IS DEI LEGALLY DEAD?

The role of diversity, equity, and inclusion (DEI) in American corporate culture expanded greatly over the last decade, especially following the murder of George Floyd. That DEI was important to recruitment/retention and contributed to superior financial performance was widely accepted (though arguably supported by thin science). Companies touted their DEI policies and training, sought diversity in their workforces, leadership, and supply chains, and otherwise let it be known that they were all-in on DEI.

But a backlash was brewing and has now boiled over; the Trump administration moved swiftly to eradicate DEI in the public and private spheres through a slew of executive orders, declaring it “illegal” and “dead.” Of course DEI means different things to different people, ranging from a general sense that everyone should be welcome to outright preferences. To the Trump administration DEI is antithetical to meritocracy, makes offensive generalizations, and promotes false “gender ideology.” While the administration’s blitzkrieg approach drew the DEI backlash into sharp relief, it was already well underway in courts of law and public opinion.

Recent cases attempt to balance equal opportunity and free speech interests with mixed results. For example, Florida’s “Stop WOKE Act,” enacted in 2022, banned workplace training teaching that people are inherently prejudiced or privileged because of protected class status. The 11th Circuit held that portions of the law, now permanently enjoined, violated business’s First Amendment free speech rights. But in American Alliance for Equal Rights v. Fearless Fund Management the same Circuit held that a contest awarding grants to majority Black female-owned businesses was not “expressive” (entitled to First Amendment protections) but rather violated Section 1981 (prohibiting race discrimination in contracting). In Henderson v. Springfield R-12 School District the Eighth Circuit rejected employees’ claims that they were “forced to assume the pejorative white supremacist label for their ‘white silence’” in mandatory training, which it viewed as a minor inconvenience. Contrastingly, in Young v. CO. Dept. of Corrections the 10th Circuit reluctantly affirmed dismissal of a white employee’s complaint that DEI training created a hostile work environment saying, “If not already at the destination, this type of race-based rhetoric is well on the way to arriving at objectively and subjectively harassing messaging.”

Several “reverse discrimination” claims made legal news in recent years and they will continue to do so. For instance, in Duvall v. Novant Health a white male won a $10M punitive damages award (later reduced on appeal) after being fired from a hospital system where executives were incented to meet race- and sex-based targets. The Supreme Court will likely use the upcoming Ames case to resolve a circuit split and clarify that the standard of proof in discrimination cases is the same regardless of whether the plaintiff belongs to a “majority” classification.

The Supreme Court’s 2020 Bostock decision, holding that Title VII prohibits discrimination based on sexual orientation and gender stereotyping, has had far-reaching implications placing it squarely in the crosshairs of DEI’s opponents. For example, it was cited in Lange v. Houston County, Georgia and Kadel v. Falwell for the propositions that welfare plans cannot categorically exclude gender-affirming care and treatments connected with sex changes/modifications. Seeking to limit Bostock’s application, in a January 2025 press release the EEOC disclaimed previous guidance under Bostock relating to gender identity as having exceeded its authority.

The threat of negative customer sentiment over DEI is palpable. Famously, in 2023 Bud Light was boycotted for a minor advertising campaign featuring a transgender influencer causing it to lose an estimated $1.4B in sales and its 20-year position as the top-selling beer in the US and triggering a 20% drop in AB InBev’s stock price. Also in 2023, several Republican Attorneys General publicly (and falsely) warned Target that Pride Month merchandise, which it had featured before without incident, could violate child protection laws prompting people to post videos of themselves knocking store displays over and confronting employees. Target concluded that quarterly sales fell for the first time in six years due to “strong reaction to this year’s Pride assortment.” A walk-back of DEI initiatives followed, and Target ended its DEI program entirely after Trump’s January 2025 executive orders (triggering a boycott from supporters of DEI). A lawsuit led by Florida’s Attorney General, who ironically decried Target’s “offensive political theatre,” now alleges Target concealed from shareholders the risks of what a press release called its “radical LGBTQ activism.” Other companies that have publicly backed away from DEI include Amazon (citing “outdated programs and materials”), Meta (citing a changing “legal and policy landscape”), McDonalds (citing the Supreme Court’s Students for Fair Admissions v. Harvard decision ending affirmative action), Walmart, Boeing, and Lowe’s. Several prominent law firms have discontinued DEI-related programs such as mentorships for women or minority attorneys, sometimes in response to a lone letter from a special interest group.

While it may be premature to sign DEI’s death certificate, winds have clearly shifted. Fundamentally the law has not; discrimination based on protected class status was already illegal, being all-welcoming remains legal (if sometimes unpopular). But there is vast interpretive space between those guideposts and things are moving fast; as of this writing, a federal court temporarily enjoined parts of two executive orders aimed at combating DEI because of unconstitutional viewpoint discrimination and vagueness. There is a small but growing groundswell of cases predicated on employees’ outrage over some flavors of DEI, as well as similarly-motivated shareholder initiatives and derivative actions. The Trump administration and some states loudly proclaim their intention to prosecute companies that they believe engage in illegal DEI, and the market can punish companies that misread how DEI resonates with their investors and customers. Littler’s 2025 Inclusion, Equity, and Diversity C-Suite Survey Report suggests that many companies still support DEI, though they anticipate it playing an attenuated role. But they will actively assess litigation, enforcement, and reputational risk and will be more circumspect in their goals, methods, and messaging.