Increased pushback of employers' DEI programs has law firms mobilizing

As employers across the country face increasing scrutiny of their diversity, equity and inclusion efforts following the U.S. Supreme Court’s June reversal of affirmative action in college admissions, law firms are stepping up to provide specialized teams to audit employers’ efforts and defend them in litigation.

In the past week, Davis Wright Tremaine and Simpson Thacher & Bartlett have announced new lawyer teams to address clients’ DEI issues while Gibson, Dunn & Crutcher launched a task force in late July. The new groups have combined lawyers with experience in employment law, government investigations, DEI and ESG work, corporate governance and appellate law.

In interviews, attorneys involved in the groups said their clients are facing scrutiny from a variety of stakeholders such as politicians, conservative think tanks, consumers and shareholders. The pushback against employers’ diversity efforts has come in the form of legal threats and lawsuits targeting hiring practices, affinity groups, performance management, diversity training, vendor diversity and fiduciary duties to investors.

“This [issue] is going to continue to emerge in the gray area in what constitutes an unfair advantage. When does a diversity hiring goal or initiative cross the line into actually holding back someone who is white? There’s always been a gray area around that,” said Vicky Slade, co-leader of the new DEI strategic consulting, support and defense group at Davis Wright Tremaine.

Slade said she’s observed varying levels of compliance with civil rights laws and employment laws upon investigating companies’ DEI efforts. “I have seen some companies become so engaged in DEI and motivated that there can be a misunderstanding about what are we actually doing here,” Slade said. “Companies need to be reminded it’s not about just selecting people based on race.”

DEI assessments serve varying needs

At Simpson Thacher, a new client offering — equity and civil rights reviews — effectively amounts to an audit of a company’s diversity efforts. The team, led by former federal prosecutors Martin Bell and Alicia Washington, aims to lend credibility to companies’ assessments of their own policies.

“Those kick-the-tires type of surveys are often proactive but sometimes brought on by a shareholder action,” said Bell.

Private companies may be interested in equity reviews for internal reasons, too. “Sometimes the audience you’re looking to inspire confidence in goes beyond shareholders. Sometimes it’s your own workforce in response to an incident that’s taken place, or watchdog groups responding to a story in the media,” Bell continued. “Either way, you want to be able to allay concerns about the independence or rigor of such a review by saying, ‘Hey, we are bringing in Simpson Thacher, they are at the vanguard of what they do.’”

However, while a series of lawsuits and legal threats against companies like Amazon, Starbucks and Comcast has caused some employers to reconsider the scale and scope of their DEI efforts, companies also face risk by removing DEI policies that protect against workplace discrimination.

“When something receives new scrutiny and there are letters from senators in the news, it makes sense to pause and be concerned,” said Slade. “There has been much more questioning of DEI programs and should we be doing this anymore. It’s just as important for employers to remember why they are doing it … there is just as much risk in scaling back as there is in forging ahead.”

The extent of the chilling effect brought on by recent DEI challenges has yet to be realized, said Washington of Simpson Thacher, but the fact that some companies turned to accounting firms and other consultants for DEI policy makes compliance gaps more common.

“At this point, clients are trying to understand whether DEI policies, practices and programs expose them to legal risk given the potential for increased scrutiny,” Washington said. “Given the landscape, it’s all the more critical for companies to have the benefit of counsel while exploring what they can and cannot do in this space.”