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In doing so, the proposed rule appears to flip the old presumption on its head, allowing the existence of the prior presumption to serve as evidence of discrimination against those who were excluded from it.
Quick Hits
- The proposed rule replaces the old eligibility framework with a new test requiring applicants to show that a governmental or private entity discriminated against or was biased against their racial, ethnic, or cultural group, and that such discrimination caused them material harm.
- The rule explicitly identifies “unlawful” DEI programs, affirmative action policies, race-based quotas, set-asides, and hiring targets as qualifying bases for establishing social disadvantage, meaning that corporate DEI programs could become evidence of discrimination in 8(a) certification proceedings.
- Applicants can self-certify group membership and material harm, defined as “loss of access to or diminished opportunities related to economic advancement,” and need not show that the discrimination directly impacted their entry into or advancement in business.
- The rule applies only to individually owned 8(a) applicants and does not affect entity-owned firms, including businesses owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations, or Community Development Corporations.
Background
As we discussed in our February 2026 article, SBA previously released policy guidance signaling that it would administer the 8(a) program on a strictly race-neutral basis going forward and would no longer allow presumptions of social disadvantage to establish program eligibility.
That guidance abandoned prior narrative frameworks, replacing them with a fact-specific inquiry into whether an individual has actually experienced social disadvantage. SBA also announced that only sixty-five companies were admitted to the 8(a) program in 2025, signaling a materially narrower program. SBA indicated it was finalizing formal regulatory changes, and the proposed rule published on June 11, 2026, is that follow-on action.
What the Proposed Rule Would Change
The proposed rule makes four targeted changes to 13 C.F.R. § 124.103:
First, the regulation would be revised to align with the statutory text in 15 U.S.C. § 637(a)(5), which defines socially disadvantaged individuals in race-neutral terms.
Second, the current regulatory tests for social disadvantage would be replaced with a new test. Under that test, an applicant to the 8(a) program can establish social disadvantage by showing that during the applicant’s lifetime, a governmental or private entity discriminated or was biased against a clearly definable racial, ethnic, or cultural group of which the applicant is a member, or favored a group of which he or she is not a member, and that such discrimination conferred material harm on the applicant.
Third, the current non-presumptive test under 13 C.F.R. § 124.103(c) would be removed, making the new test the sole test for establishing social disadvantage.
Fourth, the process for group inclusion on the rebuttable presumption list would be eliminated entirely.
However, the proposed rule applies only to individually owned 8(a) applicants and does not affect entity-owned firms, including businesses owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations, or Community Development Corporations.
What Does It Mean to Be Impacted by ‘Unlawful’ DEI Programs?
The most significant aspect of the proposed rule is its explicit incorporation of unlawful DEI programs as a basis for establishing social disadvantage. The proposed regulatory text at 13 C.F.R. § 124.103(b)(3)(ii) provides that an applicant must show evidence that a government or private entity’s action, policy, rule, regulation, or other practice “favored other groups, excluding the citizen’s group, or disadvantaged the citizen’s group.” The regulation then provides a non-exhaustive list of qualifying actions, which includes:
- Unlawful diversity, equity, and inclusion programs or policies
- Unlawful affirmative action programs or policies
- Race-based quotas, set-asides, or hiring targets
- Any policies or programs that favored some groups over others on the basis of race
SBA provides two specific examples in the proposed regulatory text. First, as discussed above, prior iterations of 13 C.F.R. § 124.103 that excluded an applicant’s racial or ethnic group from the rebuttable presumption would themselves qualify as discriminatory government action. Second, situations where the applicant’s group was disadvantaged in college or university admissions decisions or otherwise discriminated against by a private entity in an unlawful manner, as contemplated in recent U.S. Supreme Court decisions addressing affirmative action programs.
The term “material harm” is defined in the proposed rule as “loss of access to or diminished opportunities related to economic advancement.” To establish individual harm, the applicant may self-certify that he or she (1) was a member of the relevant group at the time of the discriminatory action or during the effective period of the relevant policy, and (2) suffered material harm because of that action. The applicant must also submit evidence that the government or private entity’s action favored or disfavored groups. Sufficient evidence may include materials on government, university, and corporate websites; policies, regulations, guidance, procedures, or documents; statements by officials; reports, audits, or findings; court decisions; or administrative rulings.
Notably, the proposed test does not require the applicant to show that the discrimination directly impacted their entry into or advancement in the business world, which was a requirement under the prior non-presumptive test. Instead, the material harm standard of “loss of access to or diminished opportunities related to economic advancement” is broader and can be self-certified.
