By Daniel Wiessner
(Reuters) – President Donald Trump has issued an executive order designed to eradicate workforce diversity, equity and inclusion (DEI) initiatives in the federal government and the private sector. Trump suggested that some companies will face investigations and legal action if their programs are deemed to be discriminatory.
WHAT IS DEI?
The term refers to a broad array of programs and policies that supporters say promote the fair treatment and full participation of groups that historically have been underrepresented or faced discrimination. DEI can include hiring and promotion policies, workplace training on “unconscious bias,” pay equity audits, mentor and internship programs, employer-sponsored social events and many other initiatives.
Some DEI policies are designed to address historical discrimination by ensuring employment decisions company-wide are based entirely on merit and not existing bias – for example, by eliminating preferences for job applicants who attended elite universities. Others offer opportunities to specific groups of workers or job applicants, like training programs for women or internships for Black or Hispanic workers.
WHEN DID DEI INITIATIVES BECOME MORE COMMON?
Companies have been focused on the diversity of their workforce for decades, but contemporary DEI initiatives took off after nationwide protests in 2020 over police shootings of unarmed Black people. Many companies adopted policies designed to boost the recruitment, hiring, and promotion of minority workers and raise awareness of historical and structural biases to show their alliance with civil rights causes.
That triggered swift backlash from Republicans and conservative groups, who claim that many DEI programs shift discrimination from one set of workers to another. They also say that a 2023 U.S. Supreme Court ruling barring race-conscious college admissions policies applies in the employment context, an issue that is far from settled. The high court’s decision and subsequent threats of legal action by conservative groups led many businesses to rethink their DEI policies.
More recently, several major companies including Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN), and Meta (NASDAQ:META) have walked back their DEI policies in the face of public pressure and after the November election victory by Trump, who has long criticized DEI initiatives.
WHAT DOES TRUMP’S EXECUTIVE ORDER DO?
The order issued Tuesday directs federal agencies to terminate diversity-related rules and programs and remove references to “DEI principles” from grants and contracts. The order also seeks to dissuade private companies from using DEI programs and hiring on the basis of race and sex – what the order called “illegal DEI discrimination and preferences.” It directs all federal agencies to each identify up to nine publicly-traded companies or other entities that might be subject to civil investigation.
Trump also repealed several executive orders, such as a 1965 order barring employment discrimination by federal contractors that has for decades been seen as a key tool to spur private companies to further diversity efforts. Separately on Tuesday, the White House in a memo ordered federal agencies to place employees who work on DEI initiatives on paid leave and later lay them off.
CAN DEI INITIATIVES BE ILLEGAL?
It depends on what form they take. They can be, particularly if an employer sets explicit quotas or states a preference for specific groups, such as women or people of color. A federal law, Title VII of the Civil Rights Act of 1964, prohibits employment discrimination on the basis of sex, race, national origin, religion and other traits.
But, many corporate DEI initiatives do not establish numerical targets or explicitly mention protected traits like race and sex, and there is little consensus among courts over what types of programs or policies violate Title VII and other laws. Several companies such as CBS, Morgan Stanley (NYSE:MS), and newspaper publisher Gannett are facing lawsuits claiming they pushed out white men to further diversity goals, but courts have not issued final rulings in those cases.
Opponents of DEI policies argue that many of them necessarily violate Title VII by factoring race, sex and other characteristics covered by the law into employment decisions. Companies have said that their policies are crafted to avoid any bias and that, in many cases, DEI policies better enable them to comply with anti-discrimination laws.
WILL THE GOVERNMENT SUE BUSINESSES OVER DEI PROGRAMS?
The order suggests that employers could face legal action, though it is light on details. The Equal Employment Opportunity (SO:FTCE11B) Commission, which enforces Title VII, can push employers to settle discrimination complaints by workers and sue them if they do not. Trump this week appointed Andrea Lucas, the EEOC’s lone Republican member, as its acting chair. Lucas has said that many common DEI programs are likely unlawful, particularly in light of the Supreme Court ruling on college admissions.
Employers could also potentially face lawsuits from the U.S. Department of Justice, which is more directly controlled by the president than the EEOC, an independent agency. And federal contractors could be hit with penalties and have their contracts terminated by the U.S. Department of Labor.
