U.S. Organizations Debate How to Comply to New DEI Guidelines and Restrictions
Many U.S. private organizations, nongovernmental organizations (NGOs), and contractors have been scrambling to interpret and comply with a flurry of executive orders and directives from the new Trump Administration, especially when it comes to diversity, equity, and inclusion (DEI) initiatives.
There are two major executive orders (EOs) in question here: “Ending Radical and Wasteful Government DEI Programs and Preferencing” (20 January) and “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (21 January). While the first focuses on government diversity efforts, the second turns to private sector activities.
The 20 January EO directs each federal agency to eliminate all federal DEI and “environmental justice” offices and positions; equity action plans developed during the Biden administration; equity actions, initiatives, or programs; equity-related grants or contracts; and all DEI performance requirements for employees, contactors, or grantees.
This has already had notable impacts in the United States. Federally, the Overseas Security Advisory Council (OSAC) at the U.S. State Department dismantled its Global Security Pride and Women in Security common interest committees on 20 January, and other federal agencies’ webpages about diversity were promptly taken down.
The 21 January EO turns toward private-sector DEI activities. While the EO starts by asserting the Trump administration’s dedication to enforcing federal civil rights laws that protect Americans from discrimination based on race, color, religion, sex, or national origin, it argues that DEI practices can violate those civil rights laws. Private organizations including Target, Meta, Amazon, and McDonald’s announced this month that they were ending some of their diversity practices or closing down DEI programs.
The EO says that “illegal” DEI policies “not only violate the text and spirit of our longstanding Federal civil-rights laws, they also undermine our national unity, as they deny, discredit, and undermine the traditional American values of hard work, excellence, and individual achievement in favor of an unlawful, corrosive, and pernicious identity-based spoils system.”
The EO rescinds Executive Order 11246, which was signed by U.S. President Lyndon B. Johnson in 1965 to incorporate civil rights priorities into the federal contracting process. The order required that every government contract include a statement asserting that the contractor would not discriminate against employees or applicants because of their race, creed, color, or national origin. EO 11246 required federal contractors and subcontractors to collect applicant and employee demographic data, conduct regular analyses of employment practices for disparate impacts, and engage in outreach efforts to try and eliminate impediments to equal employment opportunities for women and for racial and ethnic minorities, according to analysis from Pillsbury Law.
Section 4 of the 21 January EO, “Encouraging the Private Sector to End Illegal DEI Discrimination and Preferences,” empowers the heads of government agencies to take action to eliminate “illegal” DEI initiatives in the private sector.
The section also floats the idea of having the U.S. attorney general and federal agencies “identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of $500 million or more, state and local bar and medical associations, and institutions of higher education with endowments over $1 billion” that are allegedly practicing “illegal” DEI activities and recommend litigation against those organizations.
But what constitutes “illegal” DEI programs? This is up for debate. The EO does not ban or prohibit all private employer DEI programs (the executive branch does not have the authority to do so without an act of Congress), but the threshold for illegal vs. permissible programs can feel murky.
The National Law Review walked through recent EOs on 27 January.
“The broad language of this order has prompted concern among private employers about the legitimacy and sustainability of their DEI programs—likely an intended result of the order,” according to the review. “Yet, the order does not and cannot make lawful programs unlawful. Well-conceived DEI programs do not discriminate by virtue of those programs. Instead, those programs operate to create a more fulsome collection of qualified job candidates and to build professional communities focused on collective success and individual opportunity. Such programs do not (and indeed may not) create ‘illegal preferences.’ The Civil Rights Act of 1964 makes it unlawful to discriminate against anyone (including white people) on the basis of their race or other protected characteristics; this has been the law throughout the growth of DEI initiatives. Job decisions must be made for legitimate, non-discriminatory reasons. As long as an employer does that, it may continue its DEI efforts.”
According to guidance from law firm Husch Blackwell, “The relevant caselaw suggests that if a private employer sets explicit hiring quotas, articulates a preference for specific demographics such as women or people of color, or makes employment decisions based in whole or in part on an employee’s race, gender, or identity status, it risks violating Title VII of the Civil Rights Act of 1964. Our assessment is that this risk is now elevated in light of the January 21 EO.
“By contrast, the vast majority of DEI programs and policies currently utilized by most employers—which include employee resource groups, optional DEI and bias trainings, and strategies for diversifying candidate pools for recruiting purposes—would appear to fall well outside the definition of ‘illegal’ practices under existing law,” the analysis continued.
Unlawful practices would be quotas, setting aside positions for someone of a particular demographic, or preferences (giving a “plus” to a woman or person of color when choosing between candidates, even if the plus is given to break a tie), according to analysis from SHRM. Other practices might not be unlawful but carry higher legal risk, such as setting aspirational goals related to DEI and linking an employee’s pay to the achievement of those goals.
SHRM said that “employers should make sure their initiatives are not being used as a proxy for hiring or promoting minorities or women without regard to merit.”
Anthony Haller, an attorney with Blank Rome in Philadelphia, told SHRM that, “Diversity should be defined broadly to include, for instance, first-generation college graduates, persons with disabilities, veterans, disadvantaged backgrounds, and other categories that cut across racial and gender lines.”
Although the 21 January EO currently focuses on large organizations, smaller companies will not be exempt, and the risk will trickle down, warned an attorney interviewed by SHRM.
SHRM’s president of CEO Action for Inclusion and Diversity, Anuradha Hebbar, suggested that “all private companies evaluate their inclusion and diversity initiatives to ensure they provide equal access to opportunities, skills development, and do not give special advantages to one person or group over another, avoiding any perception of identity-based favoritism. They should also review their initiatives to determine whether they foster inclusivity or inclusive workplace cultures.”
Although diversity initiatives are being targeted in the EO, inclusion—making sure every employee is given the necessary support and tools to achieve their performance goals, perform at their highest levels, and bring their whole selves to work—is the hallmark of a nondiscriminatory policy, SHRM reported.
So, what should you do now? A number of law firms provided lists of where to start. Here’s a summary:
- Decide on your DEI stance. “Each company and organization will need to decide based on their circumstances, priorities, and risk tolerances whether to adopt a wait-and-see approach, or to double down on the organization’s commitment to the values of DEI in statements to customers, members, employees, or other stakeholders, or to eliminate or reduce some of their DEI-related activities,” said Pillsbury.
- Conduct audits. Conduct thorough and organization-wide audits to evaluate all internal and external DEI initiatives, from hiring to supplier diversity requirements to social change programs. Evaluate whether they include any elements that could be considered out of compliance with antidiscrimination laws. Pay special attention to anything that could be considered a quota or preferential treatment based on demographics.
- Use a broad definition of diversity. Consider diversity in terms of a wide variety of characteristics beyond race and gender, including age, veteran status, and life experience, Husch Blackwell advises.
- Support employee engagement. Consider mentorship programs and other groups that are open to all employees and support resource groups that are consistent with state and federal law.
- Voluntary training and awareness. Organizations should be able to “continue offering training on bias, anti-discrimination, and cultural competency, but avoid mandatory trainings where certain groups of employees are singled out as responsible for historical inequities,” according to Husch Blackwell.
- Prepare for inquiries. “Organizations may develop or refine their protocols for responding to external audits, inquiries, or subpoenas related to DEI initiatives,” according to Pillsbury. “Counsel and compliance teams should also consider providing targeted training for human resources, compliance, communications, and business leadership teams on how to adapt to this potentially heightened regulatory scrutiny.”
