One plaintiff, Sekwan Merritt, founded an electrical contracting company in Maryland in 2017 after serving five years in prison for nonviolent drug offenses, the suit said. Four of the company’s five contractors also have criminal records, according to the suit.
When business dried up as covid-19 cases spiked and Maryland shut down, the suit says, Merritt sought federal relief but could not complete an application after answering “yes” to questions that asked whether he was on parole.
“Immediately upon submission of the application, a screen popped up stating: ‘Based on the answers provided, your application cannot be processed at this time,’ ” according to the complaint.
Merritt’s company has survived with the help of his savings and family loans, the suit said, but it alleges businesses like his are unfairly punished — particularly those owned by people of color, as exclusion policies “fall hardest on minority business owners and workers.”
“The criminal-record exclusions are inconsistent with the text and purpose of the Cares Act,” the suit argues. “They tell a sweeping category of small-business owners across the country that, at a time of acute financial fragility, there is no lifeline for them or their employees.”
The suit seeks an injunction that would prevent the government from enforcing the exclusions and set aside funds for those already excluded, among other relief.
The Treasury Department did not respond to a request for comment. A spokeswoman for the SBA declined to comment, but said rules for criminal exclusions changed Friday. According to the administration’s website, those involved in “nonfinancial felonies” more than a year ago are now eligible for Cares relief. The previous threshold was five years.
In a statement, ReNika Moore, director of the ACLU’s Racial Justice Program, said “excluding small business owners from federal aid based on their contact with the criminal legal system ignores the job opportunities, products, and services they provide to their communities.”
“The excluded small business owners are more likely to be Black and Latinx because of bias in our criminal legal system, and their communities are hardest hit by covid-19,” the statement said. “We won’t stop fighting until this economic lifeline is afforded to all.”
Andrew Glazier, chief executive of the nonprofit Defy Ventures, which helps former prisoners start businesses and is a plaintiff in the suit, said in an interview that his organization was able to access Cares Act relief, although some of the clients it tries to steer toward entrepreneurship were not. When his clients were turned down for federal relief, he said, he “could see the heartbreak in their faces.”
“There is no difference between … someone formerly incarcerated and me except he made a mistake 20 years ago that he has paid for with time in prison,” he said. “To see him unable to apply for the same relief I could apply for was unfair and unjust. They just were shut out.”
Merritt said his business, Lightning Electric, has no access to bank financing and is fighting for its survival.
“I deserve an opportunity — a chance to continue growing,” he said. “A lot of people don't give us a chance. It’s like you’re completely shut out of society.”