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Ninth Circuit:
Federal Government Must Turn Over Diversity Data to Media
Opinion Says Freedom of Information Act Exception for ‘Commercial’ Information Does Not Protect Demographic Reports of U.S. Contractors
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday affirmed an order compelling disclosure, under the Freedom of Information Act, by the U.S. Department of Labor of more than 16,000 reports filed by federal contractors between 2016 and 2020 relating to demographic information of their workforces, finding that the documents do not qualify under a statutory exemption for “commercial information.”
In an opinion by Circuit Judge Anthony D. Johnstone, the court held that the information in the reports does not pertain to the “subject of commerce” because it is too attenuated from the company’s business operations or trade, rejecting arguments that the data reveals contractors’ headcount and organizational priorities that relate directly to the entities’ ability to turn a profit.
Seeking the data were the Center for Investigative Reporting (“CIR”)—a San Francisco-based news organization that produces the liberal-leaning Reveal podcast which merged last year with the left-wing publication Mother Jones—and journalist Will Evans who works for the health-journalism website, The Examination.
They say the information is key to their ability to report on diversity, equity, and inclusion of federal contractors.
Demographics Reports
In a complaint filed in November 2022, CIR and Evans alleged that the Department of Labor violated the Freedom of Information Act (“FOIA”), codified at 5 U.S.C. § 552, by failing to hand over the diversity reports after the plaintiffs filed three requests under the statute seeking their disclosure.
They allege that the “matter has been pending…for nearly four years, since the date of CIR’s original request in January 2019” and assert that “[r]elease of the demographic information contained in the…Reports would inform the public on the important topics of workplace diversity, equality, and inclusivity.”
The department turned over the reports for non-objecting contractors, but withheld those filed by 4,141 employers who did not consent to disclosure, asserting that the documents are covered by Exemption 4 of the FOIA, which shields “commercial information” that is “privileged or confidential” in order to protect against competitive disadvantages that could result from the discovery of a company’s private business information.
Use of Bellwethers
Each party consented to the selection of six objecting contractors to be used as bellwethers to test the exemption argument. Allied Universal, the country’s largest provider of private security guards, and Brandenburg Industrial Service Co., a demolition and environmental remediation corporation, were among those chosen.
After both sides filed motions for summary judgment based on the selected bellwethers, Senior District Court Judge William Alsup of the Northern District of California ordered that the undisclosed reports be turned over. Alsup opined that the demographics information was not “commercial” because it lacked any trade or sales value.
Johnstone’s opinion, joined in by Senior Circuit Judge N. Randy Smith and District Court Judge Dana L. Christensen of the District of Montana, sitting by designation, affirms the order on different grounds.
Commercial Information
Information can be deemed “commercial” under Exemption 4 based on it being “the object” of commerce or having a “subject” of trade. Johnstone said that only the latter category is at issue, as the department does not contend that any of the data was collected with an eye towards selling the statistics.
He noted that data has been deemed to have the subject of commerce where it describes an exchange of goods or services or reveals how a company makes a profit. Applying these principles, the judge remarked:
“The information in the bellwethers’ EEO reports does not have a ‘commercial’ subject within the meaning of Exemption 4….[T]he reports describe only two types of information about federal contractors’ workforces: (1) data on the number of employees in each of ten general job categories and (2) demographic data on the employees’ race, sex, and ethnicity. They do not disclose any details about the services provided by federal contractors, the prices charged for those services, the resulting profits, the terms of the contractors’ agreements with the government, or any similar information that we or other courts ordinarily treat as ‘commercial.’ ”
Headcount Information
The defendant argued that the information in the reports is “commercial” because it reflects a contractor’s headcount and organizational structure, which affects the company’s capacity to engage in commerce. Johnstone explained:
“Allied Universal, for example, primarily sells ‘guard hours,’ equivalent to one hour of security-guard time. So its ‘ability to supply its product—guard hours—is a direct function of the number of security guards it employs,’ which can be gleaned from its job-category data.”
Rejecting that characterization, the jurist wrote:
“[T]he job-category data in the EEO reports does not alone reveal information about the contractors’ profitability, volume of products, or other aspects of their commercial exchanges. Consider Allied Universal. While the number of security guards it employs influences the volume of services it can provide, other factors like its overhead costs also play a role. And the reports do not contain information on security guards’ schedules, wages, or work locations, which also affect the number of guard hours that Allied Universal sells. For the other bellwethers, too, the job-category data in the EEO reports reveals only one of multiple factors that affect their sales and profits. So the Department has shown only an attenuated connection between the job-category data and the contractors’ commercial activity.”
Diversity Reports
He continued:
“The same goes for the EEO reports’ data on the racial, sexual, and ethnic diversity of contractors’ workforces. The Department argues that ‘[d]iverse firms are better able to attract and retain talented employees and compete for customers in certain markets.’…Yet the Department again fails to explain how this data describes contractors’ exchange of goods or services or their making of a profit, so the Department has not shown that it is ‘commercial.’ ”
As for Alsup’s conclusion that the data does not qualify for the exemption because it lacks commercial value, he said “nothing in the text of Exemption 4 imposes any commercial-value or competitive-harm requirement” so “[t]he district court reached the same result for a different reason.”
The case is Center for Investigative Reporting v. U.S. Department of Labor, 24-880.
The reports at issue were generated under a mandate originating in a 1965 executive order, signed by President Lyndon B. Johnson, imposing certain nondiscrimination and affirmative action requirements on federal contractors employing more than 50 people.
Yesterday’s decision might open the gate to some of the last disclosures from the Department of Labor relating to the demographics of the federal contractors’ workforces, as President Donald Trump revoked the reporting mandate in January in an executive order titled, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.”
Following the signing, the then-Acting Secretary of Labor Vincent Micone ordered that the department cease all investigative and enforcement activity under Johnson’s order.
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