Invoking the First Amendment to defend initiatives aimed at boosting workplace diversity, equity, and inclusion (DEI) has the potential to set a precedent that may ultimately undermine other civil rights objectives.

Federal Appeals Court Ruling

In a recent legal development, the US Court of Appeals for the Eleventh Circuit rejected the First Amendment defense put forth by Fearless Fund Management LLC in a lawsuit challenging its grant contest for Black women entrepreneurs. The court ruled that the fund’s actions violated Section 1981 of the 1866 Civil Rights Act, which prohibits race discrimination in contracts, and fell outside the protections afforded by the First Amendment.

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Implications for Workplace Diversity Efforts

Despite the setback for DEI proponents, employment attorneys noted a potential upside for diversity efforts in workplaces. Lauren Parris Watts, a partner at Seyfarth Shaw LLP, emphasized the slippery slope of using the First Amendment as a defense for exclusionary programs. She warned that such a defense could be exploited by racist or anti-LGBTQ+ groups to justify discrimination.

The Creative Argument for First Amendment Defense

Ishan Bhabha, co-chair of Jenner & Block LLP’s DEI protection task force, expressed concern about the broader implications of upholding a First Amendment defense in this context. He pointed out that such defenses are typically reserved for expressive conduct closely tied to specific organizational actions, similar to symbolic speech.

Fearless Fund’s Position

Fearless Fund argued that its grant contest was a form of charitable giving protected as expressive conduct under the First Amendment, aimed at highlighting the significance of Black-women-owned businesses. However, the court rejected this argument, likening the grant process to discriminatory hiring practices.

Balancing Free Speech and Civil Rights

Defending diversity initiatives on First Amendment grounds is complex, as it involves balancing free speech with anti-discrimination laws. Derick Dailey of Crowell & Moring LLP highlighted this tension, noting the intricate interplay between these legal principles.

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Textualism and Legal Interpretations

The Fearless Fund case, like other challenges to DEI efforts, hinges on the interpretation of Reconstruction-era laws designed to dismantle racial barriers. Advocates argue that such initiatives are remedial measures to address systemic racial disparities. A textualist interpretation by the Supreme Court, focusing on the original meaning of Section 1981, could potentially support the legality of such grant programs.

Adjusting DEI Strategies

As courts scrutinize DEI initiatives more closely, employers must develop legally sound policies. Recent rulings, such as the Tenth Circuit’s dismissal of a lawsuit against Colorado’s DEI training program and the Fourth Circuit’s affirmation of a biased verdict in favor of a White male employee, underscore the importance of adhering to anti-discrimination laws.

Future of DEI Efforts

Investors and companies committed to DEI may need to refine their strategies to withstand legal challenges. This could involve removing explicit references to racial minorities from eligibility criteria while focusing on supporting diversity. However, the ongoing legal challenges may hinder corporate America’s efforts to promote inclusivity.

Parris Watts expressed concern that cases like the Fearless Fund ruling could deter corporations from supporting DEI initiatives, ultimately affecting the progress made in fostering diverse and inclusive work environments.

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In recent times, the discourse surrounding corporate diversity, equity, and inclusion (DEI) programs has escalated to unprecedented levels, resulting in a surge in demand for specialists in the field. This escalation has prompted various reactions from companies, ranging from scaling back or disbanding DEI initiatives to hastily reconfiguring policies to navigate potential legal challenges.

Increased Demand for DEI Specialists

Specialists have witnessed a significant uptick in inquiries from Fortune 500 companies since June. This surge follows a pivotal Supreme Court decision banning the use of race in university admissions, which has emboldened conservative activists to challenge diversity programs across corporate America.

A lawyer and DEI expert, reports receiving calls from potential clients every week, having presented to approximately 75 companies since the previous summer. He notes a remarkable escalation in interest, describing it as “exponential” with no foreseeable end in sight.

Legal and Consultancy Response

Law firms and consultancies specializing in workplace diversity have experienced a flurry of requests for audits and legal counsel from companies seeking to assess and potentially revise their DEI efforts. Jason Schwartz, overseeing a DEI task force at the law firm Gibson Dunn, highlights the substantial demand for services related to auditing DEI efforts, board diversity, and risk assessment.

Similarly, public relations professionals like Lindsay Singleton find themselves advising clients on communication strategies concerning DEI, as companies recognize the importance of transparent and legally sound messaging in navigating the current landscape.

Backlash and Legal Challenges

The intensifying backlash against DEI initiatives, fueled by conservative groups and influential figures like Bill Ackman and Elon Musk, has led to increased legal scrutiny. Companies are now grappling with the risk of litigation and the need to ensure compliance with evolving legal standards.

Uncertain Legislative Landscape

While the legal terrain remains uncertain, companies are exploring ways to continue their diversity efforts while minimizing legal risks. Despite challenges, many remain committed to fostering inclusive workplaces and are seeking innovative solutions to navigate the complexities of DEI initiatives.

Legal Implications and Future Trends

Legal experts caution that the Supreme Court’s decisions on affirmative action in university admissions could influence future rulings on corporate employment policies. Companies are advised to align their DEI programs with evolving legal standards and mitigate potential legal risks.

Conclusion

The evolving landscape of corporate DEI programs reflects the intersection of legal, social, and business considerations. As companies navigate this complex terrain, the demand for specialized expertise and strategic guidance continues to grow, underscoring the importance of proactive and informed approaches to diversity, equity, and inclusion in the workplace.

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Macy’s Inc. is the latest target of America First Legal (AFL), a conservative group led by former Trump adviser Stephen Miller. AFL alleges that the retail giant has implemented a racially discriminatory diversity plan, urging the US Equal Employment Opportunity Commission (EEOC) to investigate what they deem as “patently illegal” quotas. This move is part of AFL’s broader campaign against diversity, equity, and inclusion initiatives, claiming violations of Title VII of the 1964 Civil Rights Act.

