Key Takeaways:

• Although the Supreme Court’s decision in SFFA v. Harvard College and SFFA v. University of North Carolina is limited to university admissions policies, the decision raises questions for many employers regarding the fate of their DEI policies. 
• In particular, Justice Gorsuch used his concurring opinion to invite challenges to such policies under Title VII.
• On July 13, 2023, Attorneys General from 13 states issued a warning letter to Fortune 100 CEOs threatening “serious legal consequences” in connection with workplace DEI efforts, following Justice Gorsuch’s guidance. Senator Tom Cotton (AR) issued a similar letter this week addressed to law firms advising clients regarding DEI programs.

On June 29, 2023, the Supreme Court issued its highly anticipated decision in SFFA v. Harvard College and SFFA v. University of North Carolina. While the Court’s ruling has fundamentally altered the landscape for higher education institutions’ admissions programs[1], many institutions and attorneys in the higher education space were anticipating this result.

Employers beyond the higher education industry have also, justifiably, taken notice. Many wonder about the decision’s broader implications and anticipated legal challenges to workplace diversity, equity, and inclusion (“DEI”) programs. With this perspective in mind, this client alert outlines certain key takeaways from the decision. We extract lessons learned and offer concrete ways employers can mitigate risks by evaluating and refreshing their DEI practices.

Understanding the SFFA Decision

In a 6-3 decision written by Chief Justice Roberts, the Court held in SFFA that Harvard’s and the University of North Carolina’s (“UNC”) admissions policies violate the Equal Protection Clause of the Fourteenth Amendment.

Specifically, the Court found the admissions programs’ goal—student body diversity—was not sufficiently measurable to qualify as a compelling interest. While noting that student body diversity is a “commendable” and “worthy” goal, the Court found the goal is “standardless” and “inescapably imponderable.”

The Court also found the admissions programs lacked a “meaningful connection between the means they employ and the goals they pursue,” criticizing racial categories used by universities as “imprecise.” Accordingly, the Court held the admissions programs failed to satisfy the narrow-tailoring requirement of the strict scrutiny inquiry.

Moreover, the Court criticized Harvard and UNC’s assertion that race is never a negative in admissions because “college admissions are zero-sum” and a benefit to some applicants on the basis of race automatically served as a negative to others. Justice Roberts further criticized any decision that is affected by “race qua race”—race for race’s sake—as one imbued with racial stereotyping.

The Title VII Next Door

While the Court’s decision is limited to university admissions policies, Justice Gorsuch in his concurring opinion expanded the discussion to draw the connection between universities and employers. Justice Gorsuch explained that, in his view, the UNC and Harvard policies violated not only the Constitution but also Title VI of the Civil Rights Act, which governs educational institutions receiving federal funds. In his analysis, Justice Gorsuch explained that “Title VI forbids a recipient of federal funds from intentionally treating one person worse than another similarly situated person on the ground of race, color, or national origin.”

In support of his analysis, Justice Gorsuch repeatedly referenced Title VII—the statute “next door,” in his words—and drew upon the Court’s landmark 2020 ruling in Bostock v. Clayton Cty. In Bostock, the Court, in an opinion authored by Justice Gorsuch, held that Title VII’s ban on discrimination based on sex also prohibits discrimination based on gender identity and sexual orientation. There, the Court explained that “an employer who intentionally treats a person worse because of sex—such as by firing the person for actions or attributes it would tolerate in an individual of another sex—discriminates against that person in violation of Title VII.” And it “doesn’t matter if other factors besides the plaintiff’s sex contributed to the decision,” so long as sex was one but-for cause.

In SFFA, Justice Gorsuch turned to address the dissenting justices who had joined the majority in Bostock and challenged them to explain how “materially identical language in Title VII” could lead to a different result under Title VI. In making this connection, Justice Gorsuch arguably issued a call to invite litigants to challenge affirmative action policies in the employment context.

Affirmative action opponents have already accepted Justice Gorsuch’s invitation. On July 13, 2023, Attorneys General of 13 states issued a cease-and-desist letter to Fortune 100 CEOs, alleging “racial discrimination is commonplace among Fortune 100 companies and others.” The 13 Attorneys General argue the Court’s decision placed every employer on notice of the “illegality of racial quotas and race-based preferences in employment.” The Attorneys General highlighted companies that explicitly committed to increasing percentages of diverse employees and suppliers by a certain timeframe. Four days later, Arkansas Senator Tom Cotton sent letters to 51 law firms in connection with advice those firms provide their clients as well as their own DEI programs. Asserting that employment-based DEI programs are both “unpopular and unlawful,” Senator Cotton argued that “the same principles and indeed the plain text of federal law also cover private employers,” noting that Title VII “prohibits private employers from basing hiring decisions on race.” He warned that both increased Congressional oversight and litigation should be expected.

How Employers Can Apply Lessons Learned from the SFFA Decision

Again, to be clear, the Court’s decision did not address employment-based DEI initiatives. While employers are wise to assess how a significant Supreme Court decision like SFFA might affect their business down the line, we note that it has no such impact today. In fact, neither of the warning letters addressed above raises issues that are new for employers. Title VII has always prohibited race-based quotas and individual hiring and promotion decisions that discriminate based on race. In preparing for challenges ahead, employers need not assume that the workplace landscape has shifted beneath their feet.

