Workplace Diversity—Getting It Right With Goals, Not Quotas

Lowenstein Sandler LLP’s Julie Levinson Werner explores workplace diversity and inclusion efforts and says adopting quotas of a fixed percentage of individuals in certain roles by a certain date based upon race, gender, or other characteristics is legally risky. She suggests steps employers can take to reconcile the prohibition on unlawful race discrimination with the undisputed value and goal of improving diversity of thought, perspective, and experience in the workplace.

Diversity, equity, and inclusion (DEI) are among the top corporate buzz words of 2020, perhaps having as much of an impact on race in 2020 as #MeToo had on sexual harassment just a few years ago. But what does DEI mean, and what are its legal limits?

DEI efforts are designed to increase the breadth of perspectives in the workplace by expanding opportunities for underrepresented groups through the development and promotion of equitable systems and initiatives to make sure historically underrepresented populations feel welcome, and have equal access to career development opportunities.

After George Floyd’s death and resulting demonstrations of grief and rage, corporate America made efforts to further embrace DEI in various ways. Making a public statement against racism, check. Posting a “black empty square” on Blackout Tuesday, check. Encouraging employees during quarantine to participate in a Zoom “How to Be an Antiracist” book club, check.

But what about more meaningful and substantive changes to improve the number of underrepresented employees within an organization? How should a company set and measure DEI goals?

Over the summer, many prominent corporations publicly announced they would achieve a certain percentage increase in their number of Black executives and employees over the next five years. In October, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced that it had opened a legal inquiry into whether Wells Fargo and Microsoft had violated anti-discrimination laws in their public statements committing to increase Black leadership.

Is It Legal?

A commitment to increasing the presence of minorities in senior level positions is an admirable goal, to be sure, but is it legal? Title VII of the Civil Rights Act prohibits discrimination on the basis of race, color, religion, sex, or national origin. Employers may not engage in policies or practices that, while not intended to discriminate, have, in fact, a disproportionately adverse effect on minorities.

Before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional, disparate impact, the employer must have a strong basis in evidence to believe that it will be subject to disparate impact liability if it fails to take the race-conscious, discriminatory action.

In 2009, in Ricci v. DeStefano, the U.S. Supreme Court held that the City of New Haven, Conn., could not disregard the results of a firefighter promotional test even though white candidates had outperformed minority candidates. Although the city had the noble goal of trying to limit the test’s disparate impact upon minorities, the Supreme Court held that discarding the test results constituted unlawful discrimination against the white candidates based upon their race.

What Can Employers Do?

So how can an employer reconcile the prohibition on unlawful race discrimination with the undisputed value and goal of improving the diversity of thought, perspective, and experience in the workplace?

According to reports by McKinsey & Company and the Peterson Institute for International Economics, gender and ethnic diversity are clearly correlated with profitability. McKinsey, for example, concluded that “[c]ompanies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability.”

It may boil down to nuance.

There is a difference between committing to hire and promote a certain percentage of individuals on the basis of their skin color or other factors and committing to interview and/or consider these individuals for hire or promotion.

The “Rooney Rule” is a commitment, first used by the National Football League, and now by other businesses, to interview at least a certain number of minority candidates for certain positions. Many law firms have made a similar commitment through adoption of Diversity Lab’s Mansfield Rule.

Expanding opportunities for everyone within all levels of an organization makes sense from a financial, legal, and moral perspectives. The question is how to achieve those financial and moral goals without running afoul of the law.

Suggestions for businesses include:

  • Implement the framework of the Rooney Rule/Mansfield Rule by committing to meaningfully interview and consider at least a certain number of candidates from underrepresented populations.
  • Evaluate methods of recruiting, and consider expanding outreach to underrepresented populations by, for example, including historically Black colleges and universities (HBCUs) and a broader range of schools in on-campus recruitment efforts.
  • Be purposeful and intentional when creating internships, scholarships and other opportunities.
  • Retain and nurture existing talent by creating training and mentorship programs, which are even more important now, when so many employees are working remotely and feeling isolated and unsupported.

Adopting quotas of a fixed percentage of individuals in certain roles by a certain date based upon race, gender, or other characteristics, however, is legally risky.

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