As legal challenges mount, some companies retool diversity, inclusion programs

Advocates of diversity efforts are steeling themselves for a fight this year as a growing number of lawsuits take aim at programs intended to advance racial equity in the corporate world.

Lawsuits making their way through the courts have targeted prominent companies and a wide array of diversity initiatives, including fellowships, hiring goals, anti-bias training and contract programs for minority or women-owned businesses. Most have been filed by conservative activists who have been encouraged by the Supreme Court’s June ruling ending affirmative action in college admissions and are seeking to set a similar precedent in the workplace.

The battle has been a roller coaster of setbacks and victories for both sides, but some companies are already retooling their diversity programs in the face of legal challenges, and the expectation that the conservative-dominated Supreme Court will eventually take up the issue.

“There’s a dragnet that I think we should all be concerned about,” said Alphonso David, President & CEO of the Global Black Economic Forum and a legal counsel for the Fearless Fund, an Atlanta-based non-profit that is facing a lawsuit over a grant program for businesses owned by Black women.

“It’s all coordinated to reverse existing law and advance a chilling effect throughout many industries,” David said.

One conservative activist, Christopher Rufo, claimed a victory this month with the resignation of Harvard’s first Black woman president, Claudine Gay, after allegations of plagiarism and a furor over her congressional testimony about antisemitism.

Rufo, who has cast Gay’s appointment to the job as the culmination of misguided diversity and inclusion efforts, vowed on the social media platform X, formerly known as Twitter, not to “stop until we have abolished DEI ideology from every institution in America.”

Civil Rights advocates are fighting back. On Monday, the National Action Network, led by the Rev. Al Sharpton, plans to announce a national drive to defend diversity programs at an annual Martin Luther King Jr. Day breakfast in Washington.

Sharpton and other prominent civil rights activist have rallied around the Fearless Fund as it fights a lawsuit brought by the American Alliance for Equal Rights, a group founded by anti-affirmative action activist Edward Blum, the man behind the college admissions cases the Supreme Court ruled on in June. The lawsuit alleges that one of the Fearless Fund’s grant contests discriminates against non-Black women and asks the courts to imagine a similar program designed only for white applicants.

In late September, a federal judge in Atlanta refused to block the contest, saying the grants are donations protected by the First Amendment and the lawsuit was likely to fail. But days later, a three-judge federal appeals panel suspended the contest, calling it “racially exclusionary” and saying the suit was likely to succeed.

Oral arguments in the case are scheduled for Jan. 31. The outcome of the case could be a bellwether for similar diversity programs.

Advocates say the legal backlash comes at a time when investment in diversity programs are slowing following a surge in 2020 in the wake of racial protests over the police killing of George Floyd. Job openings for diversity officers and similar positions have declined in recent months. The combined share of venture capital funding for businesses owned by Black and Latina women has dipped back to less than 1% after briefly surpassing that threshold—at 1.05%—in 2021 following a jump in 2020, according to the nonprofit advocacy group digitalundivided.

Faced with a messy legal landscape, companies are being cautious. Most major companies have so far stuck by diversity initiatives, which many ramped up in the face of pressure from some shareholders, employees and customers. Starbucks and Disney are among companies that have so far prevailed in court against challenges to their Diversity Equity and Inclusion policies.

But some have made changes to diversity programs to try to protect them from legal scrutiny.

Among those are two prominent law firms that had faced lawsuits by Blum’s group. The firms, Morrison Foerster and Perkins Coie, opened their diversity fellowship programs to all applicants of all races in October, changes the companies said were in the works before Blum’s lawsuits, which he subsequently dropped.

In May, Comcast said business owners of all backgrounds would be eligible to apply for a grant program originally intended for women and people of color when it launched in 2020. The telecommunications settled a lawsuit last year over the program brought by the conservative Wisconsin Institute for Law & Liberty on behalf of the white owner of a commercial cleaning business.

The Wisconsin Institute filed another lawsuit in October, this one on behalf of two construction firms. The lawsuit seeks to dismantle the U.S. Department of Transportation’s Disadvantaged Business Enterprise program, which dates back to the Reagan administration and requires that 10% of funds authorized for highway and transit federal assistance programs be expended with small business owned by women, minorities or other socially and economically disadvantaged people.

Dan Lennington, an attorney with the Wisconsin Institute, said he considers Comcast’s changes “progress,” but the anti-affirmative action movement is looking for a broader victory that could change case law on workplace diversity programs.

The Supreme Court’s ruling on affirmative action “opened up a whole new world,” Lennington said. “This decision just really injected new life into the whole debate.”

Many of the lawsuits challenging diversity programs, including the case against the Fearless Fund, are relying on a section of the Civil Rights Act of 1866, which prohibits racial discrimination in contract agreements. The law was originally intended to protect formerly enslaved people, but conservative activists are citing it to challenge programs designed to benefit racial minorities.

Some conservative officials and activists are also alleging that companies crossed a line by announcing goals for increasing Black and other minority representation. Companies say such goals are not quotas but aspirational targets designed to measure the effectiveness of policies like widening candidate pools and rooting out bias in hiring.

Misty Gaither, vice president for Diversity, Equity, Inclusion and Belonging at Indeed, said the online jobsite is sticking with its goal of increasing the representation of underrepresented racial and ethnic minorities in its U.S. workforce to 30% by 2030.

“We are doubling down on our efforts because we believe it’s the right thing to do,” Gaither said.

Conservative activists have seized on the goals to argue that hiring managers are being pressured to make race-based decisions in violation of Title VII of the 1964 Civil Rights Act, which prohibits taking race into account in hiring decisions.

America First Legal, a group run by former Trump adviser Stephen Miller, sent a letter in November to the federal Equal Employment Opportunity Commission seeking an investigation into Macy’s DEI policies, including its goal of achieving 30% ethnic diversity among its leadership at the director level and above by 2025, in part to better serve its customer base, which is about 50% non-white. The retailer launched a leadership training program for selected managers of color, and last year required that candidates for director roles include ethnically diverse applicants. It also has incorporated its DEI goals into annual performance reviews for directors and company-wide incentive calculation.

America First Legal cited those initiatives to argue that Macy’s “has set explicit racial and other quotas for hiring.” The group has sent dozens of similar letters to the EEOC targeting companies from IBM to American Airlines.

Macy’s declined to comment on the letter. But in a previous interview with The Associated Press, outgoing Macy’s CEO Jeff Gennette said the company is sticking with its DEI policies while closely watching legal developments.

“Our enthusiasm and our commitment to all the prongs that we had with DEI, and our strategy, remains. We might express it differently based on court rulings and in the future,” Gennette said, without providing details.