Corporate implications of SCOTUS affirmative action reversal

On July 13, 13 Republican attorneys general wrote a letter to leaders of Fortune 100 companies warning them against using race as a factor in hiring and promotion decisions and threatening legal action if the companies did not comply.

Although the Fourteenth Amendment does not apply directly to private companies, the Supreme Court’s majority opinion and the letter argue Title VI and Title VII apply the same principles.

With legal attacks on diversity, equity, and inclusion (DEI) efforts on the horizon, private employers should risk assess their programs.

Steve Paskoff, chief executive of training company Employment Learning Innovations and a former Equal Employment Opportunity Commission and employment law attorney, said he understands the risk that can arise between DEI initiatives and applicable civil rights laws.

The core DEI and compliance question is, “How do you assure you’re getting the best talent and participation across a wide array of the population and … do so in line with what the laws require?” Paskoff summarized.

He noted two foundational elements as vital.

First, DEI, compliance, and equal employment opportunity must be operationally connected rather than handled as unrelated workplace initiatives.

“When they’re disconnected, that causes compliance risks, and [unlawful] discrimination can occur,” he said.

Second, DEI must be seen as an operational imperative linked to the organization’s core principles.

The idea is to “connect DEI to the organization’s mission/vision and values applied under common behavioral standards and procedures,” he said. “Does everybody agree we want our organization to have the best team members doing their best work individually and together … so we can do our best work? That’s an operational way to structure DEI to connect talent management and compliance.”

Extrapolating from the SCOTUS ruling

For decades, public and private universities have considered race as a factor in the admissions process. Chief Justice John Roberts summarized the three-pronged basis for the court’s rejection of universities’ race-conscious admissions processes:

“University programs must comply with strict scrutiny, they may never use race as a stereotype or negative, and—at some point—they must end. Respondents’ admissions systems—however well-intentioned and implemented in good faith—fail each of these criteria,” Roberts wrote.

Justices Ketanji Brown Jackson, Elena Kagan, and Sonia Sotomayor dissented.

Following the decision, at least one university has ended legacy admissions, a practice which has come under attack as affirmative action—typically for white, wealthy applicants—by another name.

If private employers wish to extrapolate from the court’s ruling, they can apply the same standard of analysis to their organization’s DEI program to see if it passes muster.

1. Strict scrutiny. To pass strict scrutiny, there must be sufficiently focused and measurable objectives warranting the use of race, Roberts wrote.

The court’s imposition of the strict scrutiny test in the context of universities’ admissions programs serves as a tangential reminder to private employers DEI programs should be intentionally focused and measurable—while also being inclusive. On the one hand, DEI programs must be data-driven to effect progress, like any other business objective. On the other, they cannot be so blindly mechanical in their pursuit of progress that they betray the law demanding equal opportunity for all.

In her dissent, Justice Jackson said, “Of the roughly 1,800 chief executive officers to have appeared on the well-known Fortune 500 list, fewer than 25 have been Black.” The numbers illustrate a racial disparity in a data-driven way.

Likewise, private employers can audit their workforce to gauge demographic imbalances by leadership level, which can reveal where to start examining the organization for possible implicit biases, discrepancies, or discrimination in hiring and advancement processes.

While racial quotas in hiring decisions are patently unlawful, organizations that wish to foster diversity in their staff more organically can widen the scope of their candidate search, said Risha Grant, diversity consultant and author of “Be Better Than Your BS.”

“Companies tell me all the time, ‘We recruit from the universities.’ Universities have a lot of [affinity] groups: the Black student group; the Hispanic student group; a group for women; a group for LGBT+. Are they creating partnerships with those groups to ensure they have a diverse candidate pool?” she said.

Strategies for opening the talent pool include dropping unnecessary job requirements—“Does somebody really need a master’s degree to do this job, or will it suffice they have [comparable] work experience?” Grant said—and offering flexible working hours and locations, among other things.

Paskoff acknowledged it can be a challenge balancing DEI and compliance risks.

“There’s an element of legal risk if you do DEI recruitment the wrong way, and there’s an element of performative risk if you don’t get the best talent actively involved, too,” he said. “But every organization faces a range of risks as part of daily operations—balancing these risks can be done with planning, commitment, consistency, and continuity.”

To boost collaboration and inclusion and safeguard against unconscious biases, Grant recommended companies incorporate diverse interview panels into the hiring process. Diversity in all forms should be represented: race and ethnicity, age, education, job title, disability, and more.

“Are there people on the [interview] panel who look like the people you’re interviewing? Because as much as there are a lot of similarities between us, there are a lot of differences in our lives. Sometimes we don’t understand those differences simply because we’re not [ingrained] in the culture,” Grant said.

2. No stereotyping or using race as a negative. The Supreme Court found Harvard’s consideration of race resulted in fewer admissions of Asian American students and race was unavoidably used as a negative factor. The Court further found the universities’ admissions processes also required stereotyping.

Like universities, private companies are at risk of failing this criterion. Offering a job opportunity to one candidate unavoidably means passing on another. It is not a stretch for a losing candidate to allege race-based discrimination is at play in the decision, especially when a company is openly driving a DEI recruitment strategy.

A potential workaround is to implement a blind résumé screening process, Grant and Paskoff each said, paired with implicit bias training for hiring managers.

“Some organizations are going to be saying, ‘Maybe we need to have anonymity from certain factors so that we can’t be charged with [unlawful discrimination],” Paskoff forecasted.

“Studies have shown that when somebody can’t see what a person looks like and can’t try to ascertain who [a candidate is] by what their name sounds like, companies have more representation of people of color,” said Grant.

3. Defined end point. The court found the universities lacked meaningful end points to their race-based admissions processes.

Asked whether there should, in principle, be a defined end point to companies’ DEI efforts, Grant said she would love to see one, “because that would mean we’re where we need to be.” Until then, companies should strive for sustained progress measured through metrics like demographic representation across leadership levels, retention rates, and employee satisfaction surveys.

Paskoff said companies need to be able to ask themselves: “‘Have we done our work to reverse what most would recognize as traditional forms of discrimination that existed?’” The irony, though, is “[the work] must be done in a way that is fair, that doesn’t flip the switch and create the same kinds of issues … just affecting different groups,” he said.

What would an end point look like? Grant offered a diverse leadership team or inclusive policies and procedures as examples.

“The issues that spark DEI as a concern did not arise overnight,” Paskoff said. “I don’t think we can say we’re going to be absolutely sure what [the end point] is. … It’s going to take time; there’s going to be a degree of uncertainty. That’s true of just about every business imperative.”