DoJ action in schools case highlights EDI risks in US

In the United States, the Department of Justice has launched an investigation into a school district in Iowa over diversity hiring targets, saying they may amount to unlawful race-based preferences. The DoJ has opened an investigation into Des Moines Public Schools over whether the school’s diversity targets amount to unlawful preferences under federal civil rights law. It’s the latest sign of Washington’s clampdown on EDI programmes across the board, and it raises serious questions for UK employers with US operations.

The case focuses on a 2021 initiative in Des Moines that aimed to boost teacher diversity in early grades. The DOJ says those hiring goals could amount to illegal quotas, breaching Title VII, part of the US Civil Rights Act of 1964 – one of the cornerstones of federal laws on workplace equality. Its statement was blunt: ‘DEI programmes that rely on protected characteristics can cross the line into discrimination.’

Des Moines is a civil rights case, not a fraud action, but the approach mirrors what the DOJ is now applying more widely. President Trump’s Executive Order 14173 called ‘Ending Illegal Discrimination and Restoring Merit-Based Opportunity’ was signed on 21 January, his first full day in office, and requires federal contractors and grantees to certify they don’t run unlawful EDI programmes. Under the new Civil Rights Fraud Initiative, misleading certifications can trigger False Claims Act liability, a law that carries treble damages and encourages whistleblowers to sue.

So Des Moines is a clear warning sign. What may look like aspirational targets in the UK can, in the US, be treated as discrimination, and expose employers to whistleblower claims and federal enforcement.

So what should HR teams with US operations do? To find out, I spoke to Cara Crotty, partner at US law firm Constangy and co-chair of its DEI and contractor compliance practice. Here in the UK the idea of a whistleblower suing over a diversity programme would certainly raise eyebrows, so why is it such a risk in the US? 

Cara Crotty: “Well before January of this year, I would have thought it wasn't much of a risk in the US either but President Trump issued an Executive Order on his second day in office that requires recipients of federal funds, such as federal contractors, and grantees, and many colleges and universities, to certify that they do not have illegal DEI programmes and part of that accompanying that certification is an acknowledgement that their receipt of federal funding is conditioned on their compliance. So if a contractor has a DEI policy that violates federal law, that is discriminatory, then certainly there's a potential for a False Claims Act because they're falsely certifying to the government that they are in compliance and that can create significant liability for that company. In addition, the Department of Justice has started a Civil Rights Fraud Initiative which expressly encourages employees and other private citizens to blow the whistle on companies and their employers if they believe that they have illegal DEI practices in place. So it incentivises individuals to bring those claims either directly to the government, or to file their own lawsuits. We're also seeing conservative activist groups being very active in pursuing claims against organisations that they believe have unlawful discriminatory practices. So companies need to be mindful. It’s not just the federal government, but the private sector is pursuing claims for illegal DEI and that can certainly result in more whistleblower actions going forward.” 

Joe Glavina: “We often hear that global EDI frameworks should be universal but your message, Cara, is to avoid that approach. What practical advice would you give UK firms with US operations?” 

Cara Crotty: “I think they need to look very closely at DEI goals that would apply to their US entities and that are publicly expressed as being the initiative of the US entity because that could certainly focus attention and potentially bring liability to the US entity if those practices equate to illegal DEI. Illegal EDI has not been expressly defined by the federal government - it wasn't defined in President Trump's Executive Order. We do have federal agencies coming out with guidance. The Department of Justice issued a memo just recently giving examples of the types of actions of employers, and recipients of federal funds, that it believes would be illegal discrimination, or illegal DEI, and so it's a good tool for any entity with US operations to review to see if any of the existing policies or practices could be considered problematic by the government.” 

Joe Glavina: “So is the advice to HR teams, Cara, to review policies urgently and, ideally, conduct an audit?” 

Cara Crotty: “Yes that definitely, I think, would be step number one. Look at all of your practices and procedures from an employee's entire life cycle. You want to look at your recruitment practices, hiring practices and selection, including during the employment process and history through to employee termination to see if there are potential practices that involve protected characteristics. You want to make sure you're not conditioning any term, condition, or privilege of employment, on a protected characteristics like race or gender. For example, a training programme, a scholarship programme, all of those types of things are viewed as problematic by the government and so the risk definitely is coming from both the federal government, that is scrutinising employer actions, as well as the private sector which has been very active in suing entities on behalf of their membership. So conservative activist groups are suing employers on behalf of their members alleging discriminatory practices are violating the law. So I think UK firms with US operations should definitely review all of their employment practices and procedures for potential issues with EDI and illegal preferences. I do want to say that not everything EDI-related is unlawful in the US. There are still many organisations that are embