Firing Employees to Increase Diversity Is Perhaps Not the Best Plan…

By Fiona W. Ong - Shawe Rosenthal LLP

January 13, 2023

So I know that many companies are (appropriately!) focused on Diversity, Equity & Inclusion (DEI) efforts. Some may be frustrated at the slow pace of change, and may wish to pursue those goals more aggressively – but that (ironically) can result in violations of anti-discrimination laws. A recent case provides another example of when trying too hard to fix one problem can create new ones.

In Lutz v. Liquidity Services, Inc., a Vice President of Human Resources is suing his former employer. According to the VP, the CEO/Chairman of the Board said to him, “”Mike, I want you to retire. I have a diversity problem. I need to improve the diversity profile of the company. And I need to promote Novelette [Murray] into your job.” (Important facts to note here once you’re done gasping: Novelette is an African-American woman, and the company’s leadership at that time was all white men). The VP’s retirement was announced with kudos for his accomplishments, but then (oddly) he was terminated “without cause,” although the company is now stating that it was for performance issues. (According to the company, this reason should be sufficient to undercut the VP’s claims of discrimination and warrant tossing out his lawsuit. )

Unsurprisingly, the CEO denies making those pretty shocking statements – and even testified that there was “no focus on diversity.” (Well, that bounces off the other extreme). But immediately after his discussion with the CEO, the VP apparently had a conversation in which he talked about those statements – and the court found that this “contemporaneous conversation” could support the VP’s credibility with regard to whether the statements really were made. In addition, the VP pointed out that, in a Company report to the federal Securities and Exchange Commission, the Board asserted that “Ms. Murray adds racial and gender diversity to the executive team.” (So, yeah, focus on diversity). Moreover, the sudden pivot from the VP’s retirement with wreathing laurels to a termination based on performance does raise some eyebrows, no? Given all of this, the court determined that there was certainly enough conflicting evidence that the case would be sent to the jury to decide.

So the lesson here for employers is that, while diversity initiatives are important, they must be done thoughtfully and legally. Taking negative employment actions against a non-minority employee in order to create opportunities for minority employees is still a violation of discrimination laws, even if done in the name of diversity. (And a bonus lesson – don’t rely on poor performance as the justification for termination if you’ve just publicly heralded an employee’s accomplishments)!

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