The Legal Landscape for DEI: One Year After the Harvard/UNC Decision, Business Law Today

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December 12, 2024

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In the past year, following the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College (“Harvard/UNC”),¹ a number of trends have emerged in the diversity, equity, and inclusion (“DEI”) legal landscape, including an increase in Section 1981 claims, suits against corporate DEI initiatives, challenges related to DEI programs based on the First Amendment, and actions involving scholarships in higher education. Although many of the DEI-related lawsuits and developments have not involved employers or the workplace directly, the cases and developments hold lessons for employers regarding best practices for their own DEI initiatives and programs. The proverbial dust has not yet settled, so employers should expect even more legal developments in the DEI arena in the years to come.

Increase in Section 1981 Litigation

Over the past year, there has been an increase in so-called reverse discrimination suits filed under Section 1981 of the Civil Rights Act of 1866. Section 1981 provides “all persons within the jurisdiction of the United States” the “same right in every State and Territory to make and enforce contracts.”²The Civil Rights Act of 1866 was discussed and analyzed at length in Harvard/UNC. The majority noted that “the Act did not single out a group of citizens for special treatment—rather, all citizens were meant to be treated the same as those who, at the time, had the full rights of citizenship.”³

Case precedent unique to Section 1981 further demonstrates that Section 1981 protects racial-ethnic nonminority groups and minority groups alike. For example, in McDonald v. Santa Fe Trail Transportation Company,⁴ the U.S. Supreme Court was asked to decide whether Section 1981 applied to racial discrimination against members of all races. The Court considered the plain language of the statute, examined the legislative history surrounding the Civil Rights Act of 1866, and considered other evidence regarding congressional intent. Ultimately, the Supreme Court held that the statute was clearly designed to protect citizens of every race.⁵

The recent increase in suits filed under Section 1981 is most likely connected to the differences in how Section 1981 claims proceed as compared to claims under Title VII of the Civil Rights Act of 1964. First, a plaintiff can bring a Section 1981 claim more quickly than a Title VII claim because, unlike a Title VII claim, a Section 1981 claim does not require that the plaintiff first file a charge with the U.S. Equal Employment Opportunity Commission (“EEOC”) and exhaust its administrative remedies.⁶ Second, unlike Title VII, a Section 1981 claim is not subject to a damages cap. These two key differences make a Section 1981 claim more attractive to a plaintiff looking to challenge DEI-related policies and practices.

Increase in Organizations Filing Suits Against Corporate DEI Programs

Following the Harvard/UNC decision, there has been an increase in suits filed by organizations challenging corporate DEI programs. Similar to how Students for Fair Admissions sought action on behalf of its members in Harvard/UNC, other organizations have initiated lawsuits challenging DEI programs on behalf of their members. Two of the most active organizations engaged in this litigation in the past year include American Alliance for Equal Rights (“AAER”) and America First Legal Foundation.

However, thus far, many of these suits have been dismissed due to a lack of standing. For example, earlier this year, the organization Do No Harm filed suit against Pfizer, Inc., alleging that its collegiate summer internship program violated Section 1981 because it allegedly excluded applicants on the basis of race.⁷ Pfizer challenged Do No Harm’s standing to bring the suit. Though Do No Harm claimed that it had identifiable candidates who wished to apply and met all of the requirements for the fellowship except for the racial requirement, the organization did not provide specific names of the individuals allegedly harmed.⁸ As a result, the U.S. Court of Appeals for the Second Circuit affirmed the district court’s dismissal of the lawsuit and held that “an association that relies on injuries to individual members to establish its standing must name at least one injured member.”⁹

First Amendment Concerns Related to DEI Initiatives

Recent DEI-related cases have also discussed First Amendment issues related to DEI programs, initiatives, and legislation. For example, AAER filed suit against a venture capital firm, Fearless Fund Management LLC, alleging that the firm’s grant contest violated Section 1981.¹⁰ The contest provided grants to small businesses that were at least 51 percent owned by Black women.¹¹ AAER alleged that the contest discriminated against other small business owners.¹² Fearless, in turn, argued that the First Amendment “protect[ed] [its] contest as a form of expressive conduct” and further argued that its contest was designed to demonstrate “its ‘commitment’ to the ‘[b]lack women-owned’ business community.”¹³ The U.S. Court of Appeals for the Eleventh Circuit, however, disagreed and found that “if that refusal were deemed sufficiently ‘expressive’ to warrant protection under the Free Speech Clause, then so would be every act of race discrimination.”¹⁴

In Honeyfund.com Inc. v. Governor of Florida, the Eleventh Circuit addressed a slightly different free speech concern in connection with a legal challenge to Florida’s Individual Freedom Act.¹⁵ This law, also known as the “Stop WOKE Act,” banned certain mandatory workplace trainings.¹⁶ Florida argued that the act lawfully prevented employers from mandating that their employees listen to “dangerous and offensive speech.”17 On the other hand, plaintiffs Honeyfund and Primo Tampa argued that “the Act prohibits them from sharing their viewpoints.”¹⁸ Ultimately, the Eleventh Circuit held that the statute unlawfully regulated speech because it was the content of the speech at the meetings that the state was attempting to regulate.¹⁹

Impact on Scholarships and Fellowships

Another area that has been impacted by the Harvard/UNC decision is educational scholarships and fellowships.

