The Diversity Equity and Inclusion (DEI) Executive Orders have taken root and at the time of writing been upheld most recently by the U.S. Fourth Circuit Court of Appeals.  Other than the obvious programs such as employee resource groups (ERGs), hiring preferences, and worker pipeline building, what other areas of HR may DEI impact that HR needs to be aware of?

First there are compensation initiatives.  For employers embracing DEI, a few DEI initiatives may be impacting the compensation area.  To begin with, some employers have diversity referral bonuses providing bonuses to those who refer diverse candidates who are hired.  However, these bonuses should not exceed those paid to employees for referring non-diverse candidates.  If they are, they will likely be among the “low hanging fruit” for challenges.

Another area of concern should be compensation paid for the achievement of DEI goals.  A number of employers conditioned bonuses on the achievement of individual and collective DEI-related goals and/or metrics, in particular, in the executive and managerial ranks.  Providing metrics has always been an issue as managers could “game” the system and hire, though may not retain, diversity candidates, both internal and external.  At least two courts have ruled that affirmative action plans (prior to executive order 14173 that revoked executive order 11246-the affirmative action EO), when their goals were used for these purposes, are indicators of discrimination. 

One that may not be obvious is paying employees who participate in employee resource groups (ERGs) for time spent meeting in the ERGs.  Federal and state law may, depending on the circumstances, require employers to count time spent by nonexempt (i.e., overtime-eligible) employees in ERG meetings, events, and other activities as “hours worked” and to pay them for that time – potentially at an overtime rate.  It may invite legal challenges by employees who are not paid for their time in other voluntary employer activities – think employees attending mixers where clients may be present, off hours on their own time.

Also, employers who have diversity internships, co-ops, and fellowship programs could be targeted.  Structured diversity-focused internship and fellowship programs – typically designed to provide students or recent graduates from underrepresented groups with career, mentorship, and professional development opportunities, as well as exposure to the day-to-day operations of the workplace – could be sued because they limit eligibility based on race or other protected categories.  Further, if these programs favor one set of interns, etc. for payments, and don’t provide the same terms and conditions for others, it could also be the basis of a lawsuit.

Employers need to be careful of diversity training.  The first Trump administration had unknowingly allowed diversity training that took individuals to a separate room to explain why they are biased and racist.  That is neither diversity training or inclusive practices.  HR should inventory their “diversity” training and work with legal counsel to ensure it does not violate Title VII of the Civil Rights Act.

Healthcare is also a concern.  The EEOC is unlikely to take on cases that have ties to termination of pregnancies, and healthcare providers will likely be pressured on policies that have both termination provisions as well as gender affirming provisions.  Healthcare policies will likely go up in pricing for less services and coverage, especially with Medicaid cuts. Healthcare providers will have to make up revenue with these losses. 

Although there are likely more areas of concern, independent contractors and supplier diversity should also be reviewed.  In particular, organizations should review their supplier retention policies; eliminate any requirements to retain a certain percentage of minority or women-owned businesses; remove contractor (or supplier or vendor) selection criteria that consider race or sex; make sure that supervisors who make retention decisions are not evaluated based on their performance in reaching targets to retain contractors based on race or sex; and check supplier and vendor contracts for staffing criteria that favor or disfavor any protected group.  Diversity supplier programs are common and many have set asides.  Unless a federal or state law so requires, organizations should focus on their criteria for quality, timeliness, and cost of work performed for both selection and retention of contractors, from independent to subcontractors.  Any programs that specifically assist minority or women to become subcontractors should be open to all. 

Further, on March 18, 2025, the Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Justice (DOJ) released two technical assistance documents to help inform what each agency views as “unlawful” discrimination related to diversity, equity, and inclusion (DEI) programs in the workplace.  First, the EEOC stated, “client or customer preference is not a defense to race or color discrimination.”   This statement is likely in response to General Counsel requests for diversity in the team representing the organization.  Second, EEOC and DOJ documents suggest that DEI-related training, such as anti-bias training, can give rise to a viable hostile work environment claim.  It was struck down as overreaching in the first Trump administration for first amendment violations but likely to be targeted again.

With everything, including a possible False Claims Act to collective actions, organizations should conduct audits of their diversity practices under legal counsel’s direction to ensure that areas of risk are identified, understood, and weighted to determine whether to continue in the face of this new anti-DEI environment.

Source: McDermott Will & Emery 3/20/25, Baker Hostetler LLP 3/17/25, Hall Benefits Group 3/10/25, Winston & Strawn 3/6/25, Proskauer 2/28/25