DEI Is Under Attack. Here’s How Companies Can Mitigate the Legal Risks

What happens when the irresistible force meets the immovable object? Leaders committed to diversity, equity, and inclusion (DEI) are facing this paradox with fresh urgency these days.

The irresistible force is represented by the mounting legal assault on DEI. In June 2023, the Supreme Court effectively ended race-based affirmative action in higher education in the Students for Fair Admissions (SFFA) case. On the heels of that decision, newly empowered activists have brought a barrage of challenges against workplace DEI efforts. Major companies are being slapped with formal complaints, litigation, and threatening letters.

While the outcome of any particular effort is rife with uncertainties, the overall direction of the law under a 6–3 Supreme Court conservative supermajority is not one of them. As such, some wonder whether DEI work is coming to an end. As one left-leaning legal scholar asked rhetorically: “If your whole job description has been to press for diversity, especially racial diversity, what are you supposed to do when pursuing that objective has been rendered effectively illegal?”

Yet the force of the legal assault on DEI is hitting an immovable object. As Justice Sotomayor pointed out in her dissent in SFFA, “Diversity is now a fundamental American value, housed in our varied and multicultural community that only continues to grow.” Too many people in too many major institutions, including leaders of corporations, government, academia, and the military, are committed to DEI for it to disappear. As one right-leaning journalist observed, it’s foolish for activists to think they can “end DEI,” as “that’s not going to happen.”

What, then, will occur when the force of the law collides with one of the deeply held beliefs of the twenty-first century? We predict that neither side will “win.” Rather, as the law inevitably evolves in a more conservative direction, the new legal standards will be absorbed into the field of DEI, transforming it as an enterprise. While this shift will occur organically, smart organizations can avoid a lot of pain and expense by thinking about how to adapt in a more intentional way.

What Makes DEI Risky?

To recognize what shifts are necessary, we must start by assessing legal risk. A DEI program is most risky when it meets three criteria:

1. It confers a preference, meaning that some individuals are treated more favorably than others.

2. The preference is given to members of a legally protected group, such as groups defined by the categories protected in Title VII of the Civil Rights Act of 1964. These are race, color, religion, national origin, and sex (including sexual orientation and gender identity).

3. The preference relates to a palpable benefit, such as a job, a promotion, a pay raise, a work assignment, or access to training and development opportunities.

With these three criteria in mind, it is possible to identify risky DEI programs. They include:

• Hiring quotas (“Make sure at least 45% of our incoming associates are women”)

• Tiebreaker decision-making (“If you’re choosing between two similarly strong candidates and one is white and the other is a person of color, pick the person of color”)

• Group-specific internships and fellowships (“Let’s create an internship that limits eligibility to Black and Latino talent”)

• Tying manager compensation to diversity goals (“You will get a bonus if you hire more women and people of color on your team”)

All four of these programs confer a preference on members of protected groups with respect to palpable benefits. Of course, many defenders of such programs rightly point out that these initiatives do not actually involve a “preference,” but rather simply compensate for biases that have systematically deprived certain groups of opportunities. Unfortunately, however, it is clear that the conservative supermajority on the Supreme Court does not agree with such a worldview.

These three risk criteria also point the way to how organizations can mitigate risk in their DEI programs: avoid preferences, avoid protected groups, or avoid palpable benefits.

Avoid Preferences: From Lifting to Leveling

Rather than giving “preference” to some groups, organizations can explore DEI actions that are identity-neutral but remove bias from the workplace. Examples include creating structured recruitment and promotion processes with clear, transparent, merit-based criteria; removing stereotypical language from employee evaluation processes; and reviewing employee benefits policies to ensure they are being applied equally. These approaches do not “lift” certain groups above others, but rather “level” the playing field for everybody.

Even under a worst-case scenario legal landscape, such leveling approaches will remain legal, because anti-discrimination law only applies when some people are treated differently from others.

Avoid Protected Groups: Up-switching, Down-switching, and Side-switching

The next option for reducing legal liability is to avoid protected characteristics such as race or sex. There are three ways of doing so.

The first is to shift from “cohorts to content,” or what we call “up-shifting.” Instead of limiting participation in DEI programs to members of particular cohorts, organizations can open participation to people of all demographic backgrounds who are committed to the content of the program. In a recent high-profile example, three major law firms were sued for diversity fellowship programs that limited eligibility to members of underrepresented groups. As soon as the firms changed the eligibility criteria to include anyone with a demonstrated commitment to diversity and inclusion, the lawsuits were dropped.

The second option is to shift from “cohorts to character” (down-shifting). This means considering a candidate’s identity only where it speaks to their individual character. In the SFFA decision, the court pointedly noted that while universities could no longer give a bump to candidates based on their race, they could still consider “an applicant’s discussion of how race affected his or her life, be it through discrimination, inspiration, or otherwise.”

The same applies to employers. While employers cannot make, say, a promotion decision based on race, they could invite candidates for promotion to submit an essay describing how their race and other aspects of identity have affected their lives. The employer could then consider those individual experiences when deciding which candidates have displayed resilience, determination, or other important leadership qualities.

The final option for avoiding protected groups is to shift from “cohorts to cohorts” (side-switching). This means shifting from cohorts protected by laws such as Title VII to cohorts that are not protected in such ways. For example, an organization could adopt a program that advances socioeconomic diversity, given that socioeconomic status is not a protected attribute under federal anti-discrimination law. Provided the organization is not using the new cohort as a proxy for a protected one, this form of side-switching is legally sound.

Avoid Palpable Benefits: From Adverse to Ambient

Organizations also can reduce legal risk by avoiding palpable benefits. Under Title VII, plaintiffs need to have suffered an “adverse employment action” to bring a discrimination claim, meaning a concrete change in their terms or conditions of employment rather than a mere inconvenience or trivial slight. Similarly, under another federal law that is currently being used to challenge DEI programs — section 1981 of the Civil Rights Act of 1866 — claimants need to have experienced discrimination in the making or enforcement of a contract.

As such, one safe harbor for organizations is to create DEI programs that build a more diverse and inclusive workplace culture overall, but do not directly affect the benefits or employment opportunities of individual workers. For instance, organizations might:

• Conduct employee education or training on topics such as bias, allyship, or inclusive leadership

• Create a more physically inclusive office environment, for example through all-gender bathrooms, nursing rooms, or child-care facilities

• Conduct outreach to a broader range of colleges to attract a more diverse candidate pool

• Support community organizations focused on DEI issues, for example through pro bono work and philanthropy

This term, the Supreme Court will decide a case that could lower the standard for what counts as an “adverse employment action,” making it easier to challenge some DEI programs. For now, however, organizations can mitigate risk by embracing a more “ambient” approach to their work.

Putting It All Together

These three shifts respond to the seemingly unanswerable question of what happens when the irresistible force meets the immovable object. The answer is that the object changes. The force is not resisted; it is absorbed. And the object is not moved; it is transformed.

It is true that the law will force the practice of DEI to change significantly. Yet so long as champions of DEI shift it in these strategic ways, DEI’s core project of building a more just future will endure for decades to come.

Copyright 2024 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

Explore AAPL Membership benefits.