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Corporate Talent & Inclusion

Key ways to minimize legal risk in the wake of anti-DEI action

Natalie Runyon  Director / ESG content & Advisory Services / Thomson Reuters Institute

· 5 minute read

Natalie Runyon  Director / ESG content & Advisory Services / Thomson Reuters Institute

· 5 minute read

Recent actions coming from the nation's highest court may leave many corporations wondering whether their efforts at improving diversity, equity & inclusion (DEI) in their workplace will be undone

Last summer, the U.S. Supreme Court effectively prevented college and universities from using race as a factor during the admissions process, finding that it violates the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964. The decision does not impact workplace diversity, equity & inclusion (DEI) efforts directly, however, because employment discrimination issues are governed by a separate law — Title VII of the Civil Rights Act of 1964.

Nonetheless, the decision suggests that the Court has adopted a “color blind” approach to race discrimination issues, according to David Glasgow, Executive Director of the Meltzer Center for Diversity, Inclusion, and Belonging at NYU’s School of Law. With the Court’s decision, there is a “legitimate fear that in a future case the U.S. Supreme Court will extend the same logic over to employment discrimination and prevent companies from taking into account race, sex, national origin, or other protected characteristics when making employment decisions, even when trying to correct for a large imbalance in their workforce,” Glasgow explains.

Further, legal action likely will continue to be used as a mechanism to thwart and disincentivize company’s DEI programs. As a result, Glasgow recommends that organizations do the following:

      • Shift from cohorts to concerns — Rather than limiting programs to members of a particular cohort or identity, programs should be made available to anyone who is concerned about that particular topic, Glasgow says. For example, under a law firm diversity fellowship program, a white man with a demonstrated commitment to DEI issues could also can apply for the program.
      • Conduct a self-audit in partnership with legal counsel — Organizations should analyze the level of risk in every DEI activity by using a traffic light High-risk programs would be labelled with red and less risky programs labelled with green, to identify explicitly those initiatives which give preference to members of a protected group under the law. For instance, a company using a diverse identity of a candidate as a tiebreaker in promotion decisions would land that company in the red category.
      • De-bias talent systems — One example of de-biasing a hiring system is to use structured interviewing, which ensures that all candidates meet the required qualifications, that common questions in the same order are being asked of all candidates, and that the scoring system for candidates is based on merit.
      • Continue executing inclusion and belonging programs — Glasgow advocates for the continuation of cultural initiatives that benefit every single person. “Some DEI programs benefit everyone in the workplace — even those who belong to historically dominant or majority groups at work — such as an allyship program or a program centered on authenticity or psychology safety.” Glasgow says. “There is nothing illegal about them because they are not offering a preference to any particular group.”

How to handle DEI initiatives with some risk

Under the law, plaintiffs need to show they suffered an “adverse employment action” in order for discrimination to occur; and according to Glasgow, a lot of DEI work does not meet that threshold because it does not affect specific people in their employment. Rather, it’s aimed at creating a more diverse and inclusive culture throughout the organization.

Still, getting sued for a regular discrimination claim from someone who belongs to an underrepresented identity in the workplace is still more common than a reverse discrimination claim from a white person. Glasgow warns against abandoning DEI initiatives that help to make those from underrepresented backgrounds feel more welcome or offer more opportunities to succeed in the workplace, because doing so could create an environment that is more hostile and unwelcoming to people who belong to these marginalized groups.

Also, doing so could open the company to legal risks. For example, eliminating mentorship or sponsorship initiatives that were helping more women advance through your organization might lead to a more homogeneous leadership team, which could lead to a risk of being sued under disparate impact theory, says Glasgow.

Guidance for navigating political risks

Navigating the political risks of maintaining DEI investments is not going away any time soon. This is why companies should continue to communicate why DEI is important to their core values, especially if a company views DEI initiatives as critical for its long-term business strategy.

Amid an tight labor market, a company’s ability to reach out to the next generation of talent in order to meet the company’s future strategy and to align the values of future leaders with the company’s are key points to emphasize with all stakeholders.

In determining whether or not a company should take a position on an external issue, corporate governance expert Leo Strine — currently Of Counsel in the Corporate Department at Wachtell, Lipton, Rosen & Katz, and formerly Chief Justice of the Delaware Supreme Court — advocates for companies to ensure there is a “deliberative process of the board of directors based on the direct relevance of the policy question to the company.”

Indeed, the full board “should have to weigh and bear responsibility for any corporate position,” Strine writes, adding that it “should also be clear that no employee or customer is expected to share that belief and that all people of good faith are welcome to work for and patronize the company.”

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