Is DEI illegal?
-- by Jessie Gabriel
With all the news out there linked to President Trump, it’s hard to separate what is real, what is anticipated, and what is catastrophizing that is not evidence-based. So let’s go through what is actually on the table and how it may impact you.
This has been a unique time for those of us working, either through our professional, political, or charitable endeavors, to address inequality in the U.S. Even that word, “inequality,” now has a different charge to it, as it was one of the words on the scrub list issued by the current administration. It feels particularly nasty that this is all happening on the heels of Black History Month and in the middle of Women’s History Month.
This goes beyond the feelings in our souls that we are moving in the wrong direction. For many of us, it hits squarely at our livelihoods. If you are engaged in a business with a strategy or mission to serve groups that have been historically underserved, underrepresented, or underfunded, you may now be worrying about the impact of the recent actions on the viability of your company.
With all the news out there linked to President Trump, it’s hard to separate what is real, what is anticipated, and what is catastrophizing that is not evidence-based. So let’s go through what is actually on the table and how it may impact you. Keep in mind this is an extremely cursory review that includes conclusions that may be out of date as soon as this is published. If you have any questions about how these policies might impact your business directly, we strongly advise you to contact your counsel for guidance.
The Actual Law. As far as we know, the only relatively new law in this area that is binding on private citizens and business remains the law from the Fearless Fund litigation. The holding there was that you cannot treat white people differently from people of color when you are contracting. While we will happily debate how a statute designed to prevent discrimination against people of color could be used to invalidate a grant program for Black women, the law of that case remains. As a caveat, that is not binding precedent for most federal courts, but it’s fair to assume that if the issue were raised again, the current Supreme Court would support the Fearless Fund holding.
For Those With Federal Government Contracts or Grants. On January 20, 2025, the White House issued an executive order terminating all DEI programs at federal agencies. It also requested reporting on federal contractors that were hired to support DEI efforts and those who received federal grants to advance DEI initiatives. Given the administration’s actions as to USAID, it is reasonable to anticipate they will look to terminate many of these contracts and grants (to the extent they haven’t already). If you haven’t read this order, entitled “Ending Radical and Wasteful Government DEI Programs and Preferencing,” please click on the link at the start of this paragraph. This is a formal order from our U.S. White House. Let that sink in.
I can’t go on without pointing out the obvious here—these programs were created to make things equitable, to address the inequity that had been created by previous overtly discriminatory laws and practices. Equity is a good thing. Equity is the opposite of preferencing. But you can’t build equity on top of an inequitable foundation built over hundreds of years. “[T]he master’s tools will never dismantle the master’s house.” It won’t just happen. You have to be proactive. So, what the administration is really saying is that it wants to maintain the status quo, which has served our President and his bestie, Elon, quite well.
The next day, the White House issued another executive order regarding future contracts and grants, including a requirement that any future recipient “certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” Now, what does that even mean? Chances are good that your current DEI program does not violate any existing Federal anti-discrimination laws, but that law is clearly evolving. This, unfortunately, puts companies in a bind as they don’t want to make any statement that puts them at risk for False Claims Reporting Act.
For The Private Sector. In this same executive order, the administration took aim at the private sector. This order directed federal agencies to provide reporting to the White House regarding private actors within their jurisdiction who support DEI. In particular, no later than May 21, 2025, they are to provide lists of the “most egregious actors” and plans to prevent their DEI actions, including the use of litigation. They are also required to identify “up to nine potential civil compliance investigation” targets who are “publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, [or] institutions of higher education with endowments over 1 billion dollars.” Yeah, this is a bit of weird list, but fine. Apparently President Trump really hates non-profits, but loves privately-held companies and asset managers.
Let’s start by calling this what it is: a scare tactic. There is currently no law that would support the end of programs that celebrate and support diverse, equitable, and inclusive work places. There is law making clear you can’t choose one job candidate or university candidate over another, solely based to their race. But that’s not what we’re talking about here. What we’re largely talking about here are things like employee resource groups, outreach to diverse communities, and implicit bias training. However, I do expect this administration to start filing suits against private actors in hopes of creating law that does not currently exist. Who will they target? I’d say there’s a good chance the top of the list will include people who have been vocal about disliking President Trump because, you know, that’s what matters to this President—payback.
Private Sector Response. While many companies have publicly announced (sometimes with glee, it feels), that they are abandoning their own efforts to create an inclusive workplace, others are not. As a legal geek, I do wonder what’s going on in corporate boardrooms, as they balance trying to appease this administration with their fiduciary duty to do what is best for the business (given the data indicating that DEI initiatives increase profitability). What’s better for the business: trying to avoid a frivolous lawsuit by the federal government or continuing efforts that they know benefit their company and its shareholders? I don’t mean to be flip, it’s a real question. One thing that many, many companies are doing is rethinking the language they use externally—language that they anticipate may be used as the basis for targeting by the Trump Administration.
Many of you have asked how we’re thinking about this at All Places. We are and have always been an explicitly mission-driven company focused on gender equity in the capital markets. We have never been a company that discriminates by gender on who we work with (we have other discriminatory practices, like a no a**holes policy, but so far we haven’t seen any EOs on that). Could that explicit mission and the communications we put out related to that mission put us at risk? Sure. But I see that risk as low given that we are a small business with no financial connection to any federal agency. Plus, this is who we are. If the White House wants to sue us, bring it. We’re a group of lawyers who are passionate about supporting and protecting women-owned businesses. Game on.
