Inclusion and diversity will be a greater priority for the Biden administration and employers, but a Supreme Court decision on the legal challenge to Harvard’s racial preferences could threaten approaches long-term. Employers are seeking to make sustainable changes to their cultures that will facilitate retention of top Black, Hispanic, and Asian employees, as well as improve recruiting, hiring, and promotion over the long term. A federal mandate requiring employers to disclose greater workforce demographic data to expand transparency and reinforce leadership accountability for equal opportunity in the workplace may be possible in the longer-term. However, the initial demand for greater transparency will come from investors and key stakeholders, and through Executive Orders and congressional oversight. Permissible employer actions under federal law could be impacted if, as expected, the Harvard admissions case is appealed to the Supreme Court this spring.
Federal inclusion and diversity policy will initially be limited by the narrow margins in Congress and EEOC composition. President-elect Biden has made it clear that inclusion and diversity will be a priority, and he is expected to rescind the Executive Order on diversity training that was
suspended by a Federal judge on December 22. However, the ability to make other policy changes that will impact the private sector is likely to be limited initially to federal contractors. Consider the following:
- A closely divided Congress is unlikely to agree to diversity legislation in the near term. Expect oversight hearings and focus on Board, federal contractor and financial services industry diversity initially.
- The most likely regulatory change is expansion of EEO-1 reporting to include workforce demographic and pay data. However, the EEOC has commissioned a National Academy of Sciences panel to study best approaches to pay data reporting. That report is due at the end of 2021.
- Based on Commissioner terms, the five-member Equal Employment Opportunity Commission will have a Republican majority until August of 2022. This means that while President-Elect Biden will name a Democrat as Chair who will set the Commission’s agenda, prepare draft rules and procure studies, the Commission is unlikely to make substantial regulatory or litigation changes that require a commission vote until 2022.
- The term of the Commission’s Republican General Counsel, who oversees the Commission’s litigation and enforcement regime, expires in 2023.
Initial policy activity expected in OFCCP: The Department of Labor’s Office of Federal Contract Compliance Programs will take a more aggressive enforcement stance on affirmative action under Executive Order 11246, focusing on affirmative action to remedy past findings of discrimination. It is not yet clear how the incoming administration will address employer-disclosed diversity goals, which have been questioned by the Trump administration.
Greatest near-term push for diversity disclosure expected from investors and stakeholders: Pressure has been intense from activist and mainstream investors alike on company workforce diversity disclosures, committing to improvements in representation and “making good” on promises issued last year. Investors such as CtW and the New York State Retirement Fund have joined Arjuna Capital, Proxy Impact, and others in a new upswing of shareholder proposals on diversity, inclusion, and pay equity. BlackRock, which has stated it will likely support more proposals this year, has closed ranks with State Street and Vanguard on aggressively pushing for board diversity, while NASDAQ has proposed new listing standards requiring companies to have diverse boards or explain why they do not.
Impact of Harvard racial preferences case hangs over employer diversity efforts: It is widely expected that a November 2020 court of appeals decision upholding Harvard’s race-conscious admissions process will be appealed to the Supreme Court this spring, with a decision expected sometime in 2022. The composition of the Court has changed considerably since the decisions in which race-conscious processes were previously upheld. There is widespread speculation that the Court could reverse the court of appeals decision. While the law in this area governing academia differs from that of employment, the decision could set the stage for claims against employers’ race-conscious hiring and promotion processes.