Oct 2023

How Should Employers Approach DEI Audits?

In a landmark ruling earlier this year, the U.S. Supreme Court decided that compelled considerations of race were being unconstitutionally applied in the university admissions process. While this technically only relates to affirmative action in education, the decision has opened up challenges to similar programs in the private sector. Employers offering diversity, equity, and inclusion (DEI) initiatives may wonder how this increased scrutiny will affect their efforts moving forward. 

 DEI Audits: What Are They? 

 One way a company can protect itself is with a DEI audit. The purpose of the review is to gain a more detailed understanding of the successes and shortcomings of the company’s established equity programs and to assess the potential risks that may be present within the programs’ current structure. In light of the Supreme Court’s decision, more and more organizations are finding DEI audits to be helpful opportunities to explore how they are handling these initiatives.  

 How Can Employers Make Sure DEI Audits Are Worthwhile? 

 For a successful DEI audit, employers should keep a few important considerations in mind throughout the process.  

 Protect yourself with a privileged audit. It is in a company’s best interest to hire outside counsel during a DEI audit. Why? Attorney-client privilege. One of the primary objectives of the review is to protect against potential litigation, and employers who use in-house legal counsel (or even proceed with no counsel at all) are opening themselves up to possible curveballs and extra criticism. By allowing third-party counsel to perform the audit, the organization is covered by privilege. Any liability issues that arise will become privileged information and ensure that leadership can make well-informed decisions without external pressure or responsibility. 

 Broaden the scope of your DEI initiatives. The anti-discrimination laws that the U.S. federal government has on the books are based on the concept of protected classes like race, sex, and sexual orientation. The Supreme Court decision implies that in the future, using these criteria for special programs might be legally problematic — even if it benefits protected class members. 

 DEI audits should consider how the company defines diversity in a general sense. Adding considerations other than traditional protected characteristics (such as education level or amount of languages spoken) promotes workplace diversity while reducing legal risk. 

 Allow the numbers to tell the story. Often, when an organization makes a conscious push for more diversity, it will tie managerial compensation to inclusion goals. A successful DEI review will not only obtain the numbers involved but will look deeper to add as much context to the data as possible. 

 When the numbers have painted a picture (including figures like hiring patterns and representation percentages at each pay level), it’s time for the company to dig further into the reasons the numbers are what they are. There is no value in accounting for data in a vacuum without understanding the underlying causes. 

 Speak to employees. It’s one thing to look at numbers and written policies regarding DEI programs and another to see what they are like for the people in the trenches. Audits should gather feedback from the employees and stakeholders responsible for implementing these in practice to gain a more holistic view of equity initiatives. 

 Review corporate statements. Most companies with DEI programs have released external communications that highlight their efforts. While many of these statements seemed standard and innocuous PR when they were made, the Supreme Court’s ruling may place such communications in a new light. 

 DEI audits should thoroughly examine every diversity-related release the company has issued over the last several years, including those made by individuals in their capacity as leaders. Because these statements were originally intended for the public, they may be easy targets as a basis for a lawsuit. While PR is not something you can change retroactively, understanding your company’s weaknesses can better prepare you for a challenge should one arise. 

 For more information regarding the benefits of DEI audits or to discuss the possibility of engaging outside counsel, contact experienced employment attorney Carol Harding at Earp Cohn. Carol maintains a litigation practice, having represented businesses, public entities, and individuals in state and federal courts. She combines her litigation experience with a focus on practical solutions to assist her clients in evaluating their corporate policies and procedures.