An Interesting Resolution to an EEOC Race Discrimination Investigation…

By Fiona Ong - Shawe Rosenthal LLP

December 28, 2023

The Equal Employment Opportunity Commission just announced a resolution of its investigation into Groupon’s recruitment and hiring practices, with a rather unusual term that specifically benefits Black individuals – an issue of heightened sensitivity as employers have struggled with the employment implications of the Supreme Court’s recent decision banning affirmative action in college admissions.

As described by the EEOC’s press release, this resolution includes the normal requirements for EEO training for the company’s management and employees, regular review of its existing EEOC policies, and annual reporting on its recruitment activities and hiring demographics. What is not typical is Groupon’s agreement to contribute $350,000 toward establishing an educational fund dedicated to improving primary and secondary STEM education for Black students and awarding scholarships to Black students pursuing advanced degrees in STEM fields.

As I explained in a relatively recent blog post, with very rare (really, just court-ordered) exceptions, Title VII prohibits employment decisions based on certain legally protected personal characteristics, including race. In addition, Section 1981 prohibits discrimination on the basis of race (as well as color and ethnicity) in the making and enforcing of contracts – which includes agreements in the employment context.

Building upon the Supreme Court’s no-affirmative-action decision this summer, a number of conservative organizations, Republican state Attorneys General, and some Republican legislators have actively challenged corporate diversity initiatives that were specifically based on race – including hiring quotas, leadership or fellowship programs, bonuses for achieving diverse workforce demographics, and exclusive employee affinity (or resource) groups, among other things. (I note that, while lauding the intent of such programs, I questioned their legality in another blog post several years ago.) In response, many corporate employers have stopped or significantly altered such programs to remove the focus on race.

But an educational fund and scholarships for students targeted at race? Well, these activities don’t violate Title VII, which only applies to employment. And apparently they don’t violate Section 1981 either. Under principles of contract law, an enforceable contract must have an offer, an acceptance and consideration – meaning something of value that is exchanged. So the creation of an educational fund or a scholarship, through which money is given to these students without anything of value being returned to the donor, does not create a contract. No consideration, you see.

Of course, these initiatives do not directly benefit Black employees at Groupon. But this is a longer-term, broader effort that will hopefully benefit workplace diversity – at Groupon and elsewhere – in the future. This is certainly an intriguing addition to the remedies that the EEOC may seek from employers going forward. And another initiative that employers may wish to consider as they revamp their DEIA efforts.

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