Taking on Unlawful Restrictions on COVID-19 Emergency Relief for Business Owners with Criminal Records

In response to the COVID-19 pandemic, Congress passed the CARES Act, including provisions for the Small Business Administration (SBA) to issue $350 billion in loans and grants to aid small businesses. Aid was provided through two programs, the Paycheck Protection Program and the Economic Injury Disaster Loans program. While the CARES Act passed by Congress established no restrictions on business owners’ aid eligibility pertaining to criminal histories, the SBA imposed extensive eligibility restrictions for business owners with criminal records.

Often facing barriers to employment on the job market, a significant number of people with criminal records start their own businesses. After doing so, they frequently provide a source of employment for others with criminal histories. Advocates and business owners felt that the SBA’s unprecedented aid restrictions would hinder on the ability of small business owners with criminal histories to maintain their business and pay their employees, in the process creating a ripple effect in communities of color that have faced the deepest impact of mass incarceration.

On April 10, 2020, we helped draft a joint letter from civil rights organizations across the country sent to Congress, the Treasury Secretary, and the administrator of the SBA calling on them to remove the draconian, discriminatory exclusions on COVID-19 relief eligibility for small business owners with criminal histories. When no action was taken, on June 16, 2020, we joined the American Civil Liberties Union (ACLU), and Washington Lawyers’ Committee for Civil Rights and Urban Affairs to file a lawsuit in federal court alleging that these exclusionary aid eligibility rules were arbitrary and capricious under the Administrative Procedures Act.

Following this lawsuit, the SBA issued a new rule on June 24, 2020 allowing a wider range of small business owners with criminal histories to apply for COVID-19 relief through the PPP loan program. Five days later, the United States District Court for the District of Maryland ruled that the SBA’s previous aid eligibility restrictions placed on small business owners with criminal histories were illegal and granted plaintiffs an extension to apply for Paycheck Protection Program loans.

June 29, 2020
Court rules that former SBA rules barring business owners with criminal histories from aid were illegal, extends deadline for our clients

June 24, 2020
SBA amends PPP loan eligibility for business owners with criminal histories following civil rights lawsuit

June 16, 2020
Civil rights organizations sue the Small Business Admiration for excluding business owners with criminal histories from COVID-19 relief

May 2020
We file public comment opposing new criminal record restrictions for COVID-19 recovery loans to small businesses

Staff on the Case
Claudia De Palma