Implications of 8(a) Program Changes for Employers
Although this proposed rule is directed at SBA’s small business certification program and not at employers broadly, it carries several implications worth monitoring.
Signaling on What Constitutes “Unlawful” DEI
The rule does not define what makes a DEI program “unlawful,” but its examples and legal citations point toward programs involving race-based preferences, quotas, set-asides, or hiring targets, particularly those that a court has found or could find to violate Title VII of the Civil Rights Act of 1964 or the Equal Protection Clause of the Fourteenth Amendment. This is consistent with the administration’s broader posture toward workplace DEI initiatives under Executive Orders 14173 and 14398, and it reinforces the growing regulatory environment in which race-conscious workforce programs face heightened scrutiny. Indeed, the phrase “unlawful diversity, equity, and inclusion programs or policies” echoes technical assistance from, in particular, the U.S. Equal Employment Opportunity Commission (EEOC). The EEOC has stated that DEI is a broad term not defined in Title VII and that “DEI initiatives, policies, programs, or practices may be unlawful if they involve an employer or other covered entity taking an employment action motivated—in whole or in part—by an employee’s or applicant’s race, sex, or another protected characteristic.” Further, the EEOC has cautioned that race or sex preferences are not lawful regardless of any “business interests in ‘diversity, equity, or inclusion.’”
Potential Evidentiary Use of Employer DEI Programs
Under the proposed test, an applicant seeking 8(a) certification could point to a corporation’s DEI policies as the basis for establishing social disadvantage. Sufficient evidence could include corporate policies, guidance documents, statements by corporate officials, reports, and audits. While this alone does not create new legal liability for employers, it does create a federal regulatory framework in which corporate DEI programs are treated as evidence of discrimination against excluded groups. Employers should be aware that their DEI policies and programs could become part of the administrative record in 8(a) certification proceedings.
Limited Direct Impact on Larger Employers
The 8(a) program is limited to small businesses, and the proposed rule will primarily affect the approximately 4,190 individual applicants annually. Companies that exceed SBA size standards will not be directly impacted. The broader significance is thematic: the rule reflects the administration’s view that race-conscious programs constitute actionable discrimination and creates a regulatory mechanism that rewards individuals who can demonstrate harm from such programs. However, many larger employers are federal contractors and may have exposure to the 8(a) program through their Federal Acquisition Regulatio (FAR) Part 19–related subcontracting programs. Further, for federal contractors and grant recipients, the proposed SBA rule should be viewed alongside Executive Order 14173’s certification framework, which requires federal contractors and grant recipients to certify that they do not operate programs promoting DEI that violate applicable federal antidiscrimination laws.
Related Developments in the DOT DBE Program
The SBA proposal also fits within a broader federal shift away from race- or sex-based presumptions in small-business contracting programs. The U.S. Department of Transportation’s (DOT) October 2025 DBE (Disadvantaged Business Enterprise) and ACDBE (Airport Concession DBE) interim final rule similarly removed race- and sex-based presumptions of social and economic disadvantage after the DOT and the U.S. Department of Justice (DOJ) concluded that those presumptions violated equal-protection principles. But the two frameworks diverge in important ways. The DOT now requires all DBE and ACDBE owners to make an individualized showing, supported by a personal narrative and evidence of economic hardship, systemic barriers, denied opportunities, and resulting economic harm. SBA’s proposed 8(a) rule, by contrast, would allow a U.S. citizen to establish social disadvantage through evidence that a governmental or private entity favored or disfavored racial, ethnic, or cultural groups, coupled with self-certification of group membership and material harm.
Looking Ahead
Comments on the SBA’s proposed rule are due on or before July 13, 2026. SBA has requested comment on any reliance interests that would be implicated by these proposed changes, though it does not currently intend to apply the new test to current participants. Given that SBA has not approved a new 8(a) application since August 2025 and the number of active firms has fallen below 3,000, the rule will primarily affect the pipeline of new applicants.
For employers, while the direct impact on companies too large for the 8(a) program is negligible, the rule’s treatment of corporate DEI policies as evidence of discrimination is consistent with broader enforcement trends and is worth monitoring as part of an overall compliance strategy.
Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance Practice Group, Government Contracting and Compliance Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Employment Law, Government Contracting and Compliance, and Workforce Analytics and Compliance blogs as additional information becomes available.
This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.
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