Legal Topics Related to Recent Diversity Initiatives

LEGAL TOPICS RELATED TO RECENT DIVERSITY INITIATIVES The recent focus on social justice, coupled with the #MeToo movement created several years ago, has pushed companies to make bold efforts related to diversity and inclusion. Those efforts have taken many forms as companies seek creative ways to ensure more inclusive workplaces. In addition, groups of employees have placed gender and racial equity—backed up by hard commitments—at the top of their agendas. However, responding to those efforts creates risks for companies, ranging from reverse discrimination claims to government efforts targeted at restricting diversity initiatives. I. Goal-Setting Legal Guardrails for Companies Many companies have turned to hard commitments to drive their diversity and inclusion efforts. However, those commitments come with risks if they do not take into account the complex tests related to the legal landscape and balance the interests of the entire workforce. Recent actions by the government questioning these commitments have raised the stakes, and companies must strike a balance when thinking about how far they can go to set and meet their commitments. Below, we identify the types of commitments made by companies across several industries, summarize the legal landscape and describe how employers can reduce the legal risks associated with these efforts. A. Diversity Goals by Various Employers Many employers have set a variety of goals related to increasing diversity, equity and inclusion within their workforce. Companies have promised to • Fill a minimum of 30% of all new positions—internal and external—with Black and Latino talent (adidas) • Strive for a 30% increase in the number of people of color in leadership positions over the next five years (Facebook) • Take companies public only if they have at least one diverse board member, with a focus on women in 2020, and at least two diverse board members by 2021 (Goldman Sachs) • Aim for 40% of individuals in vice president roles to be women (Goldman Sachs) • Double the number of Black and African American people managers, senior individual contributors, and senior leaders in the United States by 2025 (Microsoft) • Use progress toward a diversity matrix in evaluating executive bonuses (Starbucks) • Not hire for a position unless an underrepresented group is interviewed (VMWare)1 1 Heather Barbour Wyatt, 25+ Examples of Awesome Diversity Goals, Ongig (July 8, 2020), https://blog.ongig.com/diversity-and-inclusion/diversity-goals/. - 2 - B. Legal Landscape Regarding Diversity Efforts The legal landscape regarding goal setting has evolved from the U.S. Supreme Court cases striking down strict set-aside programs to looking closely at efforts to create and implement affirmative action plans. 1. Illegality of Quotas and Hard Set-Asides Title VII of the Civil Rights Act of 1964 makes clear that the prohibition on discrimination should not result in employers setting quotas. The law provides: Preferential treatment not to be granted on account of existing number or percentage imbalance. Nothing contained in this subchapter shall be interpreted to require any employer . . . subject to this subchapter to grant preferential treatment to any individual or to any group because of the race, color, religion, sex, or national origin of such individual or group on account of an imbalance which may exist with respect to the total number or percentage of persons of any race, color, religion, sex, or national origin employed by any employer, referred or classified for employment by any employment agency or labor organization, admitted to membership or classified by any labor organization, or admitted to, or employed in, any apprenticeship or other training program, in comparison with the total number or percentage of persons of such race, color, religion, sex, or national origin in any community, State, section, or other area, or in the available work force in any community, State, section, or other area. See 42 U.S.C. § 2000e-2(j). In two landmark cases, the Supreme Court considered programs that required governmental entities to set aside a specific percentage of contracts for minority- and women-owned businesses. In City of Richmond v. J.A. Croson Co., 488 U.S. 469, 493-94 (1989), the Supreme Court considered Richmond, Virginia’s Minority Business Utilization Plan, which required contractors who were awarded public construction contracts to subcontract at least 30% of the total dollar amount of the contract to minority business enterprises. The Court analyzed the program under the equal protection provisions of the Fourteenth Amendment. The Court applied a strict scrutiny test as the programs took into account racial and ethnic classifications as bases for decision-making. Finding that the plan did not meet the high burden, the Court struck down Richmond’s plan. In Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227 (1995), the Court returned to the issue of minority set-aside programs and considered a U.S. Department of Transportation affirmative action program that awarded financial bonuses to prime contractors if minority subcontractors were employed. Finding that the program failed to meet equal protection standards under the Fifth and Fourteenth Amendments, the Court rejected the government’s efforts. Both cases solidified the standard applied by courts when evaluating whether actions result in unlawful quotas. Under the strict scrutiny test, quotas or race-based affirmative action programs can be justified only if they satisfy a “compelling state interest” and are “narrowly tailored” to further that interest. - 3 - 2. Non-Quota Goal Setting The Supreme Court has approved of goal setting through voluntary affirmative action plans and found them to be consistent with Title VII. In United Steelworkers v. Weber, 443 U.S. 193, 208 (1979), the Court stated that “Title VII’s prohibition in §§ 703(a) and (d) against racial discrimination does not condemn all private, voluntary, race-conscious affirmative action plans [which, first, have] purposes … [that] mirror those of the statute [and second], does not unnecessarily trammel the interests of the [nonminority] employees.” The affirmative action plans that have met with the Supreme Court’s approval under Title VII had objectives, as well as benchmarks, which served to evaluate progress, guide the employment decisions at issue, and assure the grant of only those minority preferences necessary to further the plans’ purpose. Johnson v. Transp. Agency, Santa Clara Cnty., 480 U.S. 616, 621-22 (1987). Those plans consider underrepresentation in job classifications, set objectives for additional employment actions to address the underrepresentation, and allow for measuring improvements toward goals. Id. The Court, in Weber, explained that the first prong analyzes whether the goal of the plan seeks to remedy “segregation” and “under-representation of minorities that discrimination has caused.” Taxman v. Bd. of Educ. of Twp. of Piscataway, 91 F.3d 1547, 1556 (3d Cir. 1996). In Wygant v. Jackson Board of Education, 476 U.S. 267 (1986), the Court made clear that affirmative action must be supported by “a factual determination that the employer had a strong basis in evidence for its conclusion that remedial action was necessary.” Id. at 277. Subsequent decisions have interpreted the Supreme Court’s language to mean that the plan must remedy a “manifest imbalance” in the workplace or respond to a finding that past discrimination affected a particular job category. See Schurr v. Resorts Int’l Hotel, Inc., 196 F.3d 486, 496 (3d Cir. 1999). In Schurr, the Third Circuit considered a statewide New Jersey plan that set percentage goals for employment of minorities and required casinos to develop affirmative action plans to meet the specific industrywide goals. The plans did not require operators to meet any hard targets but rather required that they engage in and document their good-faith efforts to achieve the goals. The Third Circuit struck down the state program on the grounds that the legislature’s generalized statement that Atlantic City had a large minority population and that job creation would benefit “all segments of the population” failed to establish a manifest imbalance. Id. at 498. Similarly, a failure to determine whether Blacks were underrepresented in a school district or a particular high school does not establish the requisite level of manifest imbalance. Taxman, 91 F.3d at 1550. Trammel the interests of nonminority parties. The second prong of the Weber test evaluates whether the plan or the actions taken in furtherance of the plan do not “unnecessarily trammel on non-minority” parties. In Weber, the Court...