Preparing for the Next Wave of DEI Litigation: What Companies Need to Know

The recent Supreme Court ruling against affirmative action in college admissions has sparked significant backlash against corporate Diversity, Equity, and Inclusion (DEI) initiatives. Within weeks of the decision, Republican attorneys general from 13 states issued a stern warning to Fortune 100 CEOs, condemning their DEI practices and threatening legal action for “illegal preferences” in employment and contracting.

Missouri Attorney General Andrew Bailey has followed through on this threat, filing a lawsuit against IBM for allegedly violating the Missouri Human Rights Act. Bailey claims that IBM enforces racial and gender quotas in hiring and bases employee compensation and status on participation in DEI activities, which he argues are discriminatory. The lawsuit alleges that IBM’s “diversity modifier” sets unlawful hiring quotas based on race, color, national origin, sex, or ancestry, in direct violation of state law.

For companies hoping the backlash against DEI initiatives was waning, this lawsuit is a stark reminder that these programs remain under intense scrutiny. Ensuring legal compliance of DEI initiatives is now more crucial than ever.

Advancing DEI Amid Legal Challenges

Here are steps companies can take to fortify their DEI initiatives against potential legal challenges:

1. Conduct a Comprehensive Audit of DEI Programs
   • Evaluate the language and implementation of DEI initiatives to ensure they comply with legal standards.
   • Identify and amend any practices that might appear exclusionary or that set quotas based on protected characteristics, as these are prime targets for legal challenges.
2. Identify High-Risk States and Adjust Accordingly
   • Review if your company operates in states where attorneys general have threatened litigation over DEI practices. These states include Kansas, Tennessee, Alabama, Arkansas, Indiana, Nebraska, Iowa, South Carolina, Kentucky, West Virginia, Mississippi, Missouri, and Montana.
   • Accelerate the review and adjustment of DEI initiatives in these states to preempt potential lawsuits.
3. Enhance Internal Controls Over DEI Disclosures
   • Ensure all public statements about DEI initiatives are accurate and reflect the actual programs and objectives of the company.
4. Articulate the Business Case for Diversity
   • Highlight objective, measurable benefits that have been achieved through commitment to diversity. This can help build a strong case for the continuation of DEI efforts.

The Future of DEI Litigation

The Missouri lawsuit could be the beginning of a new wave of litigation targeting DEI initiatives, and companies need to be prepared for similar actions. On the same day the Missouri lawsuit was filed, Democratic attorneys general from 19 states issued a letter reaffirming their support for DEI programs, countering the earlier threats from Republican attorneys general. This bipartisan divide indicates that DEI will remain a contentious issue, especially leading up to the 2024 elections.

In conclusion, companies must remain vigilant and proactive in ensuring their DEI programs are legally sound and effectively communicated. By taking these steps, businesses can better navigate the evolving landscape of DEI litigation and continue to promote diversity, equity, and inclusion in the workplace.

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