The Supreme Court’s SFFA Decision: Impacts on Corporate DEI Initiatives

On June 29, the Supreme Court struck down Harvard and UNC’s race-conscious admissions programs with a precedential holding that effectively ends affirmative action in the education context. Though the Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA) decision does not, on its face, apply to private employers, the Supreme Court’s holding has broader implications for today’s legal landscape, particularly with respect to diversity, equity and inclusion programs and initiatives. 

Key Takeaways from the SFFA Opinion for Private Employers

Before SFFA, case law maintained that the goal of creating a diverse student body was a “compelling interest,” justifying consideration of race in college admissions. Under this framework, colleges could use race as one factor among many to enhance diversity in their student bodies. In SFFA, however, the Court concluded that race-conscious admission programs violated the Equal Protection Clause of the 14th Amendment and Title VI of the Civil Rights Act of 1964. Departing from longstanding precedent, the Court held that diversity is not a compelling interest for factoring race into admissions decisions. The Court also concluded that, even under the prior framework, Harvard and UNC’s “admissions programs fail[ed] to articulate a meaningful connection between the means they employ and the goals they pursue,” such that they could not satisfy the compelling interest test in any event. In reaching this conclusion, the Court emphasized that the racial categories the universities used to measure the racial composition of their student bodies were “overbroad” and “imprecise.”

The Court also reasoned that college admissions are a “zero-sum” game in which a benefit is provided to some at the expense of others. According to the Court, considering race in the admissions context is therefore inevitably a “negative” for those who do not benefit from that consideration, rendering the consideration illegal.

Potential Impacts of SFFA on Voluntary DEI Programs

Although the constitutional and statutory provisions at issue in SFFA (the Equal Protection Clause and Title VI) generally do not apply to private employers, the SFFA opinion set the stage for increased scrutiny of and legal challenges to private companies and their DEI initiatives. Indeed, Justice Gorsuch’s concurring opinion hinted that the Court’s ruling may apply outside of the educational context, highlighting the parallels between Title VI and Title VII and their “essentially identical terms” and judicial interpretations. 

Below are some of the key ways in which SFFA may impact corporate DEI programs:

1. Attack on Racial Classifications. The Court’s critique of the admissions programs’ “overbroad” and “imprecise” racial classifications indicates that race-conscious DEI programs are likely to fare better under judicial scrutiny if they are more precise in their references to racial categories. For example, the Court noted that “Asian” is an “overbroad” category that fails to indicate whether “South Asian” or “East Asian” populations are adequately represented. Companies that monitor demographics and aspire to consistency between workforce and community demographics should be cautious about the racial classifications they track and ensure that such classifications are specific and connected to the goals of their DEI plans.
2. “Zero-sum” Programs. Like college admissions, hiring and promotion decisions may be viewed as a zero-sum game, in which only one person can receive the benefit at issue. This reality may encourage litigants to view a DEI program’s reference to race as a “negative” factor, which presents a legal risk. Reverse discrimination claimants are likely to use this zero-sum framing in the employment context, and particularly in the realms of hiring and firing decisions. To counter this framing, employers should focus on using their DEI initiatives to create tangible benefits for all employees, rather than to achieve specific numerical goals.
3. “Diversity” as a Goal. Despite copious literature detailing the business benefits of diversity, the SFFA holding suggests that “diversity” for diversity’s sake is not always a compelling interest justifying the use of race in decision-making. To counter this possibility, private employers should focus on using their DEI programs to address specific historical discrimination and emphasize the inclusive effects of their policies.
4. Forthcoming Litigation. We can expect to see Title VII litigants seek to forge ties between Title VI and Title VII, with the end-goal of applying SFFA to private employers in Title VII suits. This movement has momentum, as evidenced by letters from 13 Republican state attorneys general to the CEOs of all Fortune 100 companies, urging that they cease unlawful race-based initiatives, including DEI initiatives, and lawsuits against prominent law firms challenging their DEI programs. Notably, however, EEOC and Biden administration representatives, as well as Democratic state attorneys general, have responded with arguments supporting the legality of DEI programs under the law.
5. Potential Expansion of Title VII. Just after the SFFA decision landed, the Court agreed to hear Muldrow v. City of St. Louis, which will determine whether Title VII applies to employer conduct where there is no identifiable “adverse employment action.” Muldrow could expand Title VII’s applicability and enable litigants to challenge corporate DEI programs without tying those programs to specific adverse actions.

Practical Tips for Private Employers

SFFA serves as a reminder to private employers to review their current DEI programs and initiatives to ensure they do not run afoul of Title VII and are structured in a way that mitigates legal risks. Best practices include:

1. Avoid “zero-sum” DEI actions. Hiring and firing decisions based on race (or other protected characteristics) are inevitably considered zero-sum strategies and are clear violations of Title VII. DEI programs should avoid situations that result in narrow groups receiving disproportionately large benefits at the expense of others. Instead, employers should focus on recruitment efforts that seek a diverse candidate base and inclusion programs that benefit all employees. 
2. Evaluate use of demographic data. While many companies regularly review and track workforce demographics, it’s imperative that the use of such metrics does not suggest that the company has race-specific “targets” or “quotas.” Further, companies should be prepared to explain how tracking demographic data is connected to their DEI goals, as well as how those goals are rooted in efforts to remedy specific historical discrimination. 
3. Ensure your DEI program articulates a clear, legitimate business goal. DEI programs that focus on legitimate business needs present a lower risk. Take care that the public and internal messaging connected to your DEI goals and initiatives reflects the legitimate business purpose of the program and its benefits for all employees. The goals of DEI initiatives should be specific and measurable, yet still avoid using quotas and targets.
4. Seek legal review of your DEI marketing and training materials. Communications and materials concerning your company’s DEI programs, both internal and external, should be prepared and disseminated with appropriate legal oversight. DEI tools and materials such as diversity scorecards, consumer-facing communications regarding DEI goals and initiatives, and C-suite and board of directors communications are all susceptible to legal challenges and should be prepared with legal guidance and input. Including criteria tied to diversity, equity and inclusion in performance evaluations and executive compensation should be carefully evaluated by legal counsel. Ensure that any outside DEI consultants partner with your legal counsel to make certain that their recommendations and materials are prepared with relevant legal standards and appropriate risk mitigation strategies in mind.

Given the potential legal implications of the SFFA decision on corporate DEI programs, Robinson Bradshaw’s DEI Compliance & Strategy Practice Group will be monitoring and reporting on the latest developments in the affirmative action and DEI legal landscape. For assistance evaluating your current DEI initiatives or developing a new corporate DEI program, contact a member of our team.