This summer the US Supreme Court will rule on the legality of using race as an affirmative action measure in admissions at Harvard and at the University of North Carolina. The legal framework for evaluating affirmative action programs in higher education is definitively different than for inclusion, diversity and equity (ID&E) programs in the employment context. Notwithstanding this distinction, the decision will signal how courts review workplace ID&E practices and policies, and may encourage legal challenges regarding the same.
The timing of this case coincides with a growing trend of state and local legislation seeking to restrict workplace ID&E efforts, increasing claims of reverse discrimination, continued shareholder action in the ID&E space, including some actions challenging the devotion of resources to ID&E as not in the interest of shareholders, and attacks on laws mandating diversity on corporate boards.
In 2014, Students for Fair Admissions (a nonprofit group of “students, parents and others who believe that racial classifications and preferences in college admissions are unfair, unnecessary, and unconstitutional”) sued both Harvard and UNC in federal court alleging that race-conscious admissions programs are unlawful. Both universities won at the trial court level. Now, SFFA has asked the Supreme Court to overrule its prior decisions and hold that the consideration of race as part of a holistic college admissions process in order to achieve a diverse student body violates Title VI of the Civil Rights Act of 1964 and the Equal Protection Clause of the Fourteenth Amendment to the US Constitution.
During oral argument last October, commentators noted that the Court’s conservative justices, who hold a 6-3 majority, expressed skepticism about the role of race in admissions, leading to predictions that the Court will rule against the schools. Such a decision would overrule long-standing precedent (see Grutter v. Bollinger) that said race could be used as one factor among many in evaluating applicants.
Backlash & the Complex Landscape for Corporate Diversity
Companies are increasingly having to navigate piecemeal legislation and measures aimed at limiting certain ID&E policies, trainings, and practices. For example:
- Effective July 2022, Florida’s Individual Freedom Act (IFA), or the so-called “Stop-WOKE” law, restricted diversity-related training in private workplaces and also barred the teaching of critical race theory in K-12 schools and universities. However, much of that law has been blocked in court and is awaiting a hearing from the US Court of Appeals for the Eleventh Circuit.
- In February 2023, Texas Governor Abbott issued a memorandum to state agencies warning them not to use any DEI programs in hiring that are “inconsistent” with Texas law, including setting diversity goals or interview targets for diverse candidates. While this memorandum is aimed at public employers, it is unclear whether the Governor may take similar action towards private employers in the state.
- In March 2023, a Montana lawmaker introduced legislation seeking to prohibit diversity, equity and inclusion training as a condition of state employment if the training is aimed at having the employee believe that a group of people are responsible for “and must feel guilt, anguish, or other forms of psychological distress,” for historical injustices.
While contending with new restrictions, there’s also an uptick in cases challenging diversity programs and alleging reverse discrimination. We are seeing increased activity from conservative advocacy groups filing lawsuits, requesting agency investigations and pursuing other complaints. Some of the allegations are founded on seemingly innocuous public statements from companies committing to advance social and racial justice. Similarly, there is an uptick in shareholder activity that is targeted at challenging the use of company resources on ID&E initiatives as not in interest of shareholders.
This backlash is also evident in the lawsuits challenging laws requiring board diversity. This week, a California federal court judge struck down Assembly Bill 979. This law requires boards of public companies headquartered in California to include at least one to three members of underrepresented groups or face a fine. (More details on the law here.) The court found that AB 979 constituted an impermissible racial quota violating the equal protection clause of the Fourteenth Amendment. (The fate of California’s gender diversity legislation for boards is unresolved. The legislation was struck down in state court and the decisions are under appeal.)
On the other hand, complicating matters, there is also a growing number of lawsuits (from employees and investors) accusing major companies that prioritized diversity, equity and inclusion initiatives in recent years of falling short on their promises.
Walking the ID&E tightrope is undoubtedly important, but it is also a space that is nuanced and not without risk. We recommend partnering with counsel to ensure ID&E programs are structured appropriately to reach intended goals and operate within legal parameters.
- Keep an eye out for the Supreme Court’s decision in the coming weeks
- Anticipate a potential increase in challenges to ID&E programs
- Work with counsel to evaluate whether current policies and programs created to advance ID&E goals could be interpreted as imposing gender- or race-based quotas
- Work with counsel to evaluate whether current policies and programs created to advance ID&E goals are race and/or gender exclusive (i.e., only offered to particular members of the workforce)
- Align company messaging (bring together diversity professionals, legal and the company’s communications leads); review all communications about ID&E programs, including promotional materials, with an eye towards areas of vulnerability
- Build your narrative; document evidence that increased diversity and inclusion can improve business results (see McKinsey’s Diversity wins: How inclusion matters)
We are advising US multinationals on ID&E best practices both at home and abroad, as well as defending clients in high stakes litigation in this area as well. Contact a member of our team for more.