Are Your DEI Programs Legal After the Affirmative Action Ruling?

Some companies have already been challenged in court. Others are being asked if their DEI programs are legal. If your workplace has goals related to hiring more women or people of color, you might be wondering: Is this still allowed?

The answer: Yes, DEI is still legal, but how you do it matters.

DEI Helps Businesses Succeed

DEI is not just a values-based initiative—it’s also tied to measurable business success. A 2020 McKinsey & Company report, Diversity Wins, found that companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the fourth quartile, and companies in the top quartile for ethnic diversity on executive teams were 36% more likely to have above-average profitability.  

Why Some Programs Are Facing Legal Risk

Even though DEI programs are legal, problems can happen if the rules aren’t clear—or if they seem to give people special treatment based only on race, gender, or other protected traits.

For example, activist groups have filed complaints about DEI programs that they say unfairly favor one group. A court even stopped a business grant program recently that was limited to participants from a specific demographic.

But the more common risk small and medium businesses face is coming from inside the house: in 2023, the EEOC received 81,055 new charges of workplace discrimination. Retaliation was the most cited claim, often filed after an employee complains about perceived discrimination, including “reverse discrimination,” when workers say a company treats them unfairly because of DEI efforts. This shows that legal challenges from employees are not just a theoretical risk.

If your business has a DEI policy, employee resource groups, or hiring goals tied to identity, it may be a good idea to review your DEI practices to avoid problems later.

DEI Is Still Legal If You Avoid “Preferential Treatment”

Despite the headlines, DEI efforts are not illegal. But certain practices can put you at risk for legal challenges.

At the highest level, businesses must follow Title VII of the Civil Rights Act, which prohibits discrimination in employment based on race, sex, religion, or national origin. Recent successful legal challenges argue that programs giving preference to one group are, by definition, discriminating against another group. Additionally, private courts have recently expanded their scrutiny of DEI programs, especially those that suggest quotas or “set-asides” for certain groups.

To stay on the safe side, you may want to avoid practices that may be interpreted as preferential treatment, such as…

• Saying you give hiring preference to certain groups or that you will only interview candidates from specific groups.
• Setting hard targets or quotas, like “30% of new hires must be women.”
• Creating programs only for certain races or genders.

Even if your goal is fairness, the words you use matter, and could be used against you. A sentence like “We want to hire more (insert a specific gender, race or identity)” could be misunderstood.

What You Can Do to Build a Fair and Inclusive Workplace

Good news: You can still support DEI! You just need to make sure your policies are open to everyone and based on equal opportunity.

While demographic targets or tying decisions directly to identity can increase legal risk, DEI goals that focus on inclusion, access, and equity are generally seen as aligned with current business and legal standards. 

Here are inclusive strategies that many businesses use to support diversity while aligning with employment laws:

• Create mentorship and training programs that are open to all. 
• Actively recruit from a wide range of sources, including Historically Black Colleges and Universities (HBCUs), Hispanic-Serving Institutions (HSIs), women's colleges, and community organizations, to widen the applicant pool while keeping the application process open to all.
• Improving workplace culture by encouraging respectful communication, collaboration, and a sense of belonging among all employees.
• Using data to track representation and identify patterns, without turning numbers into quotas. Frame data tracking as a tool for identifying and removing barriers, not for achieving a demographic target.

RISKY DEI LANGUAGE	SAFER DEI LANGUAGE
“We want 30% of our leaders to be women by 2027.”	“We’re reviewing promotion data to make sure everyone has a fair chance to grow.”

Questions SMBs Should Be Asking Before Updating Their DEI Programs

Before you make any changes—or double down on your DEI efforts, ask yourself (and your legal advisor) a few questions:

• Do any policies show special treatment based on identity? Or could they be interpreted that way by someone? ?
• Does anything we've said or written suggest hiring based on race or gender? Could these statements be misinterpreted as discriminatory?
• Are we setting goals or quotas? What metrics help us measure inclusion rather than implying preference?
• Should we ask a legal professional to review our DEI policies? Align DEI policies on hiring, promotions, or compensation with legal standards and best practices.

Checklist: What to Do Next

Take a few steps now to protect your business and keep inclusion-centered practices in your culture:

• Review your DEI policies. Make sure they don’t promise special treatment.
• Train your hiring team to focus on fairness and opportunity.
• Ask a Legal Pro to look at your DEI-related plans if they involve hiring or promotions.

Building an inclusive workplace is still a smart, legal, and strategic move—just be sure your policies reflect both your values and the law.