Auditing the Legality of your DEI Programs

By Jonathan A. Segal

The business cases for attracting (and retaining) diverse talent has not changed. The keyword is talent.

The law also has not changed in terms of the big picture.  Employers cannot provide preferences based on race, sex, etc., even if the goal is to increase diversity.

What has changed is the enforcement climate. President Trump made clear, through two Executive Orders issued in the first week of his second term, that one of his priorities was eliminating discrimination in the context of Diversity, Equity, and Inclusion (DEI).

Following the Executive Orders, the Chair of the U.S. Equal Employment Opportunity Commission, Andrea Lucas, made clear that one of her priorities is to investigate unlawful bias in the context of DEI.  Now that the EEOC has a quorum, such investigations have begun.

Employers can ignore neither the business benefits of diversity nor the legal minefields in DEI programs. Employers are well advised to consider auditing their DEI programs under the attorney-client privilege for potential discrimination and to make any necessary changes.

While these audits are important for all employers, they are particularly important for federal contractors and grantees, which must certify their compliance with federal anti-discrimination laws. False certifications can result in substantial liability under the False Claims Act.

The risk in diversity activities can best be understood as falling into 3 general categories:

(1) unlawful; (2) legally risky; and (3) lawful. Without providing legal advice, I provide examples of DEI activities that fall or likely fall in each of the 3 general categories:

Examples of unlawful conduct include, but are not limited to:

1. Establishing a quota for women and/or people of color.
2. Creating a set aside, that is, reserving a position based on race, sex, etc.
3. Considering race, sex, etc. as a “plus factor” in making an employment decision.

On these issues, the law is clear. On other issues, the law is still in its growing stage, as shown by the examples that follow.

Examples of activities that are not necessarily unlawful, but come with legal risk include, but are not limited to:

1. Setting aspirational goals. Although not per se “unlawful”, expect a challenge (at a minimum) on the ground that the aspirational goals are de facto quotas.
2. Requiring a diverse slate of candidates to be interviewed (sometimes referred to as the “Rooney” rule). The EEOC and the U.S. Department of Justice have taken the enforcement position that diverse slate requirements are unlawful. At least one federal court has suggested otherwise.
3. Providing implicit bias training. The lawfulness of the training will turn not only on its content but also on the motivation behind it. If the training is designed (motivated) to prevent discrimination, the training should be lawful. But if the training is designed (motivated) to increase diversity based on race, sex, etc., the training may be used as evidence of unlawful discrimination regarding specific employment decisions.

Examples of activities that should be lawful include:

1. Conducting a wide search so that the applicant pool is rich with talent. Please note that this is different from trying to increase the diversity of the applicant pool.
2. Taking steps to prevent unlawful bias in the decision-making process, such as blind screening. Here, the key is that the screening should apply equally to candidates regardless of sex, race, etc.
3. Considering differences in perspective, experience, skill, etc. However, such differences cannot be a proxy for race, sex, etc., which means an employer cannot consider such differences only when they increase diversity based on race, sex, etc.

In conclusion, two things are true: (1) there is no DEI exception to unlawful discrimination; and (2) DEI programs can be structured without unlawful discrimination.   Auditing a company’s DEI initiatives under attorney-client privilege can help an employer navigate the law in this area.

I’ll be speaking more in-depth on this topic at the PA Chamber’s 2026 Human Resources Conference. I hope to see you there on Thursday, March 5, at the Sheraton Harrisburg Hershey! Reserve your spot or sponsorship today.

Important note: this blog should not be construed as legal advice or as pertaining to specific factual circumstances. 

Jonathan A. Segal is a partner at Duane Morris LLP in the Employment, Labor, Benefits and Immigration Practice Group and founder of the Duane Morris Institute.