Following the decision, some states instructed their educational institutions to make changes to their scholarship programs. For example, Missouri’s attorney general, Andrew Bailey, instructed all educational institutions in Missouri subject to Title VI of the Civil Rights Act of 1964 to “identify all policies that give preference to individuals on the basis of race and immediately halt the implementation of such policies.”²⁰He also specifically instructed that scholarships “must immediately adopt race-blind standards.”²¹ As a result, the University of Missouri informed its donors that scholarships from the university would be awarded on a race-neutral basis. Some donors were upset that their scholarships could no longer be given to individuals of a specified race, which was their intent when making the donation. As a result, litigation may be looming with respect to how universities use charitable gifts with specific intentions.²²

Additionally, educational institutions offering scholarships with race-specific application criteria could face investigation by the Department of Education’s Office for Civil Rights (“OCR”). For example, the Equal Protection Project filed a complaint with the OCR alleging that five scholarships offered by Minnesota State University Moorhead were discriminatory because the scholarship conditioned eligibility on a student’s race.²³ The same organization filed a complaint with the OCR regarding Western Kentucky University scholarships that restricted eligibility based on race.²⁴ The OCR opened an investigation into the scholarships, and Western Kentucky University has since removed the scholarship offerings from its website.²⁵

In the Harvard/UNC decision, the Supreme Court focused on the constitutionality of affirmative action with respect to race, but it did not extend its analysis to gender. It’s possible that this is because Title IX has historically regulated gender equality in educational settings. Thus, while Section 1981 claims have become increasingly popular for challenging racial inequalities in educational settings, Title IX likely remains the only avenue for gender inequality claims in educational settings.

Changes to DEI Departments

In response to the Harvard/UNC decision, many educational institutions have made adjustments to their DEI departments and programs in the past year. In February 2024, the University of Florida closed its diversity department and terminated all DEI staff.²⁶ In May 2024, the board of trustees of the University of North Carolina at Chapel Hill voted to redirect funding from diversity initiatives to campus safety and policing.²⁷ Similarly, in response to state legislative actions, the University of Wyoming closed its DEI office.²⁸ The University of Iowa restructured its DEI office and renamed it the “Division of Access, Opportunity, and Diversity.”²⁹ The Massachusetts Institute of Technology eliminated diversity statements from its faculty hiring process,³⁰ and Harvard has eliminated DEI statements as a requirement for tenure-track job applications.³¹

Takeaways for Employers

In this new era of increased DEI-related litigation, the importance of lawful and thoughtful DEI programs remains for employers. One key to a successful program is effectively training employees and communicating the intention of the program to them. In other words, it is important for employers to know the why behind their DEI initiatives and programs. And effectively communicating the rationale behind DEI policies and initiatives is also key to demonstrating a lack of discriminatory intent. Employers cannot make employment-related decisions based on race, sex, or any other protected trait. Moreover, employers should not financially incentivize managers or leaders to meet related diversity goals because EEOC representatives have publicly stated that such incentives can be evidence of discriminatory intent.

At the end of the day, employers should remember that they should always hire or promote the most qualified candidate and treat employees and candidates as individuals and not as representatives of their respective demographic groups. By focusing their efforts on removing barriers to inclusion (as opposed to creating quotas or targets for racial or gender balancing), employers can manage workplace policies and standards universally across all employees while still capturing the essence of DEI.

©2024. Published in Business Law Today by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

1. Students for Fair Admissions, Inc. v. President & Fellows of Harvard Coll. (Harvard/UNC), 600 U.S. 181 (2023).

2. 42 U.S.C. § 1981.

3. Harvard/UNC, 600 U.S. at 250.

4.McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273 (1976).

5. Id. at 295.

6. Riddhi Setty & Tatyana Monnay, Conservative Duo Fights Against DEI One Bias Claim at a Time (1), Bloomberg L. (June 5, 2024).

7. Do No Harm v. Pfizer Inc., 96 F.4th 106 (2d Cir. 2024).

8. Id. at 108–09.

9. Id. at 109, 120–21.

10. Am. All. for Equal Rts. v. Fearless Fund Mgmt., LLC, 103 F.4th 765 (11th Cir. 2024).

11. Id. at 769–70.

12. Id.

13. Id. at 777, 779.

14. Id. at 779.