In response to mounting pressure from all sides, employers are racing to implement robust diversity, equity, and inclusion (DEI) initiatives. Increasingly, they’re placing a greater emphasis on establishing goals to address the underrepresentation of females and minorities in the workforce. Voluntary hiring and/or promotion goals are an effective diversity tool if properly implemented. When the goals are treated as quotas, however, employers will find themselves facing significant legal liability.
Use Goals, Not Quotas
To be legally compliant, goals should not be treated as rigid “quotas” but rather as aspirational targets. However, Title VII of the Civil Rights Act of 1964 and Executive Order 11246 prohibit employment discrimination on the basis of race and sex, among other categories. Therefore, the U.S. Supreme Court has long held that quotas and/or employment decisions based solely on an individual’s protected status like race or gender are unlawful.
Title VII’s legal prohibitions against using race or gender in employment decisions have been interpreted to include voluntary affirmative action goals that use protected status as a “plus factor” when making employment decisions between or among equally qualified individuals. The Supreme Court has held that race- or gender-conscious decisions must be used sparingly and be narrowly tailored and are appropriate only when the use of race or gender factors are part of an affirmative action plan that:
- Is designed to remedy a manifest imbalance in a traditionally segregated job;
- Is temporary; and
- Doesn’t unnecessarily trammel the rights of nonbeneficiaries.
Only in those very limited circumstances can an individual’s protected status be considered when making employment decisions. As a result, nonremedial affirmative action goals, if aimed at promoting diversity or other well-intended objectives rather than remedying unlawful discrimination, could be found to violate Title VII.
Nevertheless, the Supreme Court has been clear that Title VII doesn’t prohibit employers from developing and implementing diversity initiatives that are designed to provide a fair opportunity for all individuals, regardless of their race, as long as the employer does not engage in race- or gender-based decision making. Courts have consistently found policies expanding candidate pools are valid, provided race and gender aren’t considered when making selection decisions.
Tie Compensation to DEI Efforts, Not Outcomes
The concept of tying bonuses to diversity and inclusion objectives has grown in popularity. While some believe the tactic is a valuable practice for reaching diversity and inclusion goals, concerns remain that linking bonuses to making progress toward achieving a diversity goal may cultivate hiring and promotion quotas.
A diversity initiative that ties bonuses or other financial incentives to outcomes (i.e., meeting certain hiring and/or promotion metrics for women or minorities) incentivizes managers to make hiring and promotion decisions based on gender and/or race. As a result, any such program would be subject to and need to satisfy the requirements set forth in Weber.
Accordingly, it is recommended that any financial incentives be tied to diversity efforts instead of outcomes. Under this plan, managers would be rewarded for leading efforts or initiatives consistent with an employer’s diversity and inclusion goals.
Employers have great latitude in designing a DEI initiative, but they must be cognizant of the legal guardrails that must be followed. Gender-, race-, and ethnicity-based decisions are unlawful. Thoughtful analysis to identify the specific barriers to DEI and implementation of targeted legally compliant programs and frequent monitoring will lead to sustained change.