As an outgrowth of the recent Supreme Court ruling striking down race-based admissions at two top universities, Corporate DEI (Diversity, Equity, and Inclusion) programs are under legal attack for violating non-discrimination and equal opportunity laws. DEI programs extend into company supply chains as well, thanks to supplier diversity programs which have favored specific demographic ownership over others in terms of contract award decisions and even specific set-asides.
In the Supreme Court ruling, Chief Justice Roberts observed that the Constitution’s Equal Protection Clause may never be used in the negative or operate as a stereotype. In other words, you can’t harm specific classes of individuals by favoring another.
The Supreme Court found that The University of North Carolina violated the Equal Protection clause by discriminating against white and Asian applicants. Specifically, “over 80% of all black applicants in the top academic decile were admitted, while under 70% of white and Asian applicants in that decile were admitted… In the second-highest academic decile, the disparity is even starker: 83% of black applicants were admitted, while 58% of white applicants and 47% of Asian applicants were admitted… And in the third-highest decile, 77% of black applicants were admitted, compared to 48% of white applicants and 34% of Asian applicants.”
The Supreme Court is not going rogue. Its ruling affirms recent judgments within the private sector, including the 2021 Duvall v. Novant Health case, in which a jury awarded a $10 million verdict, finding that the company discriminated based on the plaintiffs’ race (white) and sex (male) after his firing because he did not meet targeted demographic criteria as part of its DEI initiatives. According to sources, the jury found the “termination was part of a promotional tactic aimed at increasing diversity within the upper echelons of the employer’s leadership ranks.”
In a recent feature, “The Legal Assault on Corporate Diversity Efforts Has Begun,” The Wall Street Journal observes a number of additional recent legal cases. Among other cases, “Comcast settled a case accusing it of illegally favoring minority-owned small- business customers with grants and marketing advice,” and “Amazon has been sued in Texas over a program offering an extra $10,000 to Black- or Latino-owned delivery-service contractors.”
The Civil Rights Act of 1964 made it illegal to discriminate based on color, national origin, race, religion, and sex (including sexual orientation and gender identity), but this hasn’t stopped companies from attempting to favor some groups over others.
Andrea Lucas, a US Equal Opportunity Commission (EEOC) Commissioner, who was confirmed to her role by the Senate in 2020, recently noted that she sees “significant legal and practical risk” in corporate DEI initiatives based on the fact her agency’s mission is “equal opportunity,” not “equal outcomes.”
The pursuit of “Equal Outcomes” may prove costly to one particular retailer. According to sources Surplus Record has spoken to, Target has explicitly told potential leadership hires that it expects full participation in its DEI initiatives, whether they involve discrimination against specific groups or not. Perhaps this is not surprising for a company which has committed to directed spending programs of $2 billion for black-owned businesses only by 2025 as part of its supplier diversity efforts.
In a recent interview in SHRM, an HR industry publication, Jennifer Shaw, an attorney, suggests that quotas and preferences “for hiring people from underrepresented groups can create significant legal liabilities.” For example, “if you have two otherwise equal candidates and only one meets your diversity goals, you can’t ‘break the tie’ by selecting that individual.”
Some corporate DEI programs are especially blatant in practicing exclusionary tactics. Best Buy, for example, was recently blasted in the media for a McKinsey-led management training program that explicitly excluded whites after a registration page for the program was leaked on social media.
When it comes to DEI, many companies have opted to pursue strategies which put their shareholders at legal risk. If recent court cases and rulings are any indication, it is likely that diversity programs which require discrimination by design will increasingly prove costly — both in the courts of law and public opinion.
