Nonprofits Must Prepare for Increased Scrutiny of Their DEI Employee Initiatives

Recent executive orders have put nonprofits on high alert, raising concerns about federal funding tied to diversity, equity and inclusion (DEI) initiatives. However, regardless of funding sources, all nonprofits need to review their employee DEI initiatives given these programs are becoming a hot-button issue across the nation. 

Title VII applies to nonprofits with 15 or more employees and prohibits employment discrimination based on race, color, religion, sex — including pregnancy, sexual orientation and gender identity — or national origin. Many states have discrimination laws that apply to much smaller nonprofits and protect additional characteristics.

These laws have always required employers to be blind to protected class status when making employment decisions. The blindness requirement is not contingent upon the applicant or employee being either in a historically disadvantaged protected class in society or a minority protected class in the nonprofit. Thus, so-called “majority classes,” such as white people, men and heterosexuals, are protected equally from discrimination. The protection from discrimination includes, but is not limited to, being treated less favorably than other employees due to DEI goals. 

Discrimination based upon other laws, such as those covering older age, disability and veteran status, only protects people in those classes.

What Is New

In 2023, the Supreme Court's decision in the Students for Fair Admissions v. Harvard case (opens as a pdf) invalidated university affirmative action policies that were not race-blind.

The decision did not directly impact employers but highlighted the longstanding protected class blindness rule in the employment context. Following the ruling, attorneys general from various states sent letters to companies based upon DEI website materials that appear to show the employers favoring minority classes. Some attorneys general have even sued companies on this basis. See State of Missouri v. Starbucks Corp. (opens as a pdf)

The heightened awareness also increased claims by majority class members and decisions in favor of a majority class member. For example, in March 2024, the Fourth Circuit Court of Appeals upheld a $3.4-million North Carolina jury verdict awarded to a white male executive who claimed he was fired because of his race and gender. A key piece of evidence was Novent Health’s DEI council minutes reflected that the council was seeking to address the fact that white employees were overrepresented in its management and stated:

We, Novant Health, are not interested in meeting quotas; quotas are mandated by someone outside of your organization. We want to reach our targets, targets set by the organization which is within our strategic imperatives and making sure our work force reflects the community we serve. 

Adding to the buzz, the Supreme Court recently granted cert to hear an appeal of a discrimination case brought by a heterosexual employee in Ames v. Ohio Department of Youth Services (opens as a pdf). In that case, the Supreme Court is predicted to overturn the Sixth Circuit’s holding that a plaintiff who is a member of a majority class has a higher burden of proof. To be clear, no jurisdictions allow so-called “reverse discrimination” (discrimination against the majority class); rather the Sixth Circuit and a handful of other Circuits apply a higher burden of proof to majority class members absent direct evidence of discrimination. 

Most recently, the Equal Employment Opportunity Commission (EEOC) and Department of Justice released new DEI guidance in March. The EEOC also released a longer guide on the topic. The guidance does not ban DEI employee resource groups or DEI initiatives. Rather, it: 

• Clearly affirms the class blindness rules in the employment context.
• States the exact same standard of proof applies to all discrimination claims.
• Prohibits exclusion from DEI initiatives based on protected class status.
• Highlights it is illegal to provide special training, mentoring or sponsorship to minority classes as part of DEI efforts (along with more traditional forms of discrimination).

What Nonprofits Should Do Now

Nonprofits should review their DEI initiatives so that the language does not imply that any employee will be given special treatment based upon their protected class status. For example, initiatives that “ensure” hiring and retention of diverse individuals would appear to mean the employer would promote or hire someone based upon a protected characteristic to keep employee demographics diverse. Instead, initiatives should support the equitable hiring and promotion of all individuals or, alternatively, explicitly define “diversity” to mean diverse backgrounds, experiences, perspectives and skills. 

Nonprofits should be clear that any DEI employee resource group is open to all employees, and that these groups do not influence employment policies or decisions. In addition, all DEI training should include reverse discrimination examples along with more traditional discrimination examples. 

While not legally required, nonprofits should carefully assess whether DEI initiatives are providing enough organizational benefits to warrant continuation of such programs. From a business perspective, even when DEI initiatives are carefully crafted to avoid these common pitfalls, the initiatives can still result in workplace problems. Employees may become frustrated when they realize the initiative cannot influence employment decisions and tensions may arise if employees join despite not traditionally fitting the group’s focus. Additionally, employees may view DEI efforts to be an unwelcome political statement by their employer. Finally, employee resource groups can run afoul to the National Labor Relations Act’s prohibition against employer-sponsored unions.

Nonprofits are strongly advised to include their employment or nonprofit legal counsel in their DEI review to avoid a multimillion-dollar mistake.

The preceding content was provided by a contributor unaffiliated with NonProfit PRO. The views expressed within may not directly reflect the thoughts or opinions of the staff of NonProfit PRO.