On June 29, 2023, the U.S. Supreme Court declared Harvard University's affirmative action program unconstitutional, sending shock waves across the nation into diversity, equity, and inclusion programs. Two months later, a federal judge ruled against Starbucks, following a nationwide uproar over the banning of two African-American men from Starbucks stores in white neighborhoods who claimed they were fired because of their race. He was ordered to pay manager Shannon Phillips $28 million. Philadelphia.
The one-two punch is enough to grab the attention of the director responsible for overseeing a company's DEI program. His DEI program, originally developed to reduce the risk of discrimination lawsuits, suddenly becomes a source of risk in itself?
As with all legal matters, the answer is “it depends.”
changing wind
“The law was unchanged on June 29 of last year,” says Ishan K. Baba, a partner at Jenner & Block and co-chair of the firm's DEI Protection Task Force. “However, there is no doubt that the environment has changed.” (For more information on DEI practices, see “Doing DEI Differently” on page 22.)
The Harvard case hinges on the Equal Protection Clause of the Fourteenth Amendment and Title VI, neither of which apply to most companies. However, Title VII, which prohibits employment discrimination, still applies. Conservative groups also removed Section 1981 of the Civil Rights Act of 1866, which allows them to sue companies over programs that favor one race over another.
Law firms and venture capital funds have already discontinued programs that directed hiring and investment to women and minority-owned candidates in the face of Section 1981 challenges. Large companies such as Gannett and AT&T are also facing lawsuits for firing white employees over their diversity efforts.
For example, the proposed class action lawsuit against Gannett cites the company's 2020 Inclusion Report, which states its goal of “achieving our nation's diversity and racial and gender equity through our workforce.” It is set. Executives were awarded bonuses and promotions based on their progress toward the DEI goals charged in the lawsuit. Gannett dismissed the complaint as containing “speculation and inconclusive allegations,” but the Harvard decision and widespread opposition to “woke” policies have led companies to seek more similar lawsuits. It is expected that this number will increase.
At the same time, companies still face the risk of legacy Title VII discrimination lawsuits if they do not pay attention to racial and gender disparities in their workforces. what will you do?
balancing act
“Those attacking DEI are trying to create a climate of fear,” Baba said. “But digging into the details and nuances of a particular program can give you the courage to move forward.”
First of all, Baba says that anything like a quota is trouble. The same goes for executive compensation systems that reward managers who achieve clear numerical targets. There may also be reputational risk. After a door panel on a Boeing jet exploded in January, critics were quick to point to a 2022 change to the company's executive bonus program that would put DEI in the “operational performance” category alongside “product safety.” Added. ”
Still, it is difficult to win a reverse discrimination lawsuit without solid evidence of intent. Starbucks plaintiffs showed jurors evidence that they were fired amid corporate panic over the incident at the Philadelphia store, but the black regional manager in charge of the store was not disciplined. It also didn't help that another manager testified that he agreed that race played a role in the firing.
Given the risks, some companies may take a more cautious approach to DEI. “I understand that, but that doesn't move the needle,” Baba says. In that case, the question is how to balance the importance of diversity in the workplace with the economic risks.
“Not all companies have the same risk profile,” he says. “Some might say this mission is worth taking more risks.”
