Executive Summary: On June 23, 2023, the U.S. Supreme Court overturned a 20-year precedent in two lawsuits: Students for Fair Admissions v. President and Fellows of Harvard College and Students for Fair Admissions v. University of North Carolina (SFFA v. Harvard/UNC). These lawsuits challenged race-based admission policies. Justice Roberts, authoring the majority opinion, insisted that race cannot be a deciding factor in university admissions, but did not exclude considering an applicant’s racial experiences if tied to unique character traits or abilities. He emphasized that the Fourteenth Amendment’s Equal Protection Clause applies to everyone, irrespective of race, color, or nationality. Justice Roberts critiqued the affirmative action programs for their lack of clear objectives, negative racial implications, and racial stereotyping, concluding, “We have never allowed admissions programs to function this way, and we won’t begin today.”

Businesses now question how this decision may impact the future of their diversity, equity, inclusion and belonging (DEI) programs, which have grown substantially in recent years. However, this ruling does not directly impact DEI programs and initiatives, despite the recent flurry of competing views to the contrary.

Thirteen States Issue Warnings and Twenty-One States Urge DEI Initiatives Forward

This month, in the aftermath of SFFA v. Harvard/UNC, Attorneys General from 13 states and United States Senator Tom Cotton of Arkansas sent letters to business leaders, warning them about potential risks associated with their DEI programs.

In these letters, the Attorneys General assert that “racial discrimination in employment and contracting is all too common among Fortune 100 companies and other large businesses.” The letters warn against using racial preferences or quotas to combat discrimination, a path prohibited by Title VII of the Civil Rights Act of 1964. They urge corporations to overcome their inherent biases and ensure equal treatment for all employees, applicants, and contractors, regardless of race. They also give specific examples of allegedly illegal hiring practices, such as racial hiring quotas and preferences for contractors with diverse staff or minority ownership. The letters attempt to link the legal framework under Title VI (which prohibits race discrimination in government-funded programs), addressed by the court in SFFA v. Harvard/UNC, with the requirements of Title VII (which prohibits race discrimination in employment), through Justice Gorsuch’s concurrence in SFFA v. Harvard/UNC, where he reasoned that Title VI principles “apply equally to Title VII and other laws restricting race-based discrimination in employment and contracting.”

In a stark contrast, just a few days later, on July 19, 2023, Attorneys General from 21 states sent letters underscoring the legality and necessity of Fortune 100 companies’ DEI initiatives. They challenge the opposing stance of the 13 Attorneys General who suggest that addressing racial disparity is intrinsically unlawful. Their correspondence focuses on the inapplicability of the SFFA v. Harvard/UNC ruling to employers and reminds employers the decision does not prohibit companies from recruiting from a diverse pool of candidates to address historical racial inequities and to create opportunities for everyone to be successful in the workplace. They cite Justice Jackson’s dissent to underscore how the continued existence of racial segregation, a practice deemed unconstitutional nearly a hundred years ago, remains tied to our present socio-economic life. The letters note that addressing racial disparities in the workplace is legal and a free market approach to doing so, through vendor diversity programs and recruiting initiatives, was not impacted by the SFFA v. Harvard/UNC ruling. These letters encourage employers to continue utilizing permissible means to recruit, retain, and advance in employment a diverse workforce.

These dueling letters come at a time when many companies have committed to investing in and developing programs and policies that support DEI to attract and advance a workforce that reflects our nation’s diversity. They further highlight the importance of employers evaluating their DEI initiatives for potential increased scrutiny or legal challenges.

Understanding the Impact of SFFA on Corporate Diversity Initiatives

It is crucial to understand that the SFFA v. Harvard/UNC ruling does not directly apply to most private employers and their DEI initiatives. The case was presented under the Equal Protection Clause of the 14th Amendment (relevant to public school systems as part of the state government) and Title VI (pertinent to programs receiving federal financial aid). Neither of these laws apply to the majority of private employers. Instead, private employers fall under the ambit of Title VII and other federal and state laws that prohibit employment discrimination based on protected characteristics.

Employers have historically implemented DEI initiatives in an effort to achieve the goals of Title VII – to ensure a level playing field in the employment context where everyone can participate equally. While the Court’s decision does not immediately impact private entities, it establishes a pathway for potential challenges to race-based employment practices. While DEI programs grounded in the law can continue, employers should be prepared to address challenges to their programs and initiatives through conducting a DEI audit.