The Allegations

AFL has sent nearly two dozen inquiries to the EEOC, questioning the diversity efforts of various high-profile companies, including NASCAR, Major League Baseball, Morgan Stanley, McDonald’s Corp., and Starbucks Corp. The group contends that these organizations’ diversity initiatives may run afoul of federal anti-discrimination laws.

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Macy’s Diversity Plan Scrutinized

Macy’s diversity plan, unveiled in 2019, outlines a five-point strategy to achieve greater ethnic diversity by 2025, particularly at senior director levels and above, with a targeted goal of 30 percent. Additionally, the plan includes a year-long program to enhance leadership skills for a select group of managers and directors from diverse backgrounds. AFL argues that Macy’s has further entrenched these policies, potentially violating federal law, as evident in its 2022 “Diversity, Equity and Inclusion Annual Report.”

AFL’s Response and Legal Action

Citing the recent US Supreme Court decision limiting race-conscious admissions policies in higher education, AFL has intensified its legal challenges against corporate diversity efforts. In a letter to the EEOC, the group has urged commissioners to exercise discretionary powers by filing a “commissioner charge” against Macy’s. Although relatively uncommon, commissioner charges can be initiated by any of the five members of the agency’s leadership panel, bypassing the need for employees or applicants to submit a discrimination charge.

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Unusual Rise in Commissioner Charges

While commissioner charges remain rare, there has been a noticeable increase, with 29 filed in fiscal year 2022, a significant jump from the three filed in the previous year. This trend aligns with AFL’s strategy to leverage legal avenues against what they perceive as overreaching diversity measures.

Allegations against Macy’s Board of Directors

In addition to the EEOC complaint, AFL has sent a letter to Macy’s board of directors and chairman, accusing the retailer’s diversity efforts of posing a threat to company assets, institutional disregard for federal civil rights laws, and breaches of fiduciary duty. This multifaceted approach underscores AFL’s commitment to challenging what it sees as improper and potentially unlawful diversity practices in corporate America.

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Conservative Group Drops Lawsuit After Changes to Diversity Criteria

To fend off legal challenges, companies with racial diversity and inclusion programs have been revising their eligibility criteria. This approach recently proved effective when the American Alliance for Equal Rights, led by conservative activist Edward Blum, dropped its discrimination lawsuit against Morrison & Foerster LLP. The law firm removed the term “underrepresented groups” from its diversity program criteria. Similar changes have been made by firms facing legal action, including Gibson, Dunn & Crutcher LLP and Perkins Coie LLP.

Pfizer Inc. also adopted this strategy when facing a discrimination lawsuit from the activist group Do No Harm. The company revised its Breakthrough Fellowship criteria, allowing applicants to apply “regardless of whether” they belong to specific minority groups. During oral arguments on October 3rd, federal appeals court judges in New York suggested that the lawsuit against Pfizer might become moot due to these language changes.

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Navigating Legal Challenges for Corporate DEI Programs

Companies have been seeking ways to protect their diversity, equity, and inclusion (DEI) programs from lawsuits under Title VII of the Civil Rights Act of 1964 and Section 1981 of the 1866 Civil Rights Act. This has become particularly crucial since the U.S. Supreme Court decided to strike down affirmative action in college admissions. Employment attorneys and professors believe this ruling has opened the door to additional litigation, focusing on discrimination against non-marginalized groups, including White men.

Ann McGinley, an employment law professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas, stated, “It’s a very odd place to be, to be in corporate America and trying to do something that they think is the right thing, and yet being worried about whether that’s legal or not.”

Changing Eligibility Language

Following legal challenges, Morrison & Foerster modified the language of its Keith Wetmore Fellowship for Excellence, Diversity, and Inclusion. The program previously specified that it was for first-year law students “who are members of historically underrepresented groups in the legal industry.” It now seeks students with a “demonstrated commitment to diversity and inclusion in the legal profession.”

The lawsuit against the firm was dropped, with the understanding that Morrison & Foerster would not revert to its previous eligibility language and would not require fellowship applicants to disclose their race. This stipulation was made in the U.S. District Court for the Southern District of Florida.

Eric T. McCrath, chair of Morrison & Foerster, expressed satisfaction with the decision, stating, “We are pleased by the AAER’s decision not to pursue a meritless case.”

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Strategic Implications for Companies Facing Legal Challenges

Attorney Adam Herzog of Katz Banks Kumin LLP suggested that Morrison Foerster and Perkins Coie were specifically targeted due to their explicit eligibility criteria naming certain groups. Such specific language is uncommon, as eligibility requirements usually refer to broader categories like “historically underrepresented groups.”

Modifying their DEI programs’ language may allow Perkins Coie and Pfizer to have the cases against them dismissed. The American Alliance for Equal Rights had sought a permanent injunction requiring these firms to establish “strictly race-neutral” eligibility requirements for their programs.

Companies facing similar allegations will likely follow suit by making language changes and arguing that the complaint is now moot because there is “no longer an injury that a lawsuit can remedy,” according to Herzog.

Judge Dennis Jacobs of the U.S. Court of Appeals for the Second Circuit pointed out during oral arguments in the Pfizer case that nothing is now preventing non-minority members of Do No Harm from applying to the fellowship following the company’s wording change. Judge Beth Robinson described arguing for mootness based on language changes as the “logical play” for Pfizer in the litigation.

Nevertheless, this argument has yet to be tested in court, and McGinley expressed skepticism, stating, “I would be very surprised that a court would find that to be moot because they could turn around and change it.”

As of now, representatives for Pfizer have not responded to requests for comment regarding the language changes and the ongoing lawsuit.

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