Commentary & Analysis
You undoubtedly have heard a wide range of opinions about the Supreme Court decision striking down the use of affirmative action in the higher education application process, including Harvard University’s active discrimination against students of Asian ethnicity. But what you may not be aware of is how the decision will impact corporate diversity, equity and inclusion (DEI) policies, especially those adopted over the last three years.
While the decision does not directly affect workplace DEI programs and affirmative action plans, employers can expect to see a potential increase in legal challenges to their DEI programs based on it sometime in the future, observe attorneys Andrew Turnbull, Carrie Cohen and Michael Schulman of the Morrison & Foerster law firm. “Employers should consider their workplace DEI programs and strategies as they brace for the potential impact of the court ending affirmative action for college admissions.”
Other attorneys are of the firm belief that such legal challenges to DEI initiatives will be mounted shortly, citing the widespread opposition embodied by anti-DEI laws that has already been adopted by some state legislatures. Public opinion and corporate culture also are showing signs that the pendulum of social experimentation may be swinging away from the direction of intersectionality and critical race theory, along with other initiatives seeking to require companies to adopt environmental, social and corporate governance (ESG) practices, which embrace DEI.
Advocates of the energetic promotion of DEI rapidly gained prominence following the shocking murder of George Floyd by police in May 2020 and the widespread protests and violence that followed that incident. Corporations embraced a variety of social reforms and hired DEI specialists to advise them on management policy and provide training to employees. However, in the wrong hands the process can result in promoting lingering resentment and sometimes stir up additional rancor among different ethnic groups rather than helping to promote unity of purpose and social harmony, without which it is almost impossible for a workforce to coalesce into the common cause of fulfilling any corporate mission.
Several state governments have taken direct aim at DEI programs, with 19 having introduced or passed anti-DEI legislation. “While these initiatives are focused on state agencies and state-funded higher education, they may cause concern for private employers,” warn attorneys Emily Bushaw and Elizabeth Gardner of the law firm of Perkins Coie. “Private employers should take note of these efforts as well as broader attacks on ESG initiatives.”
ESG has become so much of a political hot potato that one of its earliest and most powerful proponents, Larry Fink, chief executive of BlackRock, recently announced he is abandoning the term, if not the ideas behind it. “I don’t use the word ‘ESG’ anymore because it’s been entirely weaponized by the far left and weaponized by the far right,” he explained.
With $9.09 trillion in assets under management, BlackRock had wielded an enormous stick when it came to browbeating companies into following its ESG mandates, which later spurred some Red state pension systems to pull their investments out of the fund. Last January Fink revealed that BlackRock had lost nearly $4 billion in managed assets that could be directly attributed to the backlash against ESG.
In the meantime, there is evidence suggesting that enthusiasm for DEI is beginning to wane. Earlier this year, the employment data analysis company Revelio Labs reported that attrition rate at companies for DEI layoffs was 33% by the end of 2022, compared to 21% for non-DEI roles. In some cases, companies eliminated entire DEI departments.
More recently, it was reported that three major movie studios and the Academy of Motion Picture Arts and Sciences laid off their diversity executives. On June 20, Disney’s chief diversity officer also announced that she was leaving her post “to pursue other endeavors.”
Division in Legal Outlook
Legal experts are divided on their opinions about how much of an impact the high court decision will have on non-university employers.
In a statement issued immediately following the decision, Equal Employment Opportunity Commission Chair Charlotte A. Burrows wrote that it “does not address employer efforts to foster diverse and inclusive workforces or to engage the talents of all qualified workers, regardless of their background. It remains lawful for employers to implement diversity, equity, inclusion, and accessibility programs that seek to ensure workers of all backgrounds are afforded equal opportunity in the workplace.”
Speaking on Fox News, Andrea Lucas, another member of the EEOC who had been appointed by President Trump, disagreed, predicting that the Supreme Court’s ruling on racial preferences in college admissions will lead to an increased number of challenges to what she said were already illegal corporate DEI programs and other methods of inserting race preferences into the employment process.
