Court Enjoins Bulk of President Trump’s DEI Executive Order, Democratic State AGs Offer Guidance on ‘Lawful’ Practices

In the first days of his second administration, President Trump issued a barrage of executive orders, including many focused on labor and employment issues. Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” targets diversity, equity, and inclusion (DEI) and diversity, equity, inclusion, and accessibility (DEIA) programs of federal contractors and the private sector more broadly. As a result, many employers have pulled back on these initiatives, fearful of legal action by the federal government and/or private plaintiffs seeking to capitalize on the positions outlined in the executive order. 

Injunction Issued

On Friday, February 21, U.S. District Judge Adam B. Abelson issued a nationwide preliminary injunction and ruled that it covers “similarly situated non-parties” across the country. The 63-page Memorandum Opinion blocks the certification provision requiring grantees/contractors to certify that they do not “operate any programs promoting DEI that violate any applicable Federal antidiscrimination laws" and the provision that the AG may prosecute “illegal” diversity, equity, and inclusion programs in the private sector.  The court found that the termination and DOJ enforcement threat provisions are unconstitutionally vague, and the certification and enforcement threat provisions to be illegal viewpoint discrimination in violation of freedom of speech guaranteed by the First Amendment.  However, the court refused to enjoin the AG from investigating or reporting on diversity, equity, and inclusion provisions.   

“Plaintiffs have amply shown they are entitled to a preliminary injunction that protects them, and their members, from the substantial, irreparable harms they have shown are being caused by the Challenged Provisions and Defendants’ conduct pursuant to those provisions,” Judge Abelson wrote.

Challenges to the EO are pending in several other federal courts and it remains to be seen what, if any, action those courts will take in the wake of Judge Abelson’s ruling.

AGs' Guidance

Prior to the issuance of the injunction, and in response to the EO, 16 Democratic state attorneys general issued a joint memorandum urging employers to continue using lawful diversity, equity, inclusion and accessibility programs in their workplaces. In “Multi-State Guidance Concerning Diversity, Equity, Inclusion and Accessibility Employment Initiatives,” AGs from Arizona, California, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, and Vermont argue that the executive order “conflates unlawful preferences in hiring and promotion with sound and lawful best practices for promoting diversity, equity, inclusion, and accessibility.”  Even leaving aside the ultimate fate of the DEI EO, this guidance could become helpful assistance for employers defending reverse discrimination and other challenges to their DEI programs.

The AGs offer a reasoned defense of lawful DEI programs. The guidance argues that DEI best practices are not illegal, that the President does not have the authority to prohibit activities lawful under federal anti-discrimination laws, and that lawful DEI practices strive to level playing fields for all employees and create measurable benefits for both businesses and the workers they employ. They argue that lawful DEI programs do not result in illegal reverse discrimination.

DEI Programs Prevent Discrimination, AGs Assert

The AGs argue that robust DEI programs are important tools for combatting illegal discrimination and harassment in the workplace. Employers have an affirmative duty to identify and remediate policies and practices that have an unlawful disparate impact on—or otherwise discriminate on the basis of—protected classifications of employees and applicants. Since employers can be liable for discrimination or harassment by supervisors and workers, the AGs assert that antidiscrimination and harassment programs are an important educational tool to avoid illegal conduct by employees, which can be imputed to their employers.

In some states, individual supervisors may be personally liable for illegal harassment or retaliation, and DEI education and other programs can help supervisory employees recognize and avoid such conduct. Furthermore, courts and state agencies may view the lack of adequate policies, procedures, and trainings on discrimination and fair employment as a negative factor in assessing an employer’s culpability for discriminatory conduct. Therefore, the AGs’ memorandum recommends that proactive strategies to prevent and address discrimination should incorporate DEI principles, such as identifying and remediating policies that have unlawful disparate impacts on current and prospective employees based on legally protected classifications. 

AGs' Memo: DEI Is Good for Business

The memorandum argues that DEI programs are not just important for legal compliance—they are also good for the bottom line. In making the business case for DEI, the AGs cite a 2020 study finding that companies measuring high in diversity were more likely to post financial gains above their industry median. Implementing these values helps employers to reduce bias, foster collaboration, and create opportunities for all employees, the state officials say. As a result, they add, organizations that prioritize DEI practices tend to perform better on returns, turnover, and attracting top talent. Thus, removing barriers to attract and retain the most qualified applicants for each position can help make companies more profitable, the AGs assert. 