First, many decisions employers make are not “zero-sum.” In Bostock, the Court was addressing a decision to fire an employee. Title VII imposes liability on employers when they “fail or refuse to hire,” “discharge,” or “otherwise . . . discriminate against” someone because of a statutorily protected characteristic.[2] It does not follow that all employment decisions that view sex-based or race-based attributes as positive values would necessarily be at risk simply because affirmative action was viewed as problematic in the context of college admissions. This concern translates only to decisions that are arguably “zero-sum,” such as hiring and promotion decisions. Decisions and policies related to inclusion, by contrast, do not follow such a calculus.

Second, there are lessons to be learned from what the SFFA ruling did not cover, even in the context of university activity. The Court in SFFA did not address university recruitment efforts, for example, that focus on expanding the pie, so to speak—or maximizing diversity in the application pool. Similarly, Title VII challenges based on SFFA will likely not reach an employer’s efforts to expand and diversify its candidate pool for hiring.

Still, there are lessons employers can learn and apply from SFFA to both safeguard their DEI programs and mitigate litigation risk, such as the following:

1.    Maintain or develop new ways to measure the outcomes and benefits that a diverse workforce provides to the company. 

While the Court acknowledges diversity as a “commendable” goal, the Court criticized the goal as “standardless.” Employers’ goals related to their DEI programs should extend beyond a broad pursuit of diversity. Goals should be as measurable and trackable as possible.

To that end, consider and track what is at stake when it comes to having a diverse workforce. For example, will the company lose clients or business if they do not have a diverse workforce? Has the company experienced attrition of valuable employees in connection with DEI shortcomings? Has the company seen increased productivity in connection with DEI efforts? Consider bolstering your company’s systems to track and measure these successes or failures and avoid silos that may inhibit different departments within your organization from sharing data that may allow you to best evaluate these outcomes.

2.    Routinely review your DEI offerings, their efficacy, their operation, and their relationship to your goals and values.

 In SFFA, the Court found the connection between universities’ goals and the means they employed were “unclear.” Specifically, the Court criticized how universities measured racial diversity through racial categories, describing these categories as “plainly overbroad” and “arbitrary.”

With this in mind, assess whether demographic categories on applications and employee engagement forms are sufficient. Are they under-inclusive? Can applicants and employees check off multiple identities? Moreover, create procedures where management regularly evaluates whether the company’s DEI programming has achieved its intended effect(s). Consider using engagement surveys to measure both the need for and success of a company’s DEI program. Last, refrain from developing DEI programming or initiatives without connecting them to your goals. Be wary of DEI inertia and ensure that your initiatives remain flexible. Even long-standing or well-intended programs should be adjusted—or even abandoned—if they do not produce intended outcomes.

3.    Evaluate your hiring practices and initiatives.

Hiring and promoting an individual under the presumption that their race in itself “says something about who [they] are” is prohibited. Additionally, hiring and promoting for limited and competitive job positions can be viewed as “zero-sum.” A benefit to some applicants on the basis of race could be challenged as a negative to others. These sorts of decisions are also explicitly covered by Title VII.

Audit all HR functions and related DEI programs to ensure the workplace does not have racial quotas or preferences. As the letters written by Senator Cotton and certain Attorneys General indicate, statements implying race-based hiring quotas or preferences are very likely to trigger increased scrutiny, even if your hiring practices are legally compliant. Consider race-neutral alternatives. Can the company shift from identity-focused to mission-based statements? Can the company expand access to job opportunities? In this vein, assess whether job applications have unnecessary barriers to entry. Rethink whether certain roles really require a college degree or minimum years of practice and consider expanding your recruitment field to include new schools, geographies, or individuals with nontraditional career paths.

4.    Evaluate whether your company’s leadership is diverse.

The Court clarified that its decision does not extend to military academies due to their “potentially distinct interests.” Top former military leaders explained in their amicus brief that “[h]istory has shown that placing a diverse Armed Forces under the command of homogenous leadership is a recipe for internal resentment, discord, and violence. By contrast, units that are diverse across all levels are more cohesive, collaborative, and effective. The importance of diverse leadership has risen to new heights in recent years…”

Recognizing the positive effects diverse leadership has on workplace collaboration, create leadership development programs that facilitate a pipeline of leaders who are diverse across a spectrum of characteristics. Reinforce the importance of the tone at the top, by involving leadership in DEI efforts and ensuring that leadership support of DEI programming is apparent and visible to all employees within the organization.

Conclusion

Though the Court’s landmark race-conscious admissions decision has no immediate impact on employment-based DEI initiatives, employers can take steps now to assess existing DEI policies and refresh their programs. We will continue monitoring any related news closely and provide additional alerts with the latest developments. 

[1] In this client alert, we use “higher education institutions,” “colleges,” and “universities” to refer to all postsecondary educational institutions whose admissions policies are implicated through Title VI of the Civil Rights Act of 1964 and the Equal Protection Clause.
[2] 42 U.S.C. § 2000e-2(a)(1).