Prior to the pandemic, about 45% of companies supported ERGs. Since 2020, that number has risen to 80% of companies. Among Fortune 500 companies, that percentage is even higher; 90% of Fortune 500 companies have an ERG. This is particularly notable given that 86% of Generation Z workers expect companies to have ERGs.

What are ERGs?

ERGs are voluntary, employee-led groups most commonly formed around a shared identity such as race, ethnicity, national origin, veteran, or LGBTQIA+ status. ERGs often focus on the promotion of equitable workplace policies and practices, employee advancement and professional development opportunities, and inclusion in the workplace. ERGs are distinct from affinity groups, although the terms have mistakenly been used interchangeably. Affinity groups often connote a social purpose, whereas ERGs focus on a community-centered purpose. As such, ERGs can be extremely valuable for employers to increase retention, foster workplace belonging, and identify areas where the company may improve.

How Can a Workplace Create ERGs?

ERGs are not unions, and the process to create ERGs needs to reflect that difference. Unions are approved by a majority of bargaining unit employees and/or voluntarily organized by employers as the unit’s exclusive bargaining representative. Unions historically represent a bargaining unit concerning the terms and conditions of employment, grievances, and labor disputes. ERGs, on the other hand, are resources for employees but do not represent ERG members in negotiating the terms and conditions of employment. Although employers (and employees) may consult with unions before establishing ERGs, their functions are separate and distinct. With this important consideration in mind, there are three best practices for the creation of effective ERGs to avoid legal pitfalls and challenges.

1. Establish Clear Guidelines: Stakeholders— employers and employees— should start by establishing clear guidelines before creating ERGs. These guidelines should first and foremost define an ERG and explicitly state the differences between ERGs and unions. Second, the guidelines should clearly describe the process for creating an ERG, including most notably, that ERGs are employee-created and led. Management must approve all ERGs. There should be clear criteria explaining the formation and operation of an ERG, and the types of ERGs allowed. Third, the guidelines should be clear about the resources and support the company will provide ERGs. The guidelines should consider the amount of funds being allocated to the creation and operation of ERGs, the appropriate uses for those funds, and what other resources (such as office supplies, and technology) will be available to the ERG. Finally, the guidelines should create the role of an executive sponsor. The executive sponsor acts as a liaison between ERGs and the company’s senior management. This role ensures that ERGs stay focused, and do not delve into areas outside the purpose of ERGs (such as negotiating the terms and conditions of employment, which is reserved for recognized unions).
2. Mitigate and Avoid Legal Risks Up Front: In addition to laying out clear guidelines for ERGs, including their proper role and functions, employers should comply with labor and employment laws to mitigate legal risks associated with ERGs. ERGs should understand they must avoid any intrusions into the internal complaint process; all members of ERGs should understand that they must report complaints directly to the company and/or its human resources department, not to the ERG. ERGs should also understand and be reminded that the company’s anti-harassment and non-discrimination policies still apply equally to all ERG leaders and members. ERGs may not exclude individuals based on any legally protected characteristic. Instead, companies must ensure ERGs are inclusive of all who wish to participate. Finally, companies should consider wage and hour concerns before any issues may arise. Companies should have a policy regarding how time spent on ERG activities and participation may be treated, recorded, and paid, such as whether time spent on ERG activities will count towards overtime.
3. Encourage Collaboration: Employers should encourage ERGs to collaborate with each other. Employees often have intersecting identities and ERGs can learn from one another by having regular check-ins. For example, two ERGs could co-sponsor events, or share each other’s event announcements. Collaboration between ERGs adds to the workplace community and further encourages widespread participation. ERGs should also collaborate with their executive sponsor and keep them informed on ERG efforts. Because ERGs are different from unions, the ERG’s executive sponsor must bring the ERG’s questions and concerns to company management (after verifying that such questions and concerns are within the ERG’s boundaries). For this line of communication to be effective, collaboration between ERGs, executive sponsors, and company management must be consistent and ongoing to build trust and continue ensuring the purpose of the ERGs is being fulfilled.

Conclusion

Employee resource groups provide a great opportunity for organizations to build a more unified workforce and tap into the power of multiple perspectives. With thoughtful leadership and properly organized and vetted ERG processes, ERGs can be an invaluable asset to the success of any organization. When employees feel connected and heard, they become more engaged and passionate about the work they do, and productivity and morale increase. Ultimately, employee resource groups are a powerful way to bring together diverse workforces and leverage the strengths of members to drive positive outcomes.

Written with the assistance of Anna Ashley, a summer associate in the Husch Blackwell LLP Milwaukee office.

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