(June 29, 2023) - Andrea R. Lucas, Commissioner of the U.S. Equal Employment Opportunity Commission, explains that the Supreme Court ruling on affirmative action, as well as likely Supreme Court cases next term, heighten the risks already posed by certain corporate diversity programs.

Affirmative action in higher education suffered a major loss after the Supreme Court's decision today in Students for Fair Admissions, Inc. v. Harvard and Students for Fair Admissions, Inc. v. UNC. But in the employment context, affirmative action appears to be more prevalent than ever.

Most companies don't use the label "affirmative action" in their diversity programs. Nevertheless, from the focus on ESG to the rise of "equity" parlance in corporate diversity initiatives, companies remain under heavy pressure to take race-conscious employment actions.

This pressure has been enabled by common misunderstandings of the civil rights rules governing employers, influenced by the previous status of affirmative action in higher education admissions. However, the agency where I serve as a Commissioner (https://bit.ly/3Xw41hY), the U.S. Equal Employment Opportunity Commission (https://bit.ly/43kC0LT), is charged with enforcing equal opportunity at work, not "equity." Our mission is to prevent and eliminate discrimination, not impose "equitable" outcomes.

Poorly structured voluntary diversity programs pose both legal and practical risks for companies. Those risks existed before the Supreme Court's decision today. Now they may be even higher.

As a Commissioner, I routinely conduct outreach to help employees and employers understand and comply with the laws the EEOC enforces. I also keep a close eye on trends in employers' practices and policies. In my experience, many employers — even large, sophisticated companies — don't fully appreciate the distinction between what the Supreme Court previously deemed permissible "affirmative action" in the context of higher education admissions versus in the employment context.

There are distinct but similar statutory sections of the Civil Rights Act — Title VI and Title VII, respectively — that govern the education and employment contexts. Prior to today's ruling, the Court permitted universities to use race as a factor in admissions, based on their interest in promoting "diversity." Not so in the employment context. The Court never has blessed employers taking race-conscious employment actions based on interests in workforce diversity.

Today's Supreme Court decision rejects diversity interests as justifications for race-based university admissions decisions. This brings the rules governing higher education into closer parallel with the more restrictive standards of federal employment law. Employers generally are not permitted to take employment actions motivated by protected characteristics.

The high threshold for exceptions only proves the rule. Since the 1970s, the Supreme Court has authorized employers to consider race (and sex) only in very limited circumstances as part of voluntary, remedial affirmative action plans. These remedial plans must be temporary, narrowly tailored to the company or industry at issue, and justified by a "strong basis in evidence" that remedial action is necessary. A general interest in diversity or "equity" is not sufficient to allow race- or sex-motivated employment actions. Nor are references to societal discrimination, or differences between the composition of a company's workforce and "society," or the company's customer base.

Likewise, even in the limited contexts in which affirmative action currently is permitted, an employer still cannot use racial or sex-based quotas. Companies also cannot take race-motivated actions to maintain a demographically "balanced" workforce.

Even though the Court's ruling today does not alter federal employment law, now is a good time for employers to review their compliance with existing limitations on race- and sex-conscious diversity initiatives. Companies seriously err if they evaluate their risk under federal employment law by mistakenly referring to (now outdated) standards for higher education admissions which had approved of diversity-motivated affirmative action. And today's ruling only heightens those employers' practical risks by reemphasizing the Supreme Court's rejection of diversity, nebulous "equity" interests, or societal discrimination as justifying actions motivated — even in part — by race, sex, or other protected characteristics. Companies continuing down this path after today may violate federal antidiscrimination laws.

Moreover, two Title VII cases the Supreme Court may hear next term could have further ramifications for corporate diversity programs. Federal courts across the country uniformly hold that Title VII applies to hiring, promotion, and termination decisions. But recently, the EEOC and DOJ have advocated a broader, textualist reading of what constitutes "adverse action" in the workplace under Title VII — and some federal appellate courts have begun to agree. This issue will be before the Supreme Court next term if it agrees to hear Muldrow v. St. Louis and Davis v. Legal Services Alabama, Inc.

A more expansive view could have serious implications for certain diversity programs. The EEOC and DOJ's existing position is that Title VII bars discrimination in all actions affecting "terms, conditions, or privileges of employment" — including actions falling short of hiring, firing, or promotion. This expansive reading of Title VII could implicate a host of increasingly popular race-conscious corporate initiatives: from providing race-restricted access to mentoring, sponsorship, or training programs; to selecting interviewees partially due to diverse candidate slate policies; to tying executive or employee compensation to the company achieving certain demographic targets; to offering race-restricted diversity internship programs or accelerated interview processes, sometimes paired with euphemistic diversity "scholarships" that effectively provide more compensation for "diverse" summer interns.

Between today's wake-up call on affirmative action restrictions, and what may be coming down the pike from the Court next term on the scope of adverse actions covered by Title VII, there's never been a better time for companies to take a hard look at their diversity programs.