As Diversity, Equity and Inclusion Comes Under Legal Attack, Companies Quietly Alter Their Programs

Sophia Danner-Okotie’s has ambitious plans for her Nigerian-inspired clothing line but a sense of dread has punctured her optimism as she watches a legal battle being waged against a small venture capital firm that has provided funding instrumental to her boutique brand’s growth.

The case against the Fearless Fund alleges that one of its grant programs discriminates against non-Black women and asks the courts to imagine a similar program designed only for white applicants. It is among a growing list of lawsuits against corporate diversity and inclusion programs that are making their way through the courts this year.

Most have been filed by conservative activists encouraged by the Supreme Court’s June ruling ending affirmative action in college admissions and are now seeking to set a similar precedent in the working world.

{snip}

Dozens of prominent companies have already been targeted, as well as a wide array of diversity initiatives, including fellowships, hiring goals, anti-bias training and contract programs for minority or women-owned businesses.

Some challenges have focused on policies adopted after the 2020 protests over George Floyd’s killing by police as companies pledged more efforts to redress racial inequalities in the workplace. But others have targeted decades-old diversity programs that anti-affirmative action advocates have long tried to dismantle.

Diversity and inclusion experts say the legal backlash is already having a chilling effect over corporate efforts to address workplace inequality at a time when investment and interest in such initiatives have slowed following the post-Floyd surge.

Job openings for diversity officers and similar positions have declined in recent months. The combined share of venture capital funding for businesses owned by Black and Latina women has dipped back to less than 1% after briefly surpassing that threshold — at 1.05% — in 2021 following a jump in 2020, according to the nonprofit advocacy group digitalundivided.

The case against the Fearless Fund, which provides early-stage funding to businesses led by women of color, exemplifies the unpredictable legal landscape.

In late September, a federal judge in Atlanta refused to block a Fearless Fund grant contest for Black women business owners, saying they are donations protected by the First Amendment and the lawsuit was likely to fail. But days later, a three-judge federal appeals panel suspended the contest, calling it “racially exclusionary” and saying the suit was likely to succeed.

{snip}

But now, future funding from the program is in jeopardy. The lawsuit against the Fearless Fund is being brought by the American Alliance for Equal Rights, a nonprofit founded by anti-affirmative action activist Edward Blum, the man behind the college admissions cases the Supreme Court ruled on in June. The outcome of the case could be a bellwether for similar diversity programs.

{snip}

Faced with a messy legal landscape, companies are being cautious. Most major companies have stuck by diversity initiatives that many ramped up in the face of pressure from some shareholders, employees and customers. Starbucks and Disney are among companies that have so far prevailed in court against challenges to their inclusion policies.

But some have made changes to diversity programs to try to protect them from legal scrutiny.

Among those are two prominent law firms that had faced lawsuits by Blum’s group. The firms, Morrison Foerster and Perkins Coie, opened their diversity fellowship programs to all applicants of all races in October, changes the companies said were in the works before Blum’s lawsuits, which he subsequently dropped.

In February, Pharmaceutical giant Pfizer dropped race-based eligibility requirements for a fellowship program designed for college students of Black, Latino and Native American descent, even though a judge had dismissed a lawsuit against the program two months earlier. Despite the change, the conservative nonprofit suing Pfizer, Do No Harm, is appealing the lawsuit’s dismissal, arguing the fellowship’s goals remain the same.

In May, Comcast said business owners of all backgrounds would be eligible to apply for a grant program originally intended for women and people of color when it launched in 2020. The telecommunications settled a lawsuit last year over the program brought by the conservative Wisconsin Institute for Law & Liberty on behalf of the white owner of a commercial cleaning business.

The Wisconsin Institute filed another lawsuit in October, this one on behalf of two construction firms. The lawsuit seeks to dismantle the U.S. Department of Transportation’s Disadvantaged Business Enterprise program, which dates back to the Reagan administration and requires that 10% of funds authorized for highway and transit federal assistance programs be expended with small businesses owned by women, minorities or other socially and economically disadvantaged people.

Dan Lennington, an attorney with the Wisconsin Institute, said he considers Comcast’s changes “progress,” but the anti-affirmative action movement is looking for a broader victory that could change case law on workplace diversity programs, and the lawsuit against the DOT has that potential.

The Supreme Court’s ruling on affirmative action “opened up a whole new world,” Lennington said. {snip}

{snip}