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What parameters determine whether an organization may give free goods and services based on protected characteristics?

I'm trying to understand the pattern of organizations that dispense benefits to a certain protected characteristic based on its underrepresentation (e.g. Scholarships for X), but exclude demographics even less well represented.

Because tax-exempt status is not the same as legality, I've created a separate question for tax-exempt status. This is about legality.

Possibly relevant rulings:
  1. Masterpiece Cakeshop v. Colorado Civil Rights Commission
  2. Schuette v. Coalition to Defend Affirmative Action
Helpful examples:
  1. Before 2018, the Boy Scouts maintained legal discrimination and its nonprofit status while barring female and non-binary applicants. The Boy Scouts voluntarily opened its membership, but did not have a legal obligation nor did it risk its tax exempt status.
  2. A number of organizations (DFBSST, UNCF, Ron Brown Scholar Program) award scholarships only to certain ethnicities underrepresented in higher education. Would they be able to deny a scholarship to e.g. a Native American student, or any other student with even less representation in higher education than their target demographic?
  3. In certain programs, like athletic scholarships, certain ethnicities normally perceived as "privileged" are in fact largely underrepresented. Would it be legal for a non-profit to award scholarships only to these underrepresented groups?
Notes:
  1. It was my understanding that positive discrimination was called "affirmative action" in the United States, and that it generally did not allow hard quotas (or racial exclusion, which is a quota with an allowance of zero for certain groups).

  2. I'm ignoring the complication of religious organizations, and also the fact that the ability to discriminate may be restricted by a more conservative Supreme Court. I understand that maintaining non-profit status and legality are two separate matters.

  3. If this is too complex a question or tries to answer too many things at the same time (scholarships, food, nonprofit status vs. legality), I'm happy to break it into multiple questions so it is helpful for future searchers.

  4. If a specific example is helpful, consider the Ron Brown Scholar Program: "Applicants for this scholarship must be low-income Black or African American high school seniors."

2 Answers 2

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Alternative jurisdiction answer:

This is permitted for charities, provided that they comply with the requirements of Section 193 of the Equality Act 2010:

(1) A person does not contravene this Act only by restricting the provision of benefits to persons who share a protected characteristic if — (a) the person acts in pursuance of a charitable instrument, and (b) the provision of the benefits is within subsection (2).

(2) The provision of benefits is within this subsection if it is — (a) a proportionate means of achieving a legitimate aim, or (b) for the purpose of preventing or compensating for a disadvantage linked to the protected characteristic.

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  • Can you fill in what those sections stipulate?
    – Test
    Feb 24 at 21:02
  • @Test I've deleted it rather than elaborating as I realised it's not actually relevant to the question anyway. Those exceptions were in the context of employment issues, not in relation to giving away free goods and services based on protected characteristics.
    – JBentley
    Feb 25 at 20:11
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The primary distinction is between government action and non-government action. A non-government entity is statutorily prohibited from discriminating on certain specific grounds, for example employment, public accommodations, education and housing. The Boy Scouts don't fall under any of those categories (except in hiring of employees, but not in being a member). Charitable actions do not constitute employment, public accommodation, housing, and not in education provided that the organization does not receive funds from the Department of Education. Therefore they are free to discriminate in how they disburse their funds.

The term "affirmative action" is used broadly, so to the extent that a private action might be called "affirmative action", it is still legal to discriminate via hard quotas. The "affirmative action" exception is an exception to the general rule prohibiting discrimination on specified grounds (thus hard quotas are an exception to that exception). Since a charitable organization is not prohibited from discriminatorily disbursing funds, there is therefore no illegality to an "affirmative action" program with a hard quote.

It should, however, be pointed out, that a discriminatory scholarship would have to completely bypass administration by the educational institution, that is, the money would have to go to the recipient, and not the educational institution (since the educational institution cannot discriminate, even in disbursing funds come from a private organization).

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    Ok, I think my confusion lay in the difference between e.g. making a cake for someone and giving them a scholarship. What is the definition of a "public accommodation"? It seems odd that one might be able to give free cakes in a discriminatory manner but not discriminate if one charges for them.
    – Test
    May 30, 2023 at 22:18
  • It's actually about physical locations open to the public, like a hotel or a store.
    – user6726
    May 30, 2023 at 22:39
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    Is that really true? So if you buy the cake online, the proprietor can discriminate, but if you buy it in-store, they can't? That's even harder to believe.
    – Test
    May 31, 2023 at 1:28
  • @Test The definition of ‘public accommodation’ depends on the state when it comes to anti-discrimination statutes (e.g. TN has an exception for bona fide private clubs whose ‘policies are determined solely by its members; and...[i]ts facilities or services are available only to its members and their bona fide guests’ (TN § 4-21-102(15)(A) & (B)). You may wish to specify your question further, although I believe it’s broadly the same. Feb 25 at 21:55

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