The future of diversity, equity and inclusion (DEI) policies is facing an unknown future and volatility, especially with recent political and legal developments. President Donald Trump signed executive orders recently terminating DEI programs within the federal government. In addition, several private companies have begun rolling back their DEI initiatives, including Target, Meta, Amazon, McDonalds, Walmart, Ford, Lowe’s, John Deer and Tractor Supply to name a few. Lastly, the Supreme Court’s 2023 ruling in Students for Fair Admissions v. President and Fellows of Harvard College has had a significant impact on DEI efforts in higher education and potentially the workplace. This ruling created:
- Impact in education: The ruling eliminated the consideration of race in college admissions, and universities are working to ensure equal opportunity for students of all backgrounds.
- Impact on the workplace: The ruling has led to an increase in litigation against private-sector DEI policies and programs. Litigants have argued that the use of race or ethnicity in hiring decisions, is prohibited by Title VII. This ruling has also encouraged those who want to challenge DEI initiatives. It has also resulted in more reverse discrimination claims.
The recent appointee by President Trump for the Equal Employment Opportunity Commission, Andrea Lucas, has been quite outspoken about her prioritization of individual rights over group outcomes. She stated, “Our employment civil rights laws are a matter of individual rights. We must reject the twin lies of identity politics: that justice is measured by group outcomes and that civil rights exist solely to remedy harms against certain groups.”
DEI policies were originally intended to counteract discriminatory practices, but critics argue that education, government and business programs that single out participants based on factors such as race, gender and sexual orientation are unfair, and the same opportunities should be afforded to everyone.
Key points on the potential future of DEI policies
- Political and legal pushback: Recent actions by the Trump administration, such as ending affirmative action in federal contracting and dismantling federal DEI programs, suggest significant political pushback against these initiatives. This could result in reduced DEI efforts across various sectors, particularly those influenced by federal policies.
- Corporate adaptation: Despite the political climate, many companies are likely to continue their DEI efforts, though with some adjustments. Organizations might focus on integrating DEI more deeply into their core business strategies and using rigorous assessments to measure progress. This approach can help mitigate legal risks while still promoting inclusion and diversity (I&D).
- New strategies: Some experts propose that organizations may adopt new frameworks like Cultural Portfolio Management (CPM), which focuses on optimizing the diverse cultural assets of an organization. This could address the shortcomings of traditional DEI approaches and ensure that diversity efforts are more effective and sustainable.
- Public opinion and advocacy: The future of DEI will also depend on public opinion and advocacy from multiple viewpoints. As societal attitudes evolve, there may be renewed support for DEI initiatives, especially if advocates can demonstrate their positive impact on organizational success and social equity.
The elimination of federal support for DEI efforts could have several impacts on employment practices liability (EPL) and directors and officers (D&O) exposures:
- Increased litigation risk: Without federal support for DEI initiatives, companies might face increased litigation risks related to discrimination and harassment claims. Employees may feel less protected and more likely to file lawsuits if they perceive a lack of commitment to inclusion and diversity (I&D). In addition, it is possible companies with DEI programs in place may face an increase in reverse discrimination claims.
- Increased volatility of litigation outcomes: Will certain jurisdictions be able to maintain their view or will the jurisdictional landscape undergo significant change? Will there be a change in litigation strategy from staying in state courts versus removal to federal districts?
- Shifting social landscape: Companies that reduce or eliminate their DEI programs and organizations that support DEI programs may suffer social backlash, which can affect their market position and stakeholder trust one way or another. This could also increase scrutiny from investors and other stakeholders, potentially impacting D&O exposures.
- Regulatory scrutiny: While federal support may wane, state and local governments may enforce or discredit DEI-related regulations depending on the political climate. Companies could face a complex regulatory landscape, increasing the risk of non-compliance and associated penalties based on local support. There is a strong likelihood that there will be increased scrutiny of DEI programs from federal agencies.
- Workplace morale and productivity: A reduction in DEI efforts can impact workplace morale and productivity. Employees who feel undervalued or discriminated against are less likely to be engaged and productive, which can lead to higher turnover rates and associated costs.
- Insurance premiums: Insurers/underwriters will likely ask more questions on how clients are approaching their prior DEI programs and evaluating existing policies and practices to ensure they are lawful and how they are communicating these changes to employees. Companies with robust DEI programs might benefit from lower premiums, while those scaling back could see higher costs due to increased risk exposure.
Overall, while the federal government’s stance on DEI may change, companies will need to carefully navigate these challenges to mitigate potential EPL and D&O exposures and work with outside counsel to ensure compliance with all laws.
What is WTW doing amidst this climate of change?
We here at WTW have reached out to a few underwriters and so far, they have not changed any submission methodologies. We continue to keep a strong pulse on what we are hearing, whether it is on federal funding, civil rights and DEI. We will continue to talk to the markets and ensure we bring you the news first. No matter what, governance and risk control will always be at the forefront of how we prevent injuries or harm to others. And we are always here to partner with you.
Disclaimer
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