Practical Guidance: Developing and Evaluating DEI Programs in Light Recent Legal Developments

Some general employer considerations when evaluating existing DEI programs, or developing new programs, include:

1. Create an Inclusive Pipeline: Evaluate your recruiting strategies to expand your applicant pool. Consider recruiting at historically Black colleges and universities, minority industry groups, or veteran- or disability-focused employment or training programs. Build partnerships with organizations that focus on providing access to talent from underrepresented groups, in addition to your typical talent sources. Recruiting from a broad range of resources is a legally sound approach to creating a pipeline of diverse talent.
2. Carefully Evaluate Affirmative Action Policies and Practices: Federal contractors and subcontractors are not directly impacted by the decision in SFFA v. Harvard/UNC with regard to their affirmative action programs for job applicants and employees. That said, the decision is a concrete reminder that federal contractors should remain focused on developing affirmative action programs under Executive Order 11246 that are carefully reviewed for compliance with legal requirements. Employers who have implemented or seek to implement voluntary affirmative action policies must ensure that they are narrowly tailored and specifically follow the United Steelworkers of America v. Weber, 443 U.S. 193 (1979), requirements of permissibility. All employers should consider reviewing the availability analysis and goal-setting requirements set forth in EO 11246, that provide a data-driven path for developing goals and evaluating progress based on census data and internal availability by gender and race.
3. Provide Available Resources to All: When implementing mentoring, executive training, and leadership initiatives, ensure that classes or groups of employees are not prohibited from applying or consideration. Employers should be aware of potential reverse discrimination claims when implementing workplace diversity initiatives. Broadly defining diversity to include factors beyond race and sex, such as experience, education, and interests, may help deter such claims.
4. Implement a Diverse Slate: Careful implementation of a diverse slate program is legal. Research from the Harvard Business Review, (https://hbr.org/2016/04/if-theres-only-one-woman-in-your-candidate-pool-theres-statistically-no-chance-shell-be-hired), indicates an increased likelihood of hiring a female or minority candidate when at least two such candidates are in the final pool. Consider implementation of the Rooney Rule - https://operations.nfl.com/inside-football-ops/inclusion/the-rooney-rule/ or the Mansfield Rule - https://www.diversitylab.com/mansfield-rule-4-0/ for management and executive level roles. The program should begin with a data-driven analysis of workforce demographics. Implementation of a diverse slate program should be narrowly tailored and should not prohibit a non-minority candidate from being considered.
5. Reconsider Your Organization’s DEI Strategic Objectives: As an employer, it is crucial to understand your organization’s needs and objectives. Ensure that your organizational leadership fully grasps your DEI program’s objectives and defines how the advancement of DEI supports your company’s mission and goals. Many DEI initiatives have no relation whatsoever to applicant selection. Instead they focus on ensuring the workplace is an inclusive environment where all applicants and employees feel welcome, valued, and encouraged to participate fully and have equal opportunities for advancement. In light of the Court’s decision, affirming your organization’s commitment to DEI reassures employees that the decision does not signal a retreat from your organization’s commitment to inclusive initiatives.
6. Recognize that Diversity Goes Beyond the EEO-1 Classifications: The Supreme Court noted that diversity does not begin or end with the six noted EEO-1 race classifications (white, Native Hawaiian or other Pacific Islander, American Indian or Native Alaskan, Asian, Hispanic or Latino, Black or African American). This premise has been widely supported and should continue to be a governing factor of any employer DEI efforts. In implementing and expanding DEI initiatives, employers should champion non-traditional aspects of diversity, in addition to the typical demographic diversity. These include diversity of thought, opinion, culture, geographic location, neurodiversity, languages, religion, national origin, citizenship status, ethnicity, gender identity, morals and more. Employers who provide safe spaces to discuss these important topics without penalizing employees for respectfully expressing their opinions will create more inclusive and productive work environments. It is important to reiterate that all DEI discussions must adhere to your company’s anti-harassment and anti-discrimination policies. Consider engaging a skilled facilitator to guide the conversation respectfully and suitably.

The Bottom Line

Employers can develop and continue effective DEI programs and initiatives. Now, more than ever, it is advisable to involve your legal counsel in these important discussions. The Supreme Court’s decision underscores the need for DEI programs that are data-driven and rooted in ensuring fairness for all.