Last summer, shortly after the U.S. Supreme Court’s decision in Students for Fair Admissions v. President & Fellows of Harvard and Students for Fair Admissions v. University of North Carolina, thirteen “red state” Attorneys General warned the nation’s Fortune 100 companies that they should stop “reverse” discriminating against individuals on the basis of race or face the consequences.

In their letter, the state AGs stated,

“Sadly, racial discrimination in employment and contracting is all too common among Fortune 100 companies and other large businesses. In an inversion of the odious discriminatory practices of the distant past, today’s major companies adopt explicitly race-based initiatives which are similarly illegal. These discriminatory practices include, among other things, explicit racial quotas and preferences in hiring, recruiting, retention, promotion, and advancement. . . . 

The warning letter concluded by advising employers that they would “be held accountable” if they continued to treat people differently on the basis of race.

The signatories to the letter were the AGs from the states (or commonwealths) of Alabama, Arkansas, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Montana, Nebraska, South Carolina, Tennessee, and West Virginia.

This warning shot was swiftly followed by a letter from 21 “blue state” AGs, urging companies to ignore the threat. They reassured employers that their “corporate efforts to recruit diverse workforces and create inclusive work environments are legal and reduce corporate risk for claims of discrimination.”

The lawsuit

Missouri Attorney General Andrew Bailey now appears to be the first state AG to confirm that the threat of state action was not an idle one. On behalf of the State of Missouri, he has sued International Business Machines Corporation, alleging that the company maintains racial and gender quotas, and that executive bonuses are explicitly tied to achievement of diversity requirements.

The lawsuit quotes extensively from a video of IBM’s Chief Executive Officer Arvind Krishna, in which he allegedly said that executives were held accountable for diversity, equity, and inclusion goals and were expected to “move forward by 1 [percent] on . . . underrepresented minorities.” The lawsuit alleges that, by tying bonus compensation to the achievement of diversity goals, IBM engages in unlawful discrimination.

The lawsuit is still in its earliest phase, and IBM has not yet filed a response. Thus, at this stage, the allegations are just that – allegations.

Best practices to avoid similar claims

Employers should take heed and ensure that their DEI practices do not intentionally or unintentionally result in “reverse” discrimination. 

Communicating about internal DEI initiatives to executives and managers presents a good opportunity for employers to be deliberate and specific about the messages they are sending. Employers should avoid statements that indicate achievement of diversity goals is an expected or necessary result. Employers should also refrain from incentivizing managers to make race- or gender-conscious decisions by rewarding (or penalizing) them based on DEI outcomes. 

Best practices for communicating DEI information to decision-makers include explaining the following:

• Diversity goals do not mean that the organization “does not employ” enough members of one group, or that it “employs too many” members of another group.
• Diversity goals do not mean that the identified group should be favored in hiring or promotion decisions based on their membership in that group.
• When making selection decisions, individuals should be evaluated solely based on their qualifications, and employment decisions should be made without regard to protected characteristics, such as race and gender.
• The organization’s communication of diversity goals is simply the sharing of information regarding the overall commitment to equal employment opportunity and DEI, and this should not be interpreted as a direction, or even a suggestion, to make employment decisions based on race or gender.
• A decisionmaker’s failure to achieve a diversity goal should not result in any negative repercussions, assuming the failure is not a result of “traditional” discrimination.

Employers should continue to monitor employment processes – including DEI initiatives – to ensure that they remain non-discriminatory, including for white people, men, and other “majority” groups. In addition, employers would be well served by auditing their DEI programs and policies for legal compliance, as well as controls around internal and external communications. DEI continues to be an area ripe for scrutiny, and employers with unclear messaging around diversity will be vulnerable to legal action.