Affirmative action ruling puts target on corporate diversity programs

The complaints have been rolling in since spring. McDonald’s, Hershey and Alaska Airlines were targets, as were Anheuser-Busch and Nordstrom. Each was filed by a conservative legal group founded by a former adviser to Donald Trump, each alleging that diversity initiatives at companies are discriminatory, illegal and symptomatic of wokeness run amok.

Now that the Supreme Court has struck down the use of race-conscious admissions at colleges and universities, conservative groups and legal experts say the private sector should get ready for more challenges to their DEI - diversity, equity and inclusion - initiatives.

Though Thursday’s ruling is not expected to have direct legal implications on private sector employment practices, it “will put the wind in the sails of groups like ours, who want to get the woke, racially based hiring and promotion schemes out of corporate America,” said Will Hild, executive director of Consumers’ Research, a right-wing advocacy group that has taken aim at the use of environmental and social considerations in the finance sector.

Hild says legal precedents that allowed race-conscious admissions at colleges and universities have been a “fig leaf” for the private sector’s diversity initiatives. “Once that goes away,” he said, “it is going to be a free-for-all on pushing back against that.”

The question of race during the admissions process has come before the high court multiple times over the past four decades. Until Thursday, such policies have, to a degree, been left in place. Supreme Court precedent has not been as favorable to affirmative action preferences in employment as it has been to college admissions, said Gail Heriot, a law professor at University of San Diego, but conservative groups and legal experts said the new ruling creates an opening.

“I do believe that it will have an effect,” Linda Chavez, the chairman of the Center for Equal Opportunity, a conservative think tank that has been pressing companies to change their diversity programs. “I think you will see groups like ours looking closely to ensure that employers are not giving race undue influence in decisions about whom to hire or to promote.”

Alvin Tillery, a professor of political science at Northwestern University who runs a firm that consults Fortune 500 companies on how they carry out their diversity initiatives, said a ruling to end affirmative action will have a chilling effect on companies, which might wind down their DEI programs to avoid lawsuits or threatening letters from conservative activists.

“What I have been trying to urge my clients to think about is that you do not want to become overly compliant,” Tillery said. “If the Supreme Court strikes down affirmative action in college admissions, do not let your corporate counsel just say, ‘Oh, that is a wrap.’”

DEI programs gained momentum in the private sector in 2020 after George Floyd was murdered by a Minneapolis police officer. Companies worldwide, under public pressure to show their commitment to racial justice issues, spent an estimated $7.5 billion on the measures intended to diversify their workforces and leadership teams.

That included retailers such as Nike, technology companies like Amazon, and even the fast-food chain Chick-fil-A, a darling of conservatives because of its stance on LGBTQ+ issues. But those efforts have since tapered off and come under fire from conservative groups and politicians, who condemn the diversity initiatives as unconstitutional and underpinned by liberal values.

The battle over DEI initiatives is only example of the private sector finding itself in the crossfire of culture war issues. Conservatives angry over a Bud Light ad featuring a transgender influencer this spring prompted a boycott of the popular beer, and sales have suffered since. Target in May removed LGBTQ+ merchandise after angry shoppers threatened employees over the merchandise. In March, some Republicans blamed collapse of Silicon Valley Bank on DEI and investing that considers environmental, social and governance factors.

Since last year, America First Legal, the group run by former Trump aide Stephen Miller, has filed at least nine complaints with the Equal Employment Opportunity Commission against a host of major companies. It has accused them of “hiring people based solely on immutable characteristics, like race or sex, rather than qualifications or abilities,” which the group has argued is a violation of federal civil rights law. If the EEOC declines to investigate those claims, America Legal First has the right to sue, legal experts said.

McDonald’s, Alaska Airlines, Anheuser-Bush and Nordstrom did not respond to requests for comment. Hershey declined to comment. Mars, the maker of M&Ms, Snickers and a range of other popular food and snacks brands, also was among those targeted by America First Legal in an EEOC complaint. In a statement, Mars said it is an equal opportunity employer and does “not engage in discriminatory employment practices.” The company added, “Inclusion and diversity have long been priorities for us, and we use lawful means to pursue our inclusion and diversity objectives.”

In July 2022, America First Legal also launched a proposed class-action lawsuit against Amazon, alleging that a company program that awards $10,000 bonuses to certain Black, Latino and Native American delivery workers violated federal civil rights law. The lawsuit remains active. Amazon declined to comment on the lawsuit.

But Amazon spokesperson August Aldebot Green said the company believes in the importance of diversity, equity and inclusion, adding that it looks into the potential impact of any legal decisions on its programs and adjusts them to comply with the law. (Amazon founder Jeff Bezos owns The Washington Post. Interim chief executive Patty Stonesifer sits on the Amazon board.)

Following Thursday’s decision, Gene Hamilton, general counsel at America First Legal, said the group “will be redoubling our efforts in the weeks and months ahead to advance equality under the law for all Americans - especially in the private sector.”

Such challenges have not been limited to individual companies. In August 2021, the Securities and Exchange Commission approved a Nasdaq rule that mandates companies on the exchange to have at least two diverse directors - or explain why they don’t. A pair of conservative groups then sued to invalidate it, arguing the requirements were unconstitutional. The case is still being decided by the U.S. Court of Appeals for the 5th Circuit, and the rule remains in effect.

One of the groups, the Alliance for Fair Board Recruitment, is also challenging a pair of California laws that impose board diversity requirements on companies based in the state. The case is being decided in the Ninth Circuit Court of Appeals.

Jonathan Berry, a lawyer with Boyden Gray & Associates who represents the Alliance for Fair Board Recruitment, said in a statement Thursday that the Supreme Court “decision will likely reverberate far beyond academia.” He said, “In particular, employers should be fully on notice that diversity is not an appropriate justification for race-discriminatory affirmative action in the workplace.”

How corporations prevent discrimination falls under a different area of law than college admissions, so the Supreme Court ruling is not likely to have a direct impact on the legality of diversity initiatives at companies, according to legal experts. Whereas college admissions are governed by Title VI of the Civil Rights Act of 1964, private employment falls under Title VII. Both prohibit discrimination based on race, color or national origin.

A ruling to end affirmative action in university admissions “will send a strong signal as to how the court might lean if it was confronted with an employment case under Title VII,” said Daniel Pyne III, a labor attorney with Hopkins & Carley. That would mean more challenges under that specific statute, Pyne added, and “I would generally expect to see the court come down the same way.”

But Evan Caminker, a law professor at the University of Michigan, said the justices’ opinions are narrowly tailored to affirmative action in the education context, so they are not addressing “other contexts in which race might be legitimately taken into account in the private sector.”

Companies are nonetheless thinking of ways to protect their diversity policies from future litigation, including revising phrasing that might mirror that of affirmative action in college admissions, said Crystal Styron, a senior principal at market research firm Gartner.

“Some companies have racial quotas when it comes to hiring and promotions, and there is speculation those sorts of practices could now come under legal scrutiny,” Styron said. She added that Gartner recommends companies create policies that do not exclusively mention race, and instead focus on things like “fostering inclusive culture.”

Tillery, the Northwestern professor and diversity consultant, said he will recommend that companies stop using the word “diversity” and the acronym “DEI” to label their initiatives. “We have to start calling them Title VII compliance programs,” he said. “So the chief diversity officer is going to become the Title VII compliance officer. Inclusion training is going to be Title VII compliance training.”