DEI Programs Are Lawful, AGs Argue

The guidance observes that Executive Order 14173, and the DOJ guidance which followed, seek to combat “illegal private sector DEIA preferences, mandates, policies, programs and activities.” But “[p]references based on protected characteristics in hiring and promotion” are already illegal under federal law, except under very narrow circumstances. The AGs argue that most modern DEI programs are not unlawful because they do not provide illegal preferences. Instead, “modern best practices” focus on making sure that businesses can recruit and retain the most qualified workers. Accordingly, they say, the executive order cannot prohibit practices and policies that have longstanding legal support under Title VII, the ADA, and analogous state laws. 

Best Practices According to the AGs

The AGs highlighted some well-established practices for DEI programs in employment. While critics claim that such programs lead to hiring less qualified candidates, the AGs argue that these DEI practices should help companies attract and retain top talent from all backgrounds. 

For recruitment and hiring practices, the AGs suggested wide-scale recruitment efforts to draw larger pools of applicants from different backgrounds. To find and retain the best employees for the job, the AGs recommended employers use panel interviews with standardized criteria to evaluate skills, experience, and merit, rather than relying on subjective or potentially biased opinions. With interview processes focused on qualifications, hiring should be less motivated by unconscious bias and more likely to result in the best candidate for each position.

The AGs further recommended strategies for professional development and retention, which focused on equal access (including reasonable accommodations), trainings on inclusivity, and supporting Employee Resource Groups (ERGs). While ERGs have come under the current administration’s fire, the AGs highlighted a government study that found veteran ERGs were “vital tools” for recruiting skilled workers, training new leaders, and increasing morale and retention for both veteran and non-veteran employees. Investing in such programs can minimize employee turnover, facilitate career development, and strengthen a company’s overall culture so long as they do not provide employment benefits based on protected classifications. 

Finally, the AGs recommended steps to assess and integrate DEI practices to ensure maximum success. These include monitoring the effectiveness of policies and practices, creating clear protocols to report discrimination and harassment, instituting employee “feedback loops” to collect information on workplace experiences, and establishing work groups to build strategies for the future. Organizations should strive to integrate DEI principles and practices into their everyday way of doing business to ensure maximum success of their programs, the AGs stated.

Conclusion

While the legal challenges to the EO wend their way through the courts, there can be no question that the federal government will take a very broad view of what constitutes “illegal DEI,” while many “blue” states will not agree. As a result, employers may find themselves walking a tightrope between the Trump administration’s expressed hostility towards DEI and state regulators’ enforcement of existing state laws. Private plaintiffs may “pile on,” bringing “reverse discrimination” claims and otherwise attacking DEI initiatives when they do not receive expected jobs, promotions or other benefits. Some state regulators have sided with the administration’s view of DEI. Thus, for example: the Florida AG filed suit against Target in the form of a shareholders’ action based on DEI activities; and, in a letter to Costco, 19 Republican AGs warned of enforcement actions for systemic discrimination based on DEI programs.

While employers ultimately may decide that scrubbing their HR policies of DEI language and ending certain programs and initiatives makes sense, the state AGs’ guidance suggests a more nuanced approach can work—one which retains critical elements necessary to a robust antidiscrimination set of protocols. This helps protect a company from traditional discrimination and harassment claims—while eliminating any suggestion that improper benefits or burdens are assessed on the basis of protected classifications—which could give rise to “illegal” DEI and reverse discrimination suits. Employers may wish to engage legal counsel to comprehensively review and revise DEI policies and programs. 

Ballard Spahr’s Labor and Employment Group has robust experience in advising public and private sector and educational clients on navigating the new landscape when it comes to diversity, equity, inclusion, and accessibility initiatives and programs, as well as responding to governmental inquiries and investigations and civil enforcement proceedings.  Please contact us if we can assist you in advice and counsel regarding such matters or in responding to active inquiries, investigations, or proceedings.