The Legal Battle Over Diversity Programs Shakes the Corporate World

New York – Sophia Danner-Okotie’s Nigerian-inspired clothing line has ambitious plans for growth. However, her optimism is tainted with fear as she watches a legal battle unfold against a small venture capital firm that has provided crucial funding for her boutique brand. The case against the Fearless Fund alleges that one of its grant programs discriminates against non-Black women, and various lawsuits challenging corporate diversity and inclusion programs are making their way through the courts this year.

Most of these lawsuits have been filed by conservative activists who were encouraged by the Supreme Court’s June ruling that ended affirmative action in college admissions. They are now seeking to set a similar precedent in the working world. The battle between activists and corporations has had its fair share of victories and setbacks for both sides. As a result, some companies have started revising their diversity programs in anticipation of potential legal challenges. There is growing expectation that the conservative-dominated Supreme Court will eventually take up this issue.

One conservative activist, Christopher Rufo, claimed a recent victory with the resignation of Harvard’s first Black woman president, Claudine Gay. Rufo has framed Gay’s appointment as the culmination of diversity and inclusion efforts that have marginalized conservative voices in higher education. On social media, Rufo declared his determination to “abolish DEI ideology from every institution in America.”

Notably, dozens of prominent companies and various diversity initiatives have already been targeted by such lawsuits. These include fellowships, hiring goals, anti-bias training, and contract programs for minority or women-owned businesses. Some of the challenges have focused on policies adopted after the 2020 protests over George Floyd’s killing, while others have targeted long-standing diversity programs that anti-affirmative action advocates have long sought to dismantle.

The legal backlash against corporate diversity programs is already having a chilling effect on efforts to address workplace inequality. Companies are becoming cautious, and job openings for diversity officers and similar positions have declined in recent months. Additionally, the share of venture capital funding for businesses owned by Black and Latina women has dropped back below 1%, after briefly exceeding that threshold in 2021, according to the advocacy group digitalundivided.

The case against the Fearless Fund, which supports businesses led by women of color, exemplifies the unpredictable legal landscape. While a federal judge in Atlanta initially refused to block a Fearless Fund grant contest for Black women business owners, a three-judge federal appeals panel later suspended the contest, calling it “racially exclusionary” and indicating that the lawsuit was likely to succeed.

The uncertainty surrounding legal challenges to diversity programs puts future funding at risk, affecting entrepreneurs like Danner-Okotie. She had found success with her clothing brand during the COVID-19 pandemic, but faced obstacles in securing financial support from banks due to the perception of risk associated with her handmade Nigerian designs. The Fearless Fund played a crucial role in her business’s growth, but now its grant program is in jeopardy due to the ongoing lawsuit.

Amid the legal turmoil, some companies have made changes to diversity programs in an attempt to protect themselves from legal scrutiny. Two prominent law firms, Morrison Foerster and Perkins Coie, reopened their diversity fellowship programs to all applicants of all races. In a similar vein, Pfizer dropped race-based eligibility requirements for a fellowship program designed for college students of Black, Latino, and Native American descent. Comcast also made changes to a grant program originally intended for women and people of color to allow business owners of all backgrounds to apply.

While companies are striving to defend their diversity initiatives in court, conservative activists argue that these programs amount to discriminatory hiring practices. They point to corporate documents that share data on efforts to increase the representation of underrepresented groups in the workforce. Yet, it remains challenging to prove that companies are making hiring decisions based on race, as this would be illegal under Title VII of the 1964 Civil Rights Act. The court’s interpretation of corporate policies and the subtle pressures of Diversity, Equity, and Inclusion (DEI) initiatives play significant roles in determining the legal outcomes of such cases.

Overall, the ongoing legal battles surrounding corporate diversity programs have created a gray area in hiring practices. As the conservative movement against affirmative action gains momentum, the Supreme Court ruling on affirmative action is seen as a potential game-changer. It has injected new life into the debate and could lead to significant changes in workplace diversity programs. Oral arguments for the Fearless Fund case are scheduled for January 31, offering a glimpse into what lies ahead for similar initiatives.