Litigation Targeting Large Company DEI Programs on the Rise

The Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA) has been a game changer not just in college admissions but in employment as well. While the decision did not apply directly to private employers, its strong language criticizing affirmative action has reverberated through the corporate world. In concurrence, Justice Neil Gorsuch highlighted the parallels of Title VI and Title VII, noting both statutes “codify a categorical rule of individual equality, without regard to race.”

Conservative groups have seized on that language, and corporations such as Harley-Davidson and Jack Daniels have dropped DEI initiatives. Another large Midwest based manufacturing company says it will no longer sponsor “social or cultural awareness” events. Ford and Lowe’s have backed away from DEI-oriented programs and stopped participating in the Human Rights Campaign’s Corporate Equality Index. Other companies are reevaluating, rebranding, cutting back or eliminating DEI programs.

A Rising Tide of Questions About Corporate DEI

A growing number of activist shareholders, often funded by conservatively backed organizations, have made a wave of demands and proposals seeking DEI policy retractions or reverse racial audits.

Some shareholder proposals have been accompanied by threats of reverse discrimination litigation—and SFFA has, in fact, fueled new rounds of litigation.

In July, several Republican attorneys general warned  Fortune 100 companies they would face consequences unless they stop “reverse” discriminating on the basis of race.

Consistent with that warning, Missouri Attorney General Andrew Bailey filed the first reverse discrimination lawsuit by a state attorney general against a company and its diversity program for allegedly violating the Missouri Human Rights Act.

The lawsuit says IBM subjects job applicants to unlawful racial and gender quotas and bases pay and employment status decisions on whether employees participate in DEI practices that the Missouri attorney general alleges are discriminatory. The suit alleges IBM uses an illegal “diversity modifier,” a standard requiring the company to meet hiring quotas based on race, color, national origin, sex, or ancestry.

The lawsuit quotes extensively from a video in which IBM CEO Arvind Krishna allegedly said executives were held accountable for DEI goals and were expected to “move forward by 1 [percent] on . . . underrepresented minorities.” The lawsuit alleges that IBM engaged in unlawful discrimination by tying bonus compensation to diversity goals.

A second lawsuit alleges IBM violated Title VII and Section 1981 by firing a white male to meet racial and gender-based quotas. The federal suit alleges that IBM placed Randall Dill on a performance improvement plan, which the lawsuit contends was unrelated to his “position description, performance review metrics, and the job functions he had been performing for nearly seven years.” The lawsuit claims Dill was fired for being a white man—a “double whammy,” as the lawsuit puts it—despite being an “outstanding” employee.

America First Legal, a legal activist organization led by senior members of the former Trump administration including Stephen Miller, filed the suit. It also sued IBM subsidiary Red Hat on behalf of a separate client in May, alleging Red Hat fired a longtime employee because he was a white man.

Large Corporations Under the Microscope

In another “reverse discrimination” case, a former managing director claims that a major financial services firm fired him to make way for a less qualified and less experienced black woman so the company could meet its diversity objectives.

A former assistant vice president at AT&T, meanwhile, says he was laid off because he was “a 58-year-old white guy.”

White men have brought similar cases around the country. One alleges that a large pharma company discriminated in pursuit of its DEI goals and sought to “eliminate” older white males.

Elsewhere, a plaintiff says in a suit that Expedia declined to offer him a job in favor of a more “diverse candidate.”

Courts have already weighed in on how such cases may be resolved.

On August 20, Judge Rossie Alston of the U.S. District Court for the Eastern District of Virginia, a Trump appointee, dismissed a proposed class action that accused newspaper publisher Gannett of discriminating against white employees to diversify newsrooms.

Judge Alston cited “vague and conclusory” allegations and said the plaintiffs failed to identify a company-wide policy that impacted them based on their race.

Gannett had acknowledged a company policy that it asserted was designed to achieve “racial and gender parity with the diversity of our nation, throughout our workforce.” The plaintiff cited that statement, from a company Inclusion Report, as evidence of discrimination. Yet the Court found that statements like this were not specific enough to avoid dismissal of class action allegations.

A Political Issue

Corporate DEI programs will also be in full focus in the runup to the November elections.

Project 2025, a political initiative published by the Heritage Foundation aimed at promoting conservative policies, references DEI nearly 40 times. It declares “DEI is not” the law, and calls on the president to direct the Department of Justice and Equal Employment Opportunity Commission to “enforce Title VII to prohibit racial classifications and quotas, including human-resources classifications and DEI trainings that promote critical race theory.”

Project 2025 also encourages authorities to eliminate “policies promoted by the DEI agenda.”

What Can Employers Do?

Despite the growing trend of DEI-related litigation, employers can take steps to reduce legal risk without backtracking on their commitments on DEI.

First, and foremost, employers should perform a legally privileged assessment and potentially revise their DEI programs to ensure they are legally compliant.

Employers can tailor language in their policies and practices that promote diversity and equal opportunity for all without limiting opportunities based on protected characteristics. This may require not just changes in the descriptive language to these programs but substantive changes to the way DEI programs are structured.

Second, employers should implement a process of periodic legally privileged review of policies and practices, and how those policies are implemented, for compliance with the law. This includes not only reviewing publicly available diversity reports and materials that address the company’s DEI initiatives, but internal documents and measuring changes in a company’s demographics. This is especially important as ongoing DEI-related litigation unfolds and potential new precedent come into play.

And finally, employers must train leaders, managers and employees responsible for implementing DEI programs on lawful decision making and the parameters of DEI-related initiatives. The employees responsible for implementing DEI programs must understand the rules of the road, otherwise, those same employees may unknowingly increase legal risk.