“I think this is going to be a wake-up call for employers,” she added. “Today is a time—the best time—for lawyers to really take a look at the lawfulness of their corporate diversity programs. Even though many employers don’t use the words ‘affirmative action,’ it’s rampant today, from ESG, to focuses on equity, pretty much everywhere.”
Lucas was firm on this point: “There’s a ton of pressure at the corporate 100 across corporate America to take race-conscious actions in employment law, and that’s been illegal and it’s still illegal.”
Labor and employment lawyers appear to be just as equally divided on the decision’s impact, on one hand believing it will have little or no effect on private employers outside of academic institutions, or on the other hand warning employers to take a close look at their DEI practices to make sure they will be able to stay within the lines drawn by the Supreme Court.
“Employers should review their DEI and affirmative action initiatives and consider how and if to revise those programs in light of the potential implications of the court’s decision,” say Morrison & Foerster lawyers Turnbull, Cohen and Schulman. “There may be heightened scrutiny of business efforts on multiple fronts, and questions from employees and stakeholders about what these rulings mean for their business.”
They also stress that employers should be prepared to explain how their diversity strategies align with legal and practical considerations and to confirm where their businesses stand.
In agreement is Tracey Levy of Levy Employment Law, who said that although EEOC Chair Burrows was technically correct that the court’s decision did not address employers’ DEI initiatives directly, “certain pronouncements and key portions of the court’s rationale in the university cases suggest future obstacles for employers that continue to forge ahead with a panoply of DEI programs.”
Future Obstacles for Employers
Along with some other attorneys, Levy makes the point that the Supreme Court decision is only the most recent in a series of rulings by the nation’s courts that should serve as warning signs for employers who for whatever reason adopted affirmative action and other DEI policies. For example, she notes that the high court “never has blessed employers taking race-conscious employment actions based on interests in workforce diversity” in ways that would have been similar to what has taken place in the academic arena.
In addition, some employers offer programs like internships targeted only for specific racial minorities under the premise that this will help them introduce opportunities to minority candidates. If a benefit provided to some individuals but not others in the academic admissions context is now viewed as necessarily advantaging “the former group at the expense of the latter,” there is reason to question whether the targeted internship programs will survive legal review, Levy says.
She believes DEI measures that appear to remain safe following the Supreme Court decision include those that are designed to broaden the pool of applicants beyond liaising with the traditional recruiting contacts; are used to reconsider the necessity of certain job qualifications that may unduly filter out more diverse candidates; assess whether the phrasing of job descriptions may disincentivize categories of potentially qualified individuals from applying; and standardize interview questions and put measures in place to reduce biased selections.
Morrison & Foerster attorneys Turnbull, Cohen and Schulman suggest that companies consider several measures to lessen the risk of potential challenges to other kinds of DEI programs.
• Review existing DEI efforts with an eye toward areas of vulnerability and confirm that the initiatives do not create unlawful preferences based on protected characteristics or include quotas or set asides. “Employers should consider including race-neutral factors, such as socioeconomic status, first-generation professionals and geographic diversity, which could help increase racial diversity in the workplace while mitigating the risk of potential challenges,” they suggest.
• Review DEI program materials for any statements that describe their companies’ practices in a manner that could be viewed as unlawful. The attorneys also note that in some cases, those suing employers have used statements in DEI policies and literature to support reverse discrimination claims.
• Be prepared to justify the importance of their existing DEI programs and how those programs are consistent with the law.
• Make sure that company leaders and managers are educated about the benefits and objectives of the DEI and affirmative action programs. “It will be important for managers to understand what DEI means and that they cannot give preferential treatment to underrepresented groups when making employment decisions,” the lawyers stress.
• Undertake a review of current diversity trainings, including unconscious bias training, considering recent legislation aimed at limiting DEI programs and trainings that might make their programs vulnerable to legal attack.
• Companies also should continue to monitor state and local laws and regulations aimed at limiting or requiring DEI efforts to ensure compliance with those laws.
Turnbull, Cohen and Schulman believe the Supreme Court majority’s reasoning could be used in the future to legally challenge workplace DEI programs in other lower court venues, pointing out that in the past, courts relied on precedents found in the college admissions context, citing them as persuasive authority for assessing reverse discrimination claims filed under antidiscrimination laws.
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