For the last several years, DEI initiatives have been a buzzy topic we’ve all heard about in the business world. Even with this increased attention, we’re still seeing shockingly low implementation of DEI programs. For example, The Washington Post recently reported that an African-American woman working in Washington, D.C., currently makes 51 cents for every dollar a white man makes. Ultimately, this pay disparity would add up to a loss of approximately $2 million over a 40-year career.

In this time we’re also seeing proposed DEI ideas that clash with legal requirements. As more companies begin implementing these programs it’s important to check in and see if your company’s plans are legally permissible. 

Michelle presenting at a DEI conference.

Understanding The Challenges of The Partnership Between Legal and DEI Directors

There are several areas where DEI initiatives could overlap with legal risks. We will dive into the biggest risk areas below.

Employee Data

Thorough and accurate data about the workforce, including breakdowns by characteristics such as race and gender is required by DEI. However as it pertains to self-identification campaigns, diversity analytics, and the publishing of data, some laws restrict what information may be gathered on job applicants and employees. 

The law in this area is changing and varies by location, the DEI implementation team should work closely with the company’s attorneys to make them acutely aware of any visualizations and compilations of the data created by companies. 

Employee Decision

Corporate DEI initiatives frequently focus on recruiting and hiring from historically underserved groups, but counsel should be a partner in determining how these efforts will be effectuated. Some laws specifically prohibit certain actions even if the team’s intentions are good. Lawyers do not like the idea that demographic factors have been, or will be considered, in employment decisions due to some laws forbidding this outright. Special attention should be given when drafting job postings, conducting interviews, or rolling out new recruitment strategies.

Targets v Quotas

Anti-discrimination laws allow employers to take affirmative action to advance equal opportunity in the workplace. Personal accountability can look like setting diversity targets, and while goals are permissible, they must not present as quotas – which are not permissible under US federal law. An organization will want to make it clear that they have set goals not quotas. Only a knowledge of the history of the law and the legal landscape will provide the best foundation for creating legally sound DEI objectives. Since it is up to the courts to distinguish whether it is a goal or quota, this process can be complicated, time-consuming and expensive. So, the goal should be to create legally permissible policies to stay out of court on this issue.

Lay of the land

Very early on, your legal team should be working in partnership with your DEI team to ensure that you get the best results while protecting your business. Make sure to give your legal counsel context for the initiative, not just facts. Your DEI and legal teams should understand the structural and procedural foundation. This includes the organization’s size, and general climate of employees. 

Always bring your legal team into the discussion as partners from the beginning. Attorneys have the latest legal developments, mitigate risk and can anticipate avoidable scenarios. 

What Is Or Is Not Permissible 

The following DEI initiatives ARE permissible.

  • Goals – numerical diversity targets (% of new hires will be minorities).
  • Over-inclusiveness – Inviting everyone to be a part of the DEI conversation.

The following initiatives are NOT permissible.

  • Quotas – the inflexible reliance solely on numbers that ignore qualifications. 
  • Discharge- Termination of non-minorities in furtherance of DEI goals.
  • Absolute Bar – Creating an absolute bar to the advancement of a non-minority.

Understanding Your Risk

We typically see DEI programs pose a risk when it comes to pay equity, sex-based employment discrimination, and stereotyping based on caregiver status. 

Pay Equity 

The Equal Pay Act of 1963, which amended the Fair Labor Standards Act, protects against wage discrimination based on sex. However, at the present rate SHRM found that women will have to wait until 2060 to reach representation parity. In Colorado, the Equal Pay Transparency Act, which went into effect in 2021, prohibits employers from paying women (or men) less than other people for substantially similar work and, importantly, requires employers to include a position’s compensation range when posting any job opening.

If an applicant was underpaid at their previous job, then relying on salary history to set a pay rate in the new job would perpetuate the wage gap. There are now 21 state and local laws banning questions about an applicant’s salary history, and employers should expect more to follow. 

Sex based discrimination

In 2016 the EEOC’s multidisciplinary Task Force on Harassment in the Workplace outlined the biggest risk factors that create a home for harassment was a homogeneous workforce. Having fewer women may increase the likelihood of sex discrimination or sexual harassment for the remaining female employees.

Caregiver status

Another prediction is more lawsuits alleging sex discrimination on the grounds of employers stereotyping their female employees due to caregiver status. There is an assumption that a women will perform her job less efficiently due to her presumed family obligations, which is a form of sex-stereotyping and that adverse job actions on that basis constitutes sex discrimination. ​

Transcendent Law Group offers Diversity, Equity & Inclusion Implementation & Training that speak directly to the organization’s culture. We assist companies with implementing new programs and strategies and assist organizations in updating more mature D&I programs. Contact us today to learn more!