No I&D Slipups

Last year, the U.S. Supreme Court effectively prohibited the use of race, even if only as a “plus” factor, in college student admission decisions under Title VI of the Civil Rights Act of 1964, which forbids discrimination on the basis of race, color, and national origin in programs and activities receiving federal financial assistance. Since that ruling, employers have been grappling with what it means for them.

The Supreme Court’s decision in the case brought against Harvard University and the University of North Carolina does not apply directly to employment decisions under Title VII of the Civil Rights Act of 1964. However, the effect of the decision has been to shine a spotlight on the legality of inclusion and diversity (I&D) initiatives.

There are three general prohibitions relative to hiring and promoting under Title VII. More specifically, employers are prohibited from engaging in any of the following activities with regard to Title VII characteristics, which are race, color, religion, sex, and national origin:

• Establishing a quota by requiring that a percentage of jobs be given to individuals who have a certain Title VII characteristic. 
• Creating a set-aside, which is reserving a position for someone with a specific Title VII characteristic. 
• Giving a preference—or “plus” factor—based on a Title VII characteristic.

These prohibitions apply even if the employer is an affirmative action employer. Under Office of Federal Contract Compliance Programs (OFCCP) regulations and guidance, an employer cannot use quotas, set-asides, or preferences to achieve placement goals.

These prohibitions also generally apply if the employer’s goal is to improve I&D. While there is no diversity exception to Title VII’s general prohibitions, there is a potential exception in which consideration of a Title VII characteristic as a “plus” factor serves a remedial purpose under narrow circumstances delineated in the case law.

Here’s an overview of what these prohibitions mean with respect to employers’ efforts to increase I&D through hiring and promoting.

Quotas

Employers generally are aware of the prohibition on quotas. However, some employers have adopted quantitative I&D goals that are separate from and independent of any legally mandated affirmative action goals that may exist under the OFCCP.

Such quantitative I&D goals are not illegal per se if they are aspirational in nature. However, quantitative goals may be seen as proxies for quotas, and as such, they may at a minimum invite legal attack. Indeed, the framing of an aspirational goal is very similar to a quota, with the only real difference being that the percentage used is a “goal” as opposed to a “requirement.”

It is much safer for employers to have qualitative, rather than quantitative, I&D goals. An example of a qualitative goal: to increase the number of women and racial and ethnic minorities in management (without tying a percentage to that goal).  Seeking to increase inclusion generally carries less litigation risk than setting numerical I&D goals for your workforce.

But that risk rises if leaders’ compensation is tied to achieving those qualitative goals. Doing so arguably provides leaders with a financial incentive to consider unlawful Title VII characteristics.

This does not mean that leaders cannot be evaluated on their contributions to I&D. It just means employers are better off avoiding “scorecard tracking” to evaluate the demographics of employees involved in a manager’s hiring and promotional decisions.

Set-Asides  

Some employers impose set-asides while not necessarily realizing that they are doing so.

Boards and leadership teams need to be trained to avoid requiring or encouraging that an employment position be reserved for someone based on a Title VII characteristic(s). Note, however, that boards may have more flexibility to consider such characteristics as to their own members because board members are not applicants or employees protected by Title VII.

The Plus Factor

Finally, there’s the last prohibition—considering a Title VII factor in making a hiring or promotion decision.

Many organizations, appropriately and necessarily, emphasize to people managers the business benefits of being inclusive. Unless managers are told that they cannot consider race, gender, and other protected characteristics in their decision-making, they very well may do so in light of the emphasis on the business benefits of inclusion.

Accordingly, the training that managers receive on discrimination should explicitly say that there is no I&D exception to the company’s nondiscrimination policy. The training should also make clear what factors managers can consider.

I&D should be defined to include not only protected characteristics such as gender, race, and ethnicity, but also variation in experiences, perspectives, and skills. While decision-makers cannot consider Title VII characteristics, they ordinarily can consider other differences that may make a difference.  

Jonathan A. Segal is a partner at Duane Morris in Philadelphia and a SHRM columnist.