Less than a year after the Supreme Court ruled against the practice of race-based preferences for college admissions, the landmark decision raises questions on whether corporate diversity, equity, and inclusion efforts should prepare for a similar fate.
Hundreds of companies have begun to reassess workplace diversity initiatives since the high court ruled against affirmative action policies in higher education, for reasons including the threat of novel litigation, emerging critiques of DEI efforts from influential figures in the business world, and significant layoffs within the tech sector. While many companies adopted such policies in the aftermath of the death of George Floyd at the hands of a Minneapolis police officer in 2020, some of these programs are already retreating, according to employment and labor experts.
Data Show DEI on Decline
DEI debates have become even higher-profile after the resignation of former Harvard University President Claudine Gay, whose academic star had risen as a champion of the “diversity” initiatives. However, after a big DEI failure in academia, businesses are taking a second look.
“More and more, we’re seeing companies walk back, ever so quietly, their avowed emphasis on DEI in favor of merit-based hiring and promotion decisions,” David Wimmer, a Los Angeles labor and employment attorney, told the Washington Examiner.
There was a 44% decline in the number of DEI-related job postings in 2023, according to data cited by CNBC from job site Indeed, which also reported a 23% drop year over year. In November, a study conducted by DEI consulting firm Paradigm found that while 54% of companies have DEI budgets, there was a 4-point decrease in budgets compared to 2022.
“External forces are no longer pushing companies to invest in DEI; instead, in some cases, external forces are pushing back on companies’ investment in DEI,” the report said.
The Supreme Court’s June 2023 decision in Students for Fair Admissions v. President and Fellows of Harvard College striking down affirmative action policies in universities has led to a wave of new laws limiting its practice in states including Florida and Texas. It’s also led to a barrage of litigation from mostly conservative-backed legal groups that say corporate DEI efforts are inherently discriminatory under Title VII, the workplace civil rights law.
Former President Donald Trump‘s White House senior adviser Stephen Miller’s 501(c)(3) firm, America First Legal, has been one group at the forefront of antidiscrimination lawsuits since the affirmative action decision and has stated its commitment to “ending the racist DEI agenda” at companies including IBM, Starbucks, and Kellogg’s Activision, among other Fortune 100 companies, according to a December press release.
In a sign of total war on corporate DEI agendas, Miller’s group filed a Freedom of Information Act request in December to the U.S. Equal Employment Opportunity Commission seeking records related to the commission’s enforcement of Title VII against corporations in the wake of dozens of complaints over alleged “unlawful” DEI practices at those companies.
“Title VII of the Civil Rights Act of 1964 guarantees that workplaces in America do not discriminate against workers based on their race, color, religion, sex, national origin, and ethnicity,” AFL legal senior adviser Ian Prior said following the announcement of the group’s FOIA.
AFL’s complaint came in response to EEOC Chairwoman Charlotte Burrows, who was appointed by President Joe Biden, issuing a statement after the Supreme Court’s decision that it “remains lawful” for employers to implement DEI programs “that seek to ensure workers of all backgrounds are afforded equal opportunity in the workplace.”
Wimmer said that “many employers are becoming more and more leery of using race (and other protected categories) as a motivating component in their employment decisions.” As a substitute, he said many companies “are trying to expand their applicant pools and their recruiting efforts while using merit-based criteria in their staffing decisions.”
A Digital DEI Debate
As the impacts of a high court decision against race-based higher education policies trickle into the corporate world, a fierce online discussion over whether DEI is considered “racist” erupted between billionaire businessmen Mark Cuban and Elon Musk last month, with Musk posting on X that “discrimination on the basis of race, which DEI does, is literally the definition of racism.”
On Jan. 17, Cuban argued that “race and gender can be part of the equation” in employment decisions but that he has “never hired anyone based exclusively on race, gender, religion.”
EEOC Commissioner Andrea Lucas, a Republican, chimed into the discussion, arguing that Cuban is “dead wrong” on his views of Title VII law.
Lucas delineated two methods for establishing causality within the framework of Title VII of the 1964 Civil Rights Act: “but for” causation and the “motivating factor” approach. But-for causation requires plaintiffs to demonstrate that a protected attribute, such as race or sex, was the primary rationale behind the employment action. Conversely, “motivating factor” causation can simply mean considering race or sex as part of one of many factors, including meritocratic considerations.
Justice Neil Gorsuch, one of Trump’s three high court appointees who cemented the 6-3 Republican-nominated majority for the Harvard decision, issued a concurring opinion that served as a backbone to this parallel notion that Title VII should be interpreted identically to Title VI, which governs antidiscrimination in higher education.
In 2020’s Bostock v. Clayton County decision, which held that Title VII bans employment discrimination on the basis of sexual orientation and gender identity, Gorsuch authored the majority opinion that expanded the standard of but-for causation and narrowed the gap between motivating factor causation. He wrote that “liability can sometimes follow even if sex wasn’t a but-for cause of the employer’s challenged decision,” adding that but-for causation “continues to afford a viable, if no longer exclusive, path to relief under Title VII.”
But lacking a specific judicial mandate on corporate DEI efforts, litigants are once again taking to federal courts to test the boundaries of the high court’s decision.
Back Where We Began
Longtime affirmative action critic and conservative litigant Edward Blum, who founded the SFFA group that succeeded in its case last year after alleging such policies discriminated against Asian American applicants, is already charting a new legal campaign against corporate DEI efforts on the basis of his high court victory.
An Atlanta-based small venture capital firm known as the Fearless Fund, which offers early-stage funding for businesses owned by black women, was sued by Blum’s other group known as the American Alliance for Equal Rights in August.
Although a U.S. district court initially rejected AAER’s motion for a preliminary injunction against the race-based grant program, the 11th U.S. Circuit Court of Appeals issued a temporary injunction on Sept. 30, and a panel of three judges, two appointed under Trump and one under former President Barack Obama, will soon decide the case on the merits after a Jan. 31 oral argument.
“They’re trying to shut everybody down, but using us,” Fearless Fund’s co-founder Arian Simone said last month on her podcast during a sit-down interview with rapper T.I.
“They are trying to stop all diversity, equity, and inclusion. It’s an attack on that,” Simone said, adding that her legal fight could make its way up to the Supreme Court in due time.
In late January, Blum told Time magazine his logic for the litigation against the Fearless Fund is to apply the “shoe on the other foot” test to the basis of its business model.
“In the case of the Fearless Fund, would a different venture capital fund’s requirement that only white men are eligible for its funding and support be fair and legal? If the answer is no, then it must follow in the law that racially exclusive policies that target a different race and sex must be unfair and illegal as well,” Blum said.
Meanwhile, Blum’s student group is already leading two cases against race-based admissions policies at the U.S. Military Academy and the Naval Academy, signaling his efforts to clarify the Supreme Court’s footnote in the Harvard decision that permitted race-based admissions policies to continue at military academies.
Despite Blum’s legal success, he was recently dealt a minor setback when the Supreme Court ruled on Feb. 2 against SFFA’s efforts to enjoin West Point from making race-based considerations for the class of 2028. However, the court did note the record for the case was “underdeveloped” and that the order should not be “construed as expressing any view on the merits of the constitutional question.”
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Wimmer called the decision not to halt West Point’s policies temporarily a mere “procedural issue that keeps the status quo of West Point’s admission process in place — for better or for worse, depending upon your perspective — while the underlying lawsuit plays out in federal court.”
“Eventually, when this case makes it back to the high court, that’s when the legality of racial preferences at our nation’s military academies will be ruled upon,” Wimmer said.
