DEI Under Fire? How Corporations Can Make DEI Work Amidst Legal Backlash.

by Katherine Jafroodi

In October 2023, the American Alliance for Equal Rights filed a lawsuit against Morrison & Foerster and Perkins Coie for their DEI fellowships’ eligibility requirements. The organization, led by Ed Blum, questioned the eligibility criteria of these fellowships as discriminatory against applicants who were not members of underrepresented groups. Following the law firms’ removal of race-based eligibility requirements, the cases were dropped.

These are far from the only lawsuits filed against companies’ DEI efforts. The 2023 Supreme Court decision banning affirmative action in higher education energized conservative groups like Ed Blum’s American Alliance for Equal Rights, Stephen Miller’s American First Legal (AFL), and the American Civil Rights Project. 

For instance, the grant-giving organizations Hello Alice and Fearless Fund were also recently sued by AFL and Blum’s group respectively for prioritizing the allocation of funds to Black-owned companies. Both cases are still ongoing with the most recent updates including Hello Alice filing to dismiss their suit and Fearless Fund challenging the current court order prohibiting them from awarding grants exclusively to Black women.

Affirmative Action in Higher Ed

In the wake of Students for Fair Admissions (SFFA) v. Harvard and Students for Fair Admissions (SFFA)  v. UNC, affirmative action in employment is a hot spot of debate. In this lawsuit, the U.S. Supreme Court determined that the use of race in university admissions decisions violates the Equal Protection Clause of the Fourteenth Amendment. However, while affirmative action in college admissions has been deemed unlawful, companies can still employ it in their management practices (and it is sometimes required, under certain provisions).

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, and national origin, but mandatory affirmative action is only required for federal contractors and subcontractors. All other companies have the choice to engage in voluntary initiatives. Unlike the now-ended affirmative action process in college and university admissions, businesses practice affirmative action through efforts such as training programs, equal pay provisions, and expanded outreach efforts.

Nevertheless, following Students for Fair Admissions, businesses are concerned about the legality of and possible backlash towards these programs. The Equal Employment Opportunity Commission (EEOC) has responded to these concerns with the following statement, “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.” The lawsuits filed by conservative groups, however, aren’t easing companies’ minds and DEI efforts are suffering.

The DEI Landscape

The trajectory of Affirmative Action and DEI efforts in the corporate world has experienced notable shifts in recent years. Pharmaceutical company Pfizer removed the race-based eligibility requirements for a fellowship program aimed at supporting Black, Latino, and Native American students. Comcast opened its grant program intended for women and people of color to all business owners regardless of background.

These are not ad hoc examples. DEI Consulting company Paradigm reports an overall decrease in companies with budgets dedicated to DEI, companies with DEI strategies, companies with active DEI programs, and companies that collect employee feedback on DEI efforts. In 2023, news sources reported declines in DEI job postings across major recruitment platforms that range between a 18% decrease on Indeed to a 63% decrease on Zip Recruiter.

Far beyond the past year, the landscape of diversity initiatives has been volatile. After the heightened public awareness and outcry caused by the murder of George Floyd in 2020, there was a substantial expansion in DEI efforts and programs, more jobs in this space, and a global market valuation for DEI initiatives of $7.5 billion. 

 While some of the 2023 decline in DEI efforts may be attributed to natural market trends following the momentum gained in the 2020 DEI boom, external factors such as the Supreme Court’s recent ruling and subsequent conservative lawsuits may affect the sustainability of private companies’ DEI efforts, leaving underrepresented groups vulnerable to hiring barriers, implicit bias, and limited career mobility and raising concerns about the potential loss of social and economic benefits in the workplace.

Why is DEI Important?

The loss of DEI efforts affects everybody because DEI initiatives bring tangible economic benefits. According to McKinsey & Company, companies with greater gender and ethnic representation are more likely to financially outperform the industry average. Additionally, they found that companies with more culturally and ethnically diverse executive teams are 36% more likely to see higher-than-average profits. 

Research indicates that companies with diverse teams experience higher levels of employee satisfaction and that promoting DEI makes employees feel safe and creates a stronger sense of community. One survey revealed that 78% of respondents would not consider working for a company that does not commit significant resources to DEI.

With diverse leaders and employees providing more perspectives, companies innovate at faster rates, fuel new product development, and generate opportunity. Embracing diverse perspectives enables companies to understand and connect with a wider audience of consumers.

Still with DEI and affirmative action under fire, companies are left to navigate this increasingly hostile environment while maintaining the benefits of upholding their DEI practices. The Harvard Business Review recommends to “avoid preferences, avoid protected groups, or avoid palpable benefits,” and many organizations are following by: 

(1) Using open and structured hiring processes to level the recruitment experience for everyone.

DigitalOcean prioritizes transparency for candidates and walks them through every step of the hiring process. At each stage, candidates are provided resources for preparation, explanations of the evaluation process, and answers to frequently asked questions. While this experience was developed by DigitalOcean to establish trust and value between the company and candidates, this strategy also breaks down many hiring barriers that are the focus of DEI efforts. By giving every candidate a fair understanding of the hiring process and what the company is evaluating them on, the recruitment experience shifts towards being level for all candidates. 

(2) Opening participation in DEI programs to employees of all demographics.

By opening DEI programs participation to all employees dedicated to the content of the program, companies can avoid lawsuits founded on identity-based program qualifications. Recently, one company that opened participation in their DEI program to all demographics is Perkins Coie in response to lawsuits raised against its fellowship program.

(3) Considering identity only when it speaks to one’s character.

To avoid backlash for employment or promotion decisions based on identity, employers can invite candidates to speak about how aspects of their identity have affected their lives and allowed them to develop certain leadership qualities. Gibson Dunn utilized this strategy to avoid a lawsuit based on the eligibility criteria for its diversity scholarships. Previously, the scholarship was limited to students who identified with an underrepresented group. However, Gibson Dunn has changed their criteria to include any student who has demonstrated resilience and excellence during their path toward a career in law.  This strategy was mentioned in the SFFA case as the Supreme Court pointed out that universities were still allowed to consider how a student’s race impacted their life for admission decisions.

(4) Creating programs that build a diverse and inclusive workspace without directly providing individualized benefits to certain workers.

Instead of creating DEI programs to provide specific employment opportunities or benefits to individual workers, employers can instead develop DEI programs that work to create a more diverse and inclusive work environment. For example, ADP focused on unconscious bias awareness, implementing fair and equal hiring practices, fostering under-represented talent, hosting diverse slates and panels, and ensuring pay equity. Through these efforts, ADP is working to create a safe environment for employees of all identities without providing preferences to specific employees.

(5) Focusing on Meaningful Inclusion

Meaningful inclusion is the practice of engaging diverse leaders in their areas of power and expertise rather than on their demographic characteristics. The objective is to develop trust and respectful relationships, grounded in professional interactions that enhance business resilience through interaction based upon ideas concerning critical business objectives that matter. NxtWork’s unique focus on meaningful engagement can provide a solution to continuing progress in corporate diversity despite current legal challenges. 

As the landscape of affirmative action and DEI efforts shift in the corporate world, organizations must navigate these changes thoughtfully. By adjusting certain DEI practices and adopting strategies that promote transparency and inclusivity, businesses can uphold their previous DEI standards while mitigating potential liabilities. This allows businesses and employees to experience the benefits of DEI and foster a workspace that is diverse, equitable, and innovative without concern for legal repercussions.