Diversity tussle sparks fears over women’s progress in the workplace

Fearless Fund, a venture capital firm based in Atlanta, Georgia, offers grants of up to $20,000 specifically to smaller businesses owned by black women. It does so on the basis that such enterprises have been “historically disadvantaged”. But it recently faced a lawsuit alleging that it discriminates because white and other non-black women are ineligible for the grants.

And that lawsuit — which, on September 30, led to a federal appeals court panel in Atlanta temporarily blocking Fearless Fund from selecting grant recipients or issuing monies — is one of several orchestrated by US conservative legal strategist Edward Blum. His Students for Fair Admissions won its long battle to curtail racially conscious admissions at US colleges in the Supreme Court in June.

The Atlanta lawsuit can also be seen as part of a pattern, prompted by the win against universities, of challenges to diversity, equity and inclusion (DEI) programmes in workplaces, generally. Recruitment practices at the US’s largest law firms are already strategic targets, for example.

For women, and particularly black women, these legal challenges to DEI programmes will be a looming concern, warn DEI proponents, consultants and lawyers.

Anything that looks like it could cause a problem is going to be avoided

Such programmes have held out the promise of greater workplace parity for women, but have also only slowly led to concrete progress.

“You were starting to see, finally, something that’s more than performative progress . . . taking real steps to make sure that the C-suite is not all white and male,” says David Lopez, a Rutgers University law professor, who served as general counsel at the Equal Employment Opportunity Commission, the agency responsible for enforcing federal anti-discrimination laws, during the Obama administration. “That is being nipped in the bud because of the fear of litigation.”

Tina Opie, who teaches management at Babson College business school, is concerned that “anything that looks like it could cause a problem is going to be avoided”.

Although the legal challenges to DEI have, so far, focused on race, all women should be worried, argue lawyers and consultants who specialise in workplace issues. “If companies are going to be risk-averse going forward, then all of the groups that have benefited from DEI programmes are going to be harmed,” warns Khiara Bridges, a professor at UC Berkeley law school.

Blum’s US Supreme Court win does seem to have emboldened critics of DEI programmes, even though the justices in the majority based the ruling on the part (Title VI) of the 1964 Civil Rights Act that governs university admissions, and not on the part (Title VII) that applies to employers.

The Equal Employment Opportunity Commission chair issued a statement that corporate diversity efforts remain “lawful”. Yet the attorneys-general of 13 Republican-led states quickly sent Fortune 100 chief executives a letter underscoring employers’ “obligations” to “refrain from discriminating on the basis of race”, under DEI labels or otherwise.

By late August, individual plaintiffs had picked up on the theme, including a white former managing director at Morgan Stanley’s Wealth Management division, who filed a pending race-discrimination claim alleging the company had replaced him with a black woman to meet diversity targets. Morgan Stanley tagged the lawsuit “meritless” when it asked the court in October to send the case to arbitration.

Women, generally, and black women most of all, have much to lose if the clock turns back on employers’ DEI efforts, because they are under-represented in better-paid and higher-status jobs, say the programmes’ proponents.

Women were outnumbered five to one in the 533 most senior leadership positions in S&P 100 businesses in 2023, with only 17 black women on that list, according to USA Today in March. Similarly, one in three black women business leaders said they had been denied opportunities because of their race and gender, according to a report by consultancy Gartner, also published in March.

Since the Supreme Court ruling on college admissions, corporate leaders have grown “quieter” about DEI programmes to avoid unwanted attention, says Chandra Robinson, vice-president in the Gartner HR practice.

There is no distinction between a goal and a quota if both require the attainment of a specific percentage or number

Blum initially lost the first round in the Fearless Fund case. A trial judge denied a request to issue an injunction barring Fearless Fund from selecting businesses led by black women and issuing the grants.

But within days, after an emergency hearing before a three-judge panel at the appeals court, Blum’s organisation won a two-to-one ruling, issuing the injunction. The judges conc­lu­­ded that the argument that Fearless Fund violated federal anti-discrimination laws had a likelihood of prevailing.

Even before that win, Blum outlined in an interview with the Financial Times his plans to oppose corporate HR departments when they tie managers’ pay to meeting diversity hiring objectives. He deems such practices and policies “action­able” even if the stated diversity goals are not explicit quotas.

“There is no distinction between a goal and a quota if both require the attainment of a specific percentage or number,” Blum says.

He stresses that he litigates based on race and ethnicity programmes, not gender. But he is backed by prominent conservative funders and says he does not object to “other organisations that have gender in their litigation portfolio”.

This does not persuade his wary critics. Opie argues that people who want “women back in the kitchen” are right behind the plaintiffs challenging DEI programmes as racially discriminatory.

Yet she is also optimistic, saying that “we can overestimate the threat” — and can underestimate the potential broad appeal that DEI programmes have.