DEI's New Legal Landscape and How Employers Can Respond

Authors: Natasha K.A. Wiebusch, and Emily Scace, Brightmine Legal Editor

January 5, 2024

June 2023 saw the end of yet another longstanding legal precedent in the storied history of our nation's highest court. In a split decision, the Supreme Court abruptly terminated more than half a century of affirmative action policy in the college admissions process in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College.

The decision focused on higher education, however, as predicted in our previous coverage, its impact did not stop at campus boundaries. The private sector is now seeing a new generation of lawsuits and legislation aimed at blocking diversity, equity and inclusion (DEI) efforts.

As a result, corporate DEI has reached an inflection point. To recommit to DEI, employers must now search for not only strategic opportunities, but also compliance landmines. The real question is, how?

It's Not All Bluffing and Bravado

Since the Harvard decision, legislators like Tom Cotton have threatened private sector employers over their DEI programs. Because the decision does not formally create new limitations for employer programs, many thought these threats were more or less empty.

In reality, the decision has reinvigorated anti-DEI efforts in ways that have already impacted private employers. To navigate this new environment, employers should be aware of key litigation and other compliance issues.

DEI Program Litigation   

The most active arena for anti-DEI efforts remains in the courts. Both leading up to and following the Harvard decision, various anti-DEI groups filed lawsuits against private sector employers alleging certain DEI programs violated Title VII, the Constitution and other relevant laws.

The following table lists current notable lawsuits employers should be aware of:

Notable Pending Lawsuits*

Case Name	Jurisdiction	Summary
Am. Alliance for Equal Rights v. Fearless Fund Mgmt.	Northern District of Georgia (on appeal with the 11th Circuit)	A Black women-owned venture capital firm has a charitable program that provides grants to Black female entrepreneurs. The issue is whether the program, by providing grants only to Black women, violates Section 1981 of the Civil Rights Act of 1866.
Rogers v. Compass Group USA, Inc.	Southern District of California	Employee was terminated after requesting, as a religious accommodation, to not administer a diversity program in which only women and people of color could participate. The issue is whether the company violated Title VII and California Fair Employment and Housing Act, when it terminated the employee.
Harker v. Meta Platforms, Inc.	Southern District of New York	A Meta employee alleges Meta's diversity program for BIPOC candidates, Double the Line, violates Title VII and other civil rights laws. The employee also claims they were retaliated against after questioning the qualifications of a co-worker who was hired through the program.
Craig v. Target Corp.	Middle District of Florida (on appeal with the 11th Circuit)	Target's stock price plummeted after the company received significant backlash for LGBTQ+ themed merchandise. This securities fraud lawsuit accuses Target of making false and misleading statements about the company's ESG and DEI initiatives in their required disclosures to the Securities Exchange Commission. Specifically, the suit alleges that Target misstated its oversight of "social and political risks," which resulted in damage to the company's stock price.
Suhr v. Dietrich et al.	Eastern District of Wisconsin	The State Bar of Wisconsin funds a DEI clerkship program for first-year law students from "backgrounds that have been historically excluded from the legal field" with mandatory bar dues. A bar member alleges the program is unconstitutional, and that funding it with their mandatory dues violates their First Amendment rights.
Honeyfund.com Inc., et al. vs. Desantis et al.	Northern District of Florida	The Stop Wrongs to Our Kids and Employees (WOKE) Act prohibits private employers from covering certain DEI topics in employee trainings. The issue is whether the law violates the First Amendment.
*Status as of January 5, 2024

By watching this and other DEI litigation, employers can identify red flags, such as program criteria and accommodation requirements, and respond proactively.

Employers should also take note that in the case of DEI programs, many companies have fought back - successfully.

Most recently, a federal court dismissed a lawsuit challenging Pfizer's diversity fellowship program on the grounds that the plaintiffs lacked legal standing, as the plaintiffs would not name the individuals harmed by the fellowship's eligibility criteria.

Another set of lawsuits against legal giants Perkins Coie and Morrison Foerster for their DEI-focused fellowship programs were voluntarily dismissed after both firms adjusted the programs' eligibility requirements to allow all first-year students to apply.

