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Corporate DEI Efforts Under Scrutiny After Supreme Court's Affirmative Action Ruling

S.J. Steinhardt
Published Date:
Oct 3, 2023


In the aftermath of the U.S. Supreme Court’s ruling in the case of Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, which struck down race-based admissions to colleges, many litigants aim to extend that ruling to include corporate diversity, equity and inclusion (DEI policies, The Washington Post reported.

Private employers were already barred from making race-based decisions, including set asides, under the 1964 Civil Rights Act. But legal precedent allows employers to take race into account, and some want to see these practices curtailed as well.

“Quite frankly, the most risky thing an employer can do is make any employment decision explicitly on the basis of race,” Stacy Hawkins, a law professor at Rutgers University and a former corporate employment lawyer who specializes in diversity, told the Post. “But you can be committed to diversity in your workplace and take steps that are informed by that commitment.”

After George Floyd’s murder in 2020, companies made $340 billion in commitments to improve racial equity between May 2020 and October 2022, according to data from the McKinsey Institute for Black Economic Mobility. But there have been challenges recently. Florida Gov. Ron DeSantis (R) has barred spending on DEI at public colleges and universities in his state. In July, 13, Republican attorneys general urged Microsoft and other Fortune 100 companies to reexamine their DEI policies in response to the Supreme Court ruling on affirmative action.

Companies use a range of approaches to enhancing diversity, but such efforts have always faced challenges since the 1964 law.

“The government does not tell people how to execute this,” Stephanie Creary, assistant professor of management at the Wharton School of the University of Pennsylvania, told the Post. Companies “have to figure out for themselves what that means and what practices they have to put into place.”

Recent DEI policies emerged from major racial discrimination lawsuits, she said, such as the 2000 case in which Coca-Cola agreed to a record $192 million settlement with Black employees who were paid less and received poor performance reviews.

In recent months, numerous lawsuits and decisions have challenged the legality of DEI policies and practices in the workplace. A few have been filed by the American Alliance for Equal Rights (AAER). One was against Fearless Fund, an Atlanta-based venture capital firm run by two Black women, alleging that the fund is engaging in racial discrimination by running a grant program exclusively for early-stage companies owned by Black women. Two others were against corporate law firms Morrison Foerster and Gibson, Dunn & Crutcher, arguing that their fellowships aimed at bolstering diversity amount to racial discrimination because they exclude nonminorities.

Morrison Foerster subsequently removed all references to race from online descriptions of the fellowship, opening the program to students of all backgrounds. Gibson Dunn then changed the criteria for its diversity and inclusion scholarship, which is now for students “who have demonstrated resilience and excellence on their path toward a career in law.”

Conservative nonprofit America First Legal has filed complaints against Kellogg’s, Nordstrom and Activision Blizzard, alleging that their diversity and inclusion policies constitute racial discrimination. Last month, a provision of a Small Business Administration (SBA) program designed to help historically disadvantaged groups to bid for government contracts was ruled unconstitutional by a federal judge, a ruling could portend trouble for other programs meant to help underrepresented groups win federal contracts, including veterans and women.

Alexis Robertson, director of DEI at law firm Foley & Lardner, told the Post that a misconception exists that these policies unfairly give preference to some groups over others, a claim advanced in many ongoing lawsuits. The purpose of DEI efforts is to “make workplaces that really work for everyone,” she said.

How the courts draw the line between diversity goals and quotas is also at issue.

“When I hear ‘quota,’ I hear a requirement,” Sheila Willis, co-chair of the affirmative action and federal contract compliance practice group at law firm Fisher Phillips, told the Post. “A ‘goal’ is something that’s more aspirational.”

In a proposed class-action lawsuit from former employers of newspaper publisher Gannett, white workers claim that they were unfairly terminated or passed over for opportunities and replaced with less-qualified minority candidates as Gannett attempted to increase the number of people of color in leadership roles by 30 percent by 2025. Gannett declined to discuss the suit but it issued a statement saying that it “always seeks to recruit and retain the most qualified individuals for all roles within the company."

In the wake of all these challenges, employers should be “vigilant and thoughtful” about the language used, not only in their explicit DEI policies and practices, but also in their formal and informal communication about them, Willis told the Post.

“Regardless of how noble corporations may be with their DEI goals, the legality of this is now under the microscope,” Leon Prieto, professor of management at Clayton State University, told the Post. “Because of the fear of litigation, they have no choice but to adapt.”

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