the President’s ability to raise the federal contractor minimum wage by Executive Order 14026. The Department of Labor issued a final rule requiring any federal contractor to pay their employees a minimum hourly wage of $15, which amount is increased annually to account for inflation. The federal government opposed the request for the preliminary injunction and moved to dismiss the States’ complaint.
On January 6, 2023, the U.S. District Court for the District of Arizona denied the States’ motion for a preliminary injunction and granted the government’s motion for summary judgment, effectively dismissing the case. The States have appealed the district court’s decision to the 9th Circuit Court of Appeals.
- What is the Current Status?
The States have filed their Opening Brief. An amicus brief has been filed by the National Federation of Independent Business Small Business Legal Center. The federal government has until August 21, 2023, to file its appellate brief.
