A couple of months ago, Francine Griesing discussed the delicate tightrope of diversity hiring.  Lean too far in one direction and the employer has no plan to infuse much needed diversity into the workplace.  Lean too far in the other direction and the employer could be ensnarled in employment discrimination lawsuits.

Since that original article, the Department of Labor has been looking closer at the affirmative action plans of major companies with government contracts such as Microsoft and Wells Fargo.  The government’s message?  Government contractors “must not engage in discriminatory practices in meeting” their affirmative action goals.  This governmental response is interesting, maybe even frustrating, but it is not surprising.  In light of these new developments, it is important to consider the context and background in order to ensure that employers stay upright on that allegorical tightrope of diversity hiring.

What Exactly is Affirmative Action?

Affirmative action simply means taking steps to make hiring preferences for a specific group—namely, underrepresented minorities.  For a more complete account of the very interesting history of affirmative action, consider Louis Menand’s New Yorker article, “The Changing Meaning of Affirmative Action.”  For employers, the history of affirmative action boils down to two major Supreme Court cases: Regents of the University of California v. Bakke and United Steelworkers of America, AFL-CIO-CLC v. Weber.

Bakke was the Supreme Court’s first foray into affirmative action.  While the case addressed affirmative action in the realm of public higher education, two important takeaways from the case inform affirmative action in the workplace.  First, the legal foundation upon which affirmative action rests is fairly unstable.  The Bakke case generated six separate opinions from the Court, none of which were supported by a majority of the justices.  Then, just as it does now, the Court struggles to draw a concrete line between permissible affirmative action and unlawful racial discrimination.  Justice Lewis Powell’s opinion wrote for a plurality of the Court, and informs the second key takeaway: while some affirmative action plan is acceptable, racial quotas are expressly unconstitutional.

While Bakke discussed affirmative action in the public sector, Weber tackled affirmative action in the private sector.  Because the Constitution does not regulate private conduct, private employers were given a little bit more leeway to implement affirmative action plans than public universities were in Bakke.  However, the relevant law in Weber was Title VII of the Civil Rights Act of 1964, which outlaws employers from discriminating on the basis of race, color, religion, sex and national origin.  Still, Weber’s holding is narrow in that private sector employers may implement affirmative action plans so long as they are aimed at breaking down old patterns of racial segregation and hierarchy and they do not unnecessarily trammel the interests of white employees.

Why is the Government Singling out Government Contractors?

Beyond Bakke and Weber (and their progeny), there is one more important piece to the affirmative action puzzle: Executive Order 11246.  While the language in Weber was permissive (i.e., “employers may implement affirmative action plans…”), EO 11246 actually mandates certain employers who hold contracts with the federal government to (1) refrain from racial discrimination and (2) prepare written affirmative action plans.  The Department of Labor’s recent letters to Microsoft and Wells Fargo indicate that the government is investigating whether the companies are in violation of this Executive Order.  Ironically, the Department of Labor’s crackdown on Microsoft and Wells Fargo is not for failure to develop an affirmative action plan, but rather for potentially being overly zealous in the implementation of their plans.

For example, in the case of Microsoft, the Department of Labor’s letter specifically addressed a statement by Microsoft CEO Satya Nadella, which stated the company would “double the number of Black and African American people managers, senior individual contributors, and senior leaders in the United States by 2025.”  While in most contexts this type of language is laudable, in the affirmative action world, it sounds an awful lot like what Louis Menand referred to as “the dreaded Q-word,” a quota.  So, when the Department of Labor reminds Microsoft that they are prohibited from engaging in discriminatory practices, they are not accusing Microsoft of discriminating against underrepresented minorities, but rather a majority group—namely, white employees.  Microsoft general counsel, Dev Stahlkopf, responded to the letter, and has “emphatically” denied the accusations, explaining that the company’s practices in reaching diversity goals are legal and in-line with their obligations under EO 11246.

As an Employer, What do I Need to Know?

The recent developments with Microsoft and Wells Fargo underscore the tricky situation that diversity hiring can be and how important it is for employers to have a plan in place when attempting to set and reach diversity hiring goals.  Beyond simply having a plan, it is also prudent to speak formally about the steps you are taking to reach these goals.

For example, stripped of context, Microsoft’s CEO’s statement does sound like a quota system.  But, doubling “the number of Black and African American people managers, senior individual contributors, and senior leaders in the United States by 2025,” is not a plan, it is a goal.  And, when that goal is given the context of the plan behind it—expanding recruitment pipelines at historically black colleges and universities, teaching employees about inclusive hiring practices and focusing on retention and promotion of current employees—that plan sounds a lot less like an impermissible quota.

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