Private Employers Are Exposed to Danger if They Flout DEI Orders

Although the federal push to eliminate “illegal” diversity, equity, and inclusion programs is seeping out of government agencies into the private sector, employers have some grounds to keep their initiatives in place.

President Donald Trump has far less influence over businesses without government contracts, but executives are feeling the pressure to roll back their DEI programs to avoid angering the executive branch.

Executive orders aimed at excising DEI from federal agencies put private employers on notice with a directive for Attorney General Pam Bondi and other leaders to submit reports offering suggestions to encourage the private sector to eliminate their programs. And DEI opponents are leaning heavily on the Supreme Court’s rulings in Students for Fair Admission, Inc. v. Harvard and College and Students for Fair Admissions, Inc. v. University of North Carolina in their challenges to private sector DEI programs.

Understanding and respecting the purpose, scope, and effect of the executive orders is the first step for private employers to protect themselves from future trouble. A coalition of 16 state attorneys general issued guidance on Feb. 13, designed to assist businesses, nonprofits, and other organizations in comprehending the viability and importance of DEI policies and practices in sustaining legally compliant and vibrant workplaces.

Even though the executive orders and federal DEI initiatives haven’t been codified, private sector employers may want to consider several approaches.

Review policies, programs, and practices. As the guidance points out, “[p]olicies and practices that promote diversity, equity, inclusion, and accessibility are not the same as preferences in individual hiring and promotion decisions that have been found to be unlawful.”

If an employer is a federal contractor, it’s important to make sure it is in line with the orders. If employers don’t have federal contracts, they need to be sure they aren’t espousing or using race and sex-based preferences in their policies, programs, and practices (including their hiring, training, promotion, disciplinary, and other practices).

Don’t discriminate. The orders emphasize the importance of employers complying with federal anti-discrimination laws. If an employee complains that they are being harassed or discriminated against, the complaint should be promptly, fully, and fairly investigated and resolved.

Consider company culture. Private employers need to determine what kind of culture they will foster in today’s post-SFFA environment. However well-intentioned past or current DEI policies, programs, and practices may have been, SFFA and the orders have changed the landscape by deeming many of them illegal.

These include policies setting quotas and earmarking positions based on race and gender. It would also encompass a policy or practice of rewarding executives with bonuses for achieving minority hiring goals.

The orders don’t mean businesses can’t have a welcoming, inclusive, and innovative culture that attracts qualified, talented, and hard-working employees—regardless of their protected characteristics. Today, employers can and should reexamine how to make all employees feel valued and how to welcome different perspectives. Given the attacks on DEI efforts, employers will need to look at new ways to provide employees with opportunities for learning and growth, while producing organizational success and avoiding legal entanglements.

Watch the language. People may use phrasing that can be perceived as “loaded” or even unlawful. Some terms create misimpressions, spawn misunderstandings, and stir anger and division.

Depending on the situation, even referring to company policies as “DEI” could spark a complaint. As part of the examination and potential redefinition of an organization’s culture, businesses may want to think through whether a term such as “DEI” advances or hinders the creation of a lawful and productive culture.

Human Resources Considerations

Because a broad range of employment practices have resulted in legal challenges, businesses should consider a few important things when they’re deciding who to hire, promote, train, or fire.

The criteria for every employment decision should be clear and lawful. Decisions should be based on qualifications and merit that are consistent with the executive orders, such as not creating positions or quotas based on protected characteristics or tying executive compensation to meeting DEI goals.

Any discussion about how a candidate’s race or other protected characteristic affected their lives should be limited to avoid later claims that prohibited factors tainted the decision-making process.

New candidates should also be selected from a diverse pool, not plucked out of applications from specific backgrounds, institutions, or schools. And hiring managers need to be able to justify why they selected one candidate instead of another.

Managers and candidates should also have clear expectations about the behavioral traits, experience, skills, and outcomes required for a position. Developing a position profile that transcends a job description and outlines what success would look like is a good strategy. Then specify what the candidate will be doing at the organization and identify the most important outcomes the candidate will need to deliver. This will help hiring managers assess whether the candidate has the education, skills, work experience, and behavioral traits to succeed.

Because past performance can predict future success, behavioral-based questioning is generally the most effective interviewing technique. It’s also a way to avoid asking unlawful or inappropriate questions. To conduct a behavioral-based interview, ask open-ended rather than leading questions that focus on circumstances, ascertain what actions the candidate took, and reveal the results the candidate achieved.

In SFFA, Chief Justice John Roberts wrote that “nothing in this opinion should be construed as prohibiting universities from considering an applicant’s discussion of how race affected his or her life.” The court’s restrictions on universities—and employers—is to ensure they don’t “simply establish through application essays or other means the regime we hold unlawful today.”

This illustrates how narrow an employer’s consideration of race (and other protected characteristics) must be. It makes even more critical the need for only lawful inquiries when making employment decisions, especially in the context of DEI efforts. Because more federal measures may be adopted, and some existing measures are already being challenged and will be interpreted, employers need to stay alert and be nimble.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Paul E. Starkman is a member of Clark Hill specializing in employment law.

Jonathan Vegosen is a member of Clark Hill specializing in labor and employment matters.

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