EEOC: Proceed With Caution

Employers should also be aware of where the Equal Employment Opportunity Commission (EEOC) stands, as the majority of recent DEI program lawsuits allege violations of Title VII. At least three commissioners have made their positions known.

The day of the Harvard decision, EEOC Chair Charlotte A. Burrows released an official statement signaling the EEOC's position on the legality of DEI programs in the private sector.

In addition to emphasizing that the decision did not apply to employers, Commissioner Burrows stated, "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."

EEOC Vice Chair Jocelyn Samuels echoed Burrows' position, encouraging employers to maintain their commitment to DEI. She noted that being race-conscious does not inevitably lead to illegal race discrimination but encouraged employers to "start by embracing race-neutral DEIA measures." She also offered resources that identify examples of EEOC compliant race-neutral DEI practices.

EEOC Commissioner Andrea Lucas took a more cautionary approach, warning employers that "poorly structured voluntary diversity programs pose both legal and practical risks for companies." She reminded employers that courts have never supported employers "taking race-conscious employment actions based on interests in workforce diversity" and encouraged them to review their DEI programs to ensure legal compliance.

Commissioner Lucas also referenced Muldrow v. St. Louis, a case currently before the Supreme Court that could expand the meaning of "adverse action" under Title VII. According to Lucas, the outcome of the case "could have further ramifications" for corporate diversity programs and initiatives, such as:

• Scholarships for diverse candidates;
• Selecting interviewees partially due to diverse candidate slate policies; and
• Tying executive or employee compensation to the company achieving certain demographic targets.

State Legislation

Most legislative efforts to curb DEI programs and practices have been limited to the public sector and higher education. However, other states may venture further, as Florida has.

Florida's aggressive anti-DEI law, the Stop WOKE Act, has made headlines for attempting to prevent DEI initiatives in private businesses. More specifically, the law attempted to strictly limit what employers can cover in their employee training. These provisions are blocked by a preliminary injunction while the underlying lawsuit, brought by certain companies in Florida, is on appeal to the 11th Circuit Court of Appeals. Depending on the outcome of the appeal, employers may need to prepare for similar laws in other jurisdictions.

Employers should also monitor anti-DEI legislation regulating contracts with public entities such as House Bill 3399 in Texas, which would prevent public entities from contracting with a company that requires other companies to commit to meeting DEI or environmental standards in order to do business together.

Proactive Strategies for Employers

Renewed efforts to curb DEI in the workplace have given employers reasonable cause to worry, but it shouldn't deter continued promotion and investment in DEI. To do this while steering clear of legal pitfalls, employers should consider the following strategies:

1. Avoid Exclusivity Based on Protected Classes

Ensure that programs, policies and any other DEI initiatives do not exclude employees based on a protected class. For example, if the organization offers a mentorship program intended to promote equal opportunity, the program should not be exclusively available to any particular group.

Instead, employers may consider rephrasing eligibility requirements to emphasize an employee's experience with discrimination and oppression. While making changes, employers should consult with local counsel.

2. Leverage DEI Data

Leading organizations already leverage DEI data to enhance their DEI, people and business strategies. Now, during this time of heightened litigation, all employers - particularly public companies - should be prepared to show how DEI has improved their own company's business outcomes through concrete data.

Specifically, employers should be prepared to show that its DEI efforts have not resulted in illegal discrimination and have had a real and measurable positive impact on key performance indicators, such as retention, engagement, productivity, revenue and innovation. Leveraging DEI data in this way will not only protect the organization, but it will also promote transparency and enhance the company's DEI strategy.

3. Implement Holistic DEI Strategies

The most successful companies have implemented holistic DEI into their business in ways that go well beyond programs and training. Many of these holistic DEI strategies are low risk. They include, but are not limited to:

• Promoting employee development through internal support and education, formalized mentorship, tuition reimbursement and other educational assistance;
• Offering inclusive employee health benefits for transgender employees and LGBTQ+ families.
• Supporting caregiving employees with funding for caretakers, consultants, and onsite care;
• Creating a holistic well-being strategy that addresses all factors underlying Social Determinants of Health (SDoH); and
• Educating and advocating for psychological safety in the workplace.