Does the U.S. Supreme Court Ruling on College Admissions Have Implications for Corporate DEI Initiatives?

In the aftermath of the recent U.S. Supreme Court decision striking down the race-conscious admissions systems of two universities in a six-to-three decision (the “SFFA Decision”), commentators are asking about the impact of the ruling on corporate employment decisions; diversity, equity and inclusion (DEI) programs; and environmental, social and governance (ESG) efforts.

To be clear, the Court’s decision did not concern employment-related decisions by private employers, but rather dealt solely with student admission decisions pursuant to college admission programs that consider race. Such “affirmative action” programs are governed by the Equal Protection Clause of the 14th Amendment, which prohibits discrimination by state governments, and Title VI of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color and national origin in any program assisted by federal funding. On the other hand, the employment decisions of private employers are separately governed by Title VII of the Civil Rights Act (“Title VII”), which protects employees and job applicants from employment discrimination based on race, color, religion, sex and national origin, along with other federal, state and local employment anti-discrimination laws. Employer DEI initiatives and affirmative action efforts have always operated under a different framework than the affirmative action process used by educational institutions.

Nonetheless, it is possible that companies may face questions from boards, shareholders and employees about possible implications of this decision on DEI, ESG and human capital management in general. The simple answer to these questions is that this decision specifically concerned affirmative action programs by universities, and not employment decisions by private employers. Consideration of race in employment decisions under Title VII continues to be prohibited except under the extremely limited circumstance wherein an employer undertakes a voluntary affirmative action program. This option has been available to employers since a 1979 U.S. Supreme Court case, but such programs are still relatively rare, and require an employer-conducted analysis showing a history of discrimination (among other things).¹ Instead, efforts to recruit qualified minorities, women, persons with disabilities, and covered veterans take place through employer efforts such as training programs, outreach, and other positive steps for the recruitment and advancement of underrepresented groups.

In addition, most employers who are federal contractors and subcontractors are subject to various affirmative action requirements. But those requirements have never permitted the employer to set quotas or otherwise make preferential employment decisions based on protected characteristics.

In response to the SFFA Decision, Equal Employment Opportunity Commission Chair Charlotte A. Burrows issued a statement reiterating that the decision has no impact on employer DEI initiatives or EEO policies. She stated: “It remains lawful for employers to implement diversity, equity, inclusion, and accessibility programs that seek to ensure workers of all backgrounds are afforded equal opportunity in the workplace.”

But the Court’s ruling also comes at a time when investor² interest in diverse boards and workforces is at an all-time high, while an anti-ESG movement takes aim at corporate DEI efforts and policies. For example, Florida recently passed legislation setting parameters on workplace diversity training programs³, and over the last year conservative legal groups have filed complaints regarding the alleged hiring practices of publicly traded companies.⁴

We continue to advise companies to work with counsel to ensure that all employment, ESG- and DEI-related policies, disclosures, webpages and efforts are in compliance with Title VII and other applicable employment anti-discrimination laws, and to keep up-to-date on developments in the law. These steps may help companies mitigate risks related to potential anti-DEI litigation in the wake of this decision by the U.S. Supreme Court.

Companies can also contact V&E to discuss these developments and their implications.

¹See United Steelworkers of America v. Weber, 443 US 193 (1979); EEOC, Questions and Answers to Clarify and Provide a Common Interpretation of the Uniform Guidelines on Employee Selection Procedures, Q&A 12 (Mar. 1, 1979), available at https://www.eeoc.gov/laws/guidance/questions-and-answers-clarify-and-provide-common-interpretation-uniform-guidelines (last accessed July 3, 2023).

²See, e.g., Proxy Voting Guidelines for U.S. Securities, BlackRock Investment Stewardship (Jan. 2023), https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf (“our view [is] that diversity of perspective and thought—in the boardroom, in the management team and throughout the company—leads to better long-term economic outcomes for companies”) (last accessed July 3, 2023).

³See Press Release, https://www.flgov.com/2022/04/22/governor-ron-desantis-signs-legislation-to-protect-floridians-from-discrimination-and-woke-indoctrination/ (last accessed July 3, 2023).

⁴See, e.g., the National Center for Public Policy Research suit against Starbucks’ officers and directors, citing the DEI section of Starbucks’ website, https://nationalcenter.org/ncppr/2022/08/30/national-center-for-public-policy-research-v-starbucks-ceo-howard-schultz-et-al/ (last accessed July 3, 2023); and America First Legal’s “investigation request” regarding Mars, Incorporated’s alleged quotas for diverse hiring, citing press releases on its website, https://aflegal.org/america-first-legal-files-federal-civil-rights-complaint-against-mars-inc-for-illegal-racist-and-sexist-hiring-practices/ (last accessed July 3, 2023).

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.