In our first State AG Pulse episode in season 5, the State AG Group’s Chris Allen and Ann-Marie Luciano get a hot-off-the presses report from their colleague in the firm’s L&E Group, Mike Schmidt, on federal and state guidance to companies regarding their DEI programs. They review the joint guidance from the EEOC and USDOJ, survey what Republican and Democratic AGs have said on this topic, and offer some suggestions to companies for navigating this minefield, especially those that have government contracts or receive federal grant money.
(00:33): Chris Allen introduces today’s speakers: himself, Ann-Marie and Mike Schmidt, and turns it over to Ann-Marie to introduce the topic of today’s podcast.
(2:27): Ann-Marie explains that the Trump administration has issued two executive orders related to diversity, equity and inclusion. Mike elaborates that this was an issue President Trump campaigned on and that he was very quick to issue those executive orders on DEI after inauguration day.
(3:52) Mike goes on to explain that what’s really making news here is that the recipient or the contracting party to a federal contract has to certify that it does not operate any programs promoting DEI that would violate applicable federal anti-discrimination laws. He outlines the litigation that has ensued from the EOs, including the 4th Circuit Court of Appeals’ rejection of the nationwide injunction prohibiting the enforcement of virtually all components of President Trump’s DEI executive orders. As of right now, Mike concludes, the executive orders are back in play, together with the certification requirements and some of the attendant risks.
(6:08) Chris asks whether the certification requirements are actually in effect or whether we are still waiting for the agencies to provide guidance.
(6:28) Mike responds that on March 19, the EEOC and the USDOJ did come out with some joint guidance, “What to Do If You Experience Discrimination Related to DEI at Work”, although the more helpful advice is contained in the 11 accompanying FAQs. The FAQs start off with a plug for the EEOC’s services and the grievance process for individuals who feel they have been discriminated against. FAQ #4 confirms that Title VII applies equally to all workers, not just members of historically underrepresented groups. Applicants, trainees and apprentices are covered alongside employees. FAQ #6 states that it’s not just employers with 15 or more employees who are subject to Title VII when it comes to DEI-related claims, but also employment agencies, trainers and labor organizations. And the FAQ also notes that employers can be liable for the actions of their agents.
(10:32) In FAQ #7, the EEOC discusses when a DEI initiative, policy, program, or practice is unlawful under Title VII. The test is whether such initiatives lead to an employment-related decision that is motivated in whole or in part by race, sex, or another protected characteristic. The EEOC further affirms that resource or affinity groups are not per se illegal as long as membership of those groups is not limited to people with a particular protected characteristic. FAQ #9 reaffirms that client or customer preference or interest is not a defense in a discrimination case.
(12:52) The remainiing FAQs talk about DEI training. An employee may be able to show that diversity or other DEI-related training created a hostile work environment, although determination as to illegality will be made on a case by case basis.
(14:46) Mike sums up by saying that Title VII has not changed. It continues to prohibit employment-related actions that are motivated by impermissible protected characteristics. The EEOC will deem DEI policies and initiatives that violate Title VII to be illegal.
(15:12) Ann-Marie asks how companies can mitigate against employees complaining that their DEI programs are unlawful. Mike responds that it is more important than ever for organizations to have internal complaint procedures and recourse mechanisms for employees who feel that they’ve been discriminated against for any reason, including DEI, to minimize the likelihood that employees will seek recourse in litigation or from an agency.
(16:43) Chris asks how AGs are weighing in on this and what impact that is having. Ann-Marie explains that there have been a wide variety of responses at the state level which is feeding confusion and uncertainty. A number of Democratic AGs have argued that the EOs, because they go beyond affirming existing law, are themselves unlawful. They contend that DEI is not only lawful, but in fact the removal of DEI policies or programs may expose a business to the possibility of enforcement or future liability. Whilst the AGs do provide practical advice on how to design a compliant DEI program, it is not clear that such a program would meet the federal requirements set out in the EOs.
(18:40) Mike suggests that the key issue is that uncertainty and litigation are pushing companies to extremes to avoid becoming a target. Ann-Marie cites actions by the Missouri AG against Starbucks and by the Florida AG against Target as examples of AGs using their broad powers to enforce against businesses that they believe are violating federal or state law.
(20:50) Mike describes the conundrum of a company operating in both blue and red states that may face conflicting AG positions on DEI. Chris makes the point that in the case of Target, the hook is the SEC Act, which exemplifies the creative ways AGs are finding to hold companies accountable in the absence of clear guidance around DEI laws.
(22:34) Ann-Marie raises the issue that in states with their own False Claims Acts, requirements for state government contractors or for the receipt of state funding may conflict with federal rules. All the speakers conclude that the ground is constantly shifting and that there is a great deal of uncertainty. At a minimum, companies need to examine the structure of and language used to describe their EEO and DEI programs and initiatives to minimize the risk that they may become a target. They should also make good faith efforts to comply with the EOs in order to minimize the risk of a False Claims Act claim. Ann-Marie mentions the availability of a waiver process in some states as a mean of navigating conflicting state and federal obligations. Chris’ advice is to clients is that AGs are not going to take their foot off the gas with respect to perceived violations of their laws because they are their own sovereigns and have their own interests.
(27:51) Mike agrees that there is heightened sensitivity around reducing barriers to opportunity and organizations should take the time to review the language they use and their programs and initiatives to make sure they are in compliance with the EOs. Chris’ parting word is that if a company really thinks that what it’s doing is in the interest of reducing barriers, they should not be afraid to engage with the AGs, who will welcome the opportunity for a dialogue.
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