Navigating DEI in Today’s Business Climate

Welcome to SMB Matters. I’m Doug Riegelhuth, Chief Compliance Officer at TriNet. DEI, or diversity, equity and inclusion, is one of the hottest topics in HR these days, especially since President Trump issued his DEI-focused executive orders.

Today, I’ll talk about what SMBs need to know to quickly understand the executive orders, their implications and how to navigate the challenges presented in this new environment. So, let’s get started with a high-level summary of President Trump’s executive orders which are focused on: one, eradicating DEI from the federal government; two, removing “affirmative action” requirements that used to apply to federal contractors, and also requiring federal contractors to cease any illegal DEI activity, and certify that they are not engaging in such activity; and three, eliminating illegal DEI from the rest of the private sector by making its elimination an enforcement priority for federal agencies.

While the executive orders are the subject of a number of lawsuits, there is no question about the Trump administration’s intention to move forward to the extent possible. In fact, just a few days ago, the Department of Justice announced a plan to use the False Claims Act to go after federal contractors engaging in illegal DEI.

Of course, this all begs the question: what is illegal DEI? To answer that question, let’s start with an important concept: separation of powers within the federal government. President Trump’s executive orders do not change the law; as no president can change the law without Congress passing a bill that the president can then sign into law.

So, illegal DEI in the employment space can only mean something that would violate the existing civil rights laws relating to discrimination in employment, laws like Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, or the Americans with Disabilities Act, and the list goes on.

Such laws, at the federal level, require equal employment opportunity regardless of race, color, religion, national origin and sex (including sexual orientation and gender identity), as well as age and disability, among other things.

Sounds easy enough, but let’s work through a few key discrimination-related principles that are of crucial importance, as has been pointed out by the acting chair of the Equal Employment Opportunity Commission or EEOC.

First, it is important to keep in mind that giving preferential treatment to minorities or women is just as unlawful as giving preferential treatment to white people and men. In other words, so-called “reverse” discrimination is discrimination and therefore illegal.

Second, any employment-related decisions motivated even a little bit by race or sex, for example, are generally unlawful. In other words, legally protected categories of any sort cannot be used as plus-factors to tip the scale in any way.

Third, anti-discrimination laws do not apply only to full-time employees. They apply to applicants, interns, trainees, temporary employees, part-timers, etc. Therefore, programs designed to help only some people get a leg up even if just during the early part of the employee life-cycle or the early stages of one’s career do not get a free pass if they are unlawfully discriminatory.

Fourth, the anti-discrimination laws do not apply just to hiring and firing decisions or just to compensation decisions or other major decisions. They apply to all the terms, conditions or privileges of employment, which arguably means that they apply to just about every aspect of a person’s experience in the employment realm, including eligibility for training, leadership development, job rotations, mentoring, you name it.

Finally, while Title VII does recognize an exception for remedial affirmative action programs, that is not an option available to the vast majority of employers.

Switching gears now, another topic that employers should be thinking about is terminology. Trump’s executive orders note that inherent in DEI is the concept of “equity,” which is not the same as the concept of “equality,” and we know the law requires equality.

Every organization should make its own decisions about its DEI risk tolerance, but given the new enforcement environment, some companies are scrapping the DEI acronym and the equity terminology in particular. Others are staying the course on their terminology. While still others are even moving away from the words “diversity” and “inclusion.” Each organization must decide for itself where its risk tolerance, or risk appetite, lies in regard to nomenclature as well as everything else.

And speaking of everything else, each organization should asses its DEI activity to determine its risk. Here are some of the things to consider as part of a DEI risk assessment: Internships, training programs, leadership development opportunities, or mentoring. If such opportunities are only made available for certain races or genders or other legally protected categories, that is very risky, especially if those opportunities are a pathway to promotions. Setting diversity quotas for hiring or promotion or other employment decisions are also very risky. Setting diversity-based workforce composition goals is risky. Also risky is incentivizing hiring managers or executives to meet certain hiring goals for diversity. Requiring diverse slates of candidates is risky.

Even employee resource groups can be risky depending on how they are governed, but they should be okay if they are open to all and if not limited to just a few groups. Check out the EEOC’s recent guidance in this regard.

Training, which can run the gamut of riskiness from low-risk, legally required harassment prevention training to potentially riskier training on, say, micro-aggressions, is also an area of focus. If done right, most training whether required or not should be okay, but the key is to do it right.

These are just a few of the things to keep in mind as you assess your organization’s DEI risk. The key is for each organization to review all of its DEI-related activity in light of the applicable legal principles. Therefore, conducting a privileged DEI risk assessment with the help of an attorney who has the appropriate expertise in employment law is perhaps the best way for an organization to work through the issues, but however you choose to handle the situation, don’t wait. The time is now to act as the winds of change are blowing.

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Legal Disclaimer: This podcast is for educational purposes only. With decades of experience supporting small and medium-size businesses, TriNet has unique insight into HR best practices for businesses. TriNet does not provide legal, tax or accounting advice. The materials in this podcast and the options and opinions expressed herein may not apply to your company or scenario, so you should consult with your own advisors on how best to proceed. Reproduction in part or in whole is not permitted without express written authorization from TriNet.