Backing Diversity as First Amendment Expression Comes With Risks

Invoking the First Amendment to defend initiatives aimed at boosting workplace diversity, equity, and inclusion has the potential to set precedent that provides legal ammunition to undercut other civil rights goals.

A federal appeals court recently rejected venture capital fund Fearless Fund Management LLC’s First Amendment defense in a legal challenge to its grant contest for Black women entrepreneurs. The US Court of Appeals for the Eleventh Circuit held that the fund violated Section 1981 of the 1866 Civil Rights Act’s ban on race discrimination in contracts and went beyond the bounds of First Amendment protections for expressive conduct.

Although DEI proponents lamented the loss, employment attorneys highlighted a potential benefit for workplace diversity efforts in the ruling.

“As a firm supporter of DEI programs, I am cheerleading folks who are committed to the advancement of those communities,” said Lauren Parris Watts, a partner at Seyfarth Shaw LLP who counsels employers on creating and managing inclusive workplace cultures.

The First Amendment defense in this context, however, is a “slippery slope argument” because “the reality is, it’s not just us pro-DEI folks who are laser-focused on these decisions,” she said.

A judicial endorsement of the idea that the First Amendment protects exclusionary programs potentially opens the door for racist or anti-LGBTQ+ groups to discriminate with impunity, attorneys say. And doing so presents a challenge for courts trying to balance freedom of expression with the goal of achieving equality and justice, they said.

“Folks who are committed to eliminating DEI are also watching these decisions, and I would hate for that racist business owner, for example, to use a decision granting First Amendment protection as a justification to further exclude underrepresented communities,” Parris Watts said.

‘Creative Argument’

Ishan Bhabha, co-chair of Jenner & Block LLP’s DEI protection task force, expressed fear about the potential impact of a ruling upholding a First Amendment defense in this context.

“I don’t think many organizations would generally rely on” this defense, he said. “It’s a creative argument for sure, but the precedent that exists suggests” that First Amendment expressive conduct must be connected to the organization’s specific actions, akin to symbolic speech that’s intended to convey a particular message or statement, Bhabha said.

Fearless Fund argued that its grant contest isn’t a contract, but rather charitable giving that’s protected expressive conduct highlighting the importance of Black-women-owned businesses to the economy. But the court said the program oversteps free speech protections because it “simply and flatly refuses to entertain applications from business owners who aren’t black females.”

The ruling likened the grant process to a White business owner’s decision to fire all of his Black employees, which it deemed as equally unacceptable.

Derick Dailey, a member of Crowell & Moring LLP’s litigation and trial group, said defending diversity initiatives on First Amendment grounds can prove to be an intricate process because of the complex interplay between free speech and civil rights advocacy.

“There’s always this tension between the First Amendment and freedom of expression and anti-discrimination laws as we see front and center here,” he said.

Will Textualism Rule?

Like other lawsuits challenging the legality of DEI efforts, the Fearless Fund case relied on a Reconstruction-era law aimed at undoing measures that prevented formerly enslaved Black Americans from getting jobs, buying homes and farmland, and otherwise advancing socially and economically.

Advocates say the grant program was a remedial practice intended to correct deeply entrenched racial disparities, which Section 1981 doesn’t prohibit.

If the US Supreme Court were to issue a carefully crafted opinion based on a textualist reading of Section 1981’s purpose, that ultimately could aid diversity proponents, attorneys said.

The current Supreme Court is dominated by justices who adhere to textualism, a method of interpreting statutes that relies on the original meaning of a law’s text instead of other tools like legislative history.

“If they follow this originalist meaning of the statute, is it possible they will determine this grant program is lawful and disagree with the Eleventh Circuit,” Dailey said.

“You have groups of people who are attempting to remediate past harms and racism. This is what Section 1981 is about,” he said. “Fearless Fund makes the case that it’s trying to give capital to Black women who have been locked out for centuries because of racism and patriarchy.”

Adjusting Strategies

As courts intensify their scrutiny of workplace DEI initiatives, attorneys say any rulings in the diversity space, even if not employment-specific, can help employers develop legally sound policies and assess associated risks.

They include the Tenth Circuit’s recent dismissal of a White correctional officer’s lawsuit alleging that the Colorado Department of Corrections’ DEI training program created a racially hostile work environment. The officer failed to allege how the training amounted to race-based harassment in violation of Title VII of the 1964 Civil Rights Act, it said.

But two of the jurists on the three-judge panel said the substance and messaging of the training “could promote racial discrimination and stereotypes” and “encourage racial preferences in hiring, firing, and promotion decisions.”

The Fourth Circuit affirmed a jury verdict awarding nearly $4 million in lost wages, benefits, and interest to a White male Novant Health Inc. employee who alleged race and sex bias. The worker was able to demonstrate at trial that the company wrongfully fired him amidst a corporate initiative aimed at enhancing diversity in its executive and senior leadership ranks, the court said.

Federal and state anti-discrimination law remains clear that companies cannot categorically exclude others based on a protected trait in workplace programs and employment decisions, Bhabha said.

Stuart McCalla, a managing partner at Evolution, a San Francisco-based consulting and investment firm, said investors who claim commitment to supporting workforce diversity and providing capital to small, minority-owned businesses will become more strategic with their current efforts.

They can tweak their DEI efforts by removing references to racial minorities from the eligibility criteria, said McCalla, who manages venture capital funds.

However, Parris Watts said she remains concerned about the potential impact of ongoing legal challenges on DEI efforts.

“The fear that I have is that cases like this one, even though it’s not an employment law case, will curtail corporate America’s effort to continue supporting these groups,” she said.