Proceed With Caution: Voluntary Diversity Efforts Must Be Undertaken With Care To Limit Litigation Risk For Employers

Published date23 November 2021
Subject MatterCorporate/Commercial Law, Employment and HR, Discrimination, Disability & Sexual Harassment, Employee Rights/ Labour Relations, Diversity, Equity & Inclusion
Law FirmPhelps Dunbar
AuthorReed L. Russell and Julie A. Girard

Employers across the country are voluntarily implementing plans to promote diversity within their workforce, especially in management positions. Wells Fargo, Microsoft, and Amazon are just a few of the companies whose efforts have recently made headlines. And businesses are using their influence to encourage diversity in their other relationships, too. In 2018, the CEO of BlackRock, which manages trillions in investments and is one of the most influential shareholders of the world's largest companies, made headlines when he issued an open letter to other CEOs indicating that companies that failed to demonstrate how they advance diversity and "make[] a positive contribution to society" would risk losing the support of BlackRock.1

Such efforts, however, are meeting some resistance, with courts and others raising questions about their legality. On April 15, 2021, the Florida Supreme Court sua sponte issued an opinion amending Rule 6-10.3(d) of the Rules Regulating The Florida Bar.2 The opinion rejected a policy setting diversity requirements for faculty at Business Law Section-sponsored CLEs based on "race, ethnicity, gender, sexual orientation, gender identity, disability, and multiculturalism."3 In rejecting the policy, the court stated that "quotas based on characteristics like the ones in this policy are antithetical to basic American principles of nondiscrimination."4 In early 2021, Coca-Cola announced diversity benchmarks for its outside counsel, with a statement that outside counsel who failed to meet the diverse staffing metrics would forfeit 30% of their fees, but the plan's implementation was reportedly paused, the recently hired general counsel who initiated the plan replaced, and the company received a demand letter claiming the plan was unlawful.5

With so many industry leaders publicizing their efforts to promote diversity, others may be tempted to follow suit. The response by courts and stakeholders, however, suggests proceeding with caution with any such effort. The line between what courts consider permissible diversity efforts and unlawful discrimination can be difficult to discern, and getting it wrong can lead to liability. Businesses voluntarily taking action should, therefore, know the legal risks, common pitfalls, and implications of diversity efforts so they can craft plans within the bounds of the law. Well-intentioned missteps can backfire and invite agency investigation, prompt lawsuits, and undermine the diversity programs themselves.

Introduction to Voluntary Employer Action

Employers adopt plans to improve workforce diversity for a variety of reasons. Some do so in response to a court order after a finding of discrimination,6 others do so pursuant to government regulation or as a negotiated remedy in a consent decree or settlement agreement,7 and more and more are announcing plans to do so voluntarily, without any court or agency intervention. This article focuses on the last category - voluntary actions - and in particular, two types of voluntary employer actions: diversity initiatives and what the Equal Employment Opportunity Commission (EEOC) calls "affirmative action plans."

Diversity initiatives and affirmative action plans "are related concepts, but the terms have different origins and legal connotations."8 On one hand, diversity initiatives are designed to "draw talent and ideas from all segments of the population" by expanding the pool of qualified individuals considered for a particular position. They do not dictate selection procedures or processes, and instead merely broaden the reach of employers to consider more diverse candidates. Such initiatives do not fall within the scope of anti-discrimination laws because they merely help employers consider additional, more diverse candidates. For example, an employer implementing a diversity initiative may increase its recruiting efforts at historically black colleges and universities (HBCU) to attract more candidates of color. This expanded-recruitment effort functions only to bring more candidates into consideration.

On the other hand, affirmative action plans aim "to overcome the effects of past or present practices, policies, or other barriers to equal employment opportunity" by permitting employers to expressly favor a particular group in selection decisions when certain prerequisites are met.9 Under a valid affirmative action plan, for example, an employer may go beyond simply expanding the qualified candidate pool by increasing HBCU recruiting, and reserve a spot for a graduating HBCU student of color in its incoming employee class.

The law - specifically Title VII of the Civil Rights Act of 1964 - addresses these two concepts differently. According to courts and EEOC, "Title VII permits diversity [initiatives] designed to open up opportunities to everyone,"10 but affirmative action plans run afoul of Title VII unless certain prerequisites are met and the plan is implemented in a particular way. Although it may initially appear simple to distinguish diversity initiatives and affirmative action plans, the line between a selection procedure regulated by Title VII can be difficult to discern.

Title VII: The Legal Landscape

Title VII prohibits discriminatory employment practices on the basis "of [an] individual's race, color, religion, sex, or national origin."11 Shortly after Title VII's passage, the Supreme Court declared that its purpose "is plain from the language of the statute[:]...to achieve equality of employment opportunities and remove barriers that have operated in the past to favor an identifiable group of white employees over other employees."12 Legislative history is consistent with this interpretation, citing testimony that, at the time Title VII was considered, "discrimination in employment [was] overwhelming,"13 and that the Civil Rights Act could help remedy pervasive unemployment, underemployment, and income disparities experienced by Black people, which were categorized as the "effects" of "severe inequality."14

Title VII, thus, prohibits employers from relying on protected characteristics like race or sex in employment-selection decisions. Beyond obvious selection decisions such as hiring and promoting, various "selection procedures" are also actionable under Title VII.15 Courts, for example, have permitted Title VII claims based solely on an employer's decision on who to select for an interview.16 Moreover, adding a person to a selection pool for consideration "when considered with other factors in a case, can constitute circumstantial evidence of" a racially discriminatory hiring decision.17

What constitutes actionable selection under Title VII is, therefore, broad. While the Supreme Court made clear in Griggs v. Duke Power Co., 401 U.S. 424, 429-30 (1971), that Title VII was designed to remove barriers to employment opportunities that had historically "favored an identifiable group of white employees,"18 the statute protects any person from being discriminated against on the basis of the enumerated protected characteristics in Title VII.19

In response to Title VII's passage, employers hired compliance officers, established affirmative action plans, and developed new methods for screening job applicants, evaluating employee performance, and allocating work.20 Those voluntary efforts were understood to be designed to advance Title VII's purpose of achieving equality in the workplace for women and people of color.21 But because Title VII prohibits decisions that are based on a protected characteristic, the voluntary efforts exposed employers to litigation risks. Specifically, they presented a risk of white job applicants and employees asserting that the employers were making decisions based on race.

Therefore, in 1979, EEOC promulgated guidelines to help...

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