Hey CEOs – Be Careful About Diversity Hiring Quotas!

By Fiona W. Ong - Shawe Rosenthal LLP

July 29, 2020

In light of the global racial justice movement, I know that all major (and most not-so-major) corporations are thinking about diversity, equity and inclusion right now. They are promoting DE&I initiatives in the workplace, and proudly trumpeting their activities to their workforce and the public. And that’s good, because this is an important issue. But what’s not good is when companies rush in blindly, because those anti-discrimination initiatives can (ironically) end up violating the anti-discrimination laws!

I’ve been following the public updates of major corporations on their diversity and inclusion activities. My jaw dropped when I saw that some of them are “committed” to filling management and/or executive level positions with a specific percentage of minorities generally and/or Black individuals within a specific time frame.

So what’s wrong with that? Isn’t that a good thing – to increase minority representation at the leadership level by a concrete amount? Don’t we want to give those opportunities to traditionally under-represented groups? Of course, we do – that makes sense at a gut level! Right?

But our employment laws are not necessarily intuitive. And unfortunately, such “commitments” would appear to violate those laws. In the 1976 case of McDonald v. Santa Fe Trail Transportation Co., the U.S. Supreme Court stated that Title VII prohibits “discriminatory preference for any [racial] group, minority or majority.” And that includes favoring minority over White employees. Building from there, the Supreme Court has subsequently ruled that a college’s use of a fixed racial quota is discriminatory – a principle that has been extended to the employment arena.  (Quotas are only rarely permitted, if ordered by a court or negotiated as a remedy in consent decrees and settlement agreements). “Committing” to a specific percentage of hires over a specific time frame could certainly be viewed as one of these impermissible quotas.

The use of hiring goals, however, may be acceptable under specific circumstances. Government contractors are required to set such goals (not quotas!). For other private employers, the Supreme Court has permitted the use of such goals as part of a voluntary affirmative action plan, but the circumstances under which such goals may be used are quite limited, however: (1) the plan must be designed to eliminate a conspicuous racial imbalance in traditionally segregated job categories; (2) the plan may not trammel the interests of the non-minority employees; and (3) the plan is temporary in nature, intended to eliminate a manifest imbalance and not to maintain balance. The EEOC reiterates these principles in its Compliance Manual as well.

Now, I don’t know if these companies are subject to some sort of court order that requires quotas, but I would venture to guess not. And if so, then the “commitment” to specific hiring percentages becomes problematic. Even the establishment of aspirational goals must be carefully considered and implemented.

So for companies like these, I applaud you for trying to do what’s right. I caution you to do what’s legal. (And make sure that your employment lawyers are not on vacation when you issue statements like this)!