Supreme Court ruling sparks diversity battle in big business.
A New Front in the Battle for Diversity
A new front has opened up in the battle over diversity as Republican officials target the corporate world and Democrats push back after the Supreme Court’s affirmative action ruling.
Earlier this year, the Supreme Court issued a ruling that effectively ended affirmative action in college admissions. Activists and GOP officials who long have disparaged the practice celebrated, and since have turned their sights on a new target — the diversity, equity, and inclusion programs and hiring practices of big businesses.
Implications for Corporate DEI Efforts
While the ruling in Students for Fair Admissions v. President and Fellows of Harvard College pertains directly to higher education and not the corporate world, it hasn’t stopped the judgment from opening up questions about corporate DEI efforts.
For instance, last month, a group of more than a dozen Republican attorneys general sent a letter to the country’s biggest corporations warning of legal consequences over race-based employment preferences.
The GOP state officials told the corporations that discrimination laws could apply even if hiring and promotion practices fall in the bucket of corporate diversity, equity, and inclusion initiatives, which have become popular in recent years. The signatories contend that some of the efforts to secure more minority employees in the workplace equate to a form of discrimination because it could lead to hiring and promotion decisions based on race.
Frank Cania, the president and founder of HR Compliance Experts, said that corporate boardrooms are likely looking at the ruling and push from the right and evaluating what is to come.
“There may be concerns at the corporate level about that ruling being expanded to private business,” Cania told the Washington Examiner. “You don’t know how things are going to morph in the future.”
Republican lawmakers at the federal level have also set their sights on corporate DEI practices in the wake of the affirmative action ruling. Last month, Sen. Tom Cotton (R-AR) sent a letter to the CEO of Target about its 2020 DEI goal to invest more money in black-owned businesses and increase black employees at the company by 20%.
“Though that case focused on colleges, the same principles and indeed the plain text of federal law also cover private employers,” Cotton said. “Target’s DEI program applies the same race-based criteria to job offers, promotions, and business partnerships, and is similarly prohibited under federal civil rights laws.”
Greg Hoff, associate counsel of the HR Policy Association, said that the affirmative action ruling doesn’t directly apply to corporate DEI initiatives because it deals with different laws and standards of review.
That is because the affirmative action case dealt with questions about Title VI, which prohibits discrimination on the basis of race, color, or national origin under any program or activity receiving federal financial assistance, while Title VII deals with employment discrimination.
“The courts have never allowed employers to do what they had been allowing higher education institutions to do for the last 40-plus years,” Hoff told the Washington Examiner. “It’s completely prohibited to use race or any sort of other protected characteristic in an employment decision with very, very few and very narrow exceptions that are not anything like what was at stake in the Supreme Court case.”
But while the ruling has no direct “legal” bearing on employer obligations under Title VII, Hoff said there will still be implications for HR teams and corporate boardrooms because of the ruling. He said there will be increased scrutiny on companies’ hiring practices and employer DEI initiatives.
And with the new Republican push against corporate DEI following the end of affirmative action, Democrats are already gearing up for a likely contentious fight that could spawn a flood of lawsuits.
House Financial Services Chairwoman Maxine Waters (D-CA) responded to the Republican letter with her own warning to the chief executives of the companies. In the letter to the CEOs of the nation’s Fortune 100 financial services companies, Waters warned them to continue their corporate DEI efforts despite Republican pressure.
“Though America has seen some progress in ensuring that America’s workforce is as diverse as the American people, we must not overlook historical context and ongoing systemic bias that necessitates diversity and inclusion practices,” she said. “The recent Supreme Court decision on affirmative action in college admissions should not be used as a basis to attack workplace diversity initiatives.”
Cania said that, at the very least, there will be a pause in corporate America amid the flurry of attention that DEI initiatives are receiving following the affirmative action ruling.
He told the Washington Examiner that there has been an increase in litigation of so-called reverse discrimination, and he said that he thinks this ruling, right or wrong, “may increase or at least embolden plaintiffs’ attorneys to go after those types of cases even more now.”
DEI Programs and Corporate Downsizing
DEI in the corporate world has grown massively in popularity over the past few years. Cania noted that the growth really took off after the murder of George Floyd back in mid-2020. But he pointed out that according to recent statistics about corporate downsizing, DEI employees make up a high percentage of the workers that are now being cut back.
A study of more than 600 companies by data firm Revelio Labs found that attrition rates for DEI roles have outpaced those of non-DEI roles for the past three years or so, with the trend accelerating heading into 2023.
“I don’t know what’s behind that, but it’s clear that companies are cutting back on their DEI programs by cutting back on their people,” Cania said.
The Intersection of DEI and ESG
The DEI trend ties into a broader embrace of environmental, social, and government principles, or ESG, which has grown in popularity in the corporate world. The ESG movement centers on compelling social change through investment and divestment. It is a corporate model that doesn’t solely look at maximizing profit but also incorporates other elements into financial decisions — for instance, how an investment might affect fossil fuel emissions.
Potential Lawsuits and Reputational Damage
Hoff said that employers might face lawsuits over their DEI initiatives, and even if they win the lawsuit, there might be some sort of reputational damage just from the fact that they were sued over their DEI program.
“If you’re an employer, the risk calculus becomes how much are we willing to take on the reputational side, do we need to change anything to make sure we’re still in compliance with Title VII, etc.,” he said.
Hoff said that a lot of the same interest groups that worked to overturn affirmative action in higher education are going to turn their attention to employment and the corporate world.
“Whether that’s right or wrong is not for me to say … so if you’re an employer, the risk is not that your legal obligations have changed if your practices are already in compliance with Title VII, that has not changed,” he said. “But regardless, the risk is coming from this sort of increased risk of litigation by some of these groups of individuals who would like to go after DEI in the corporate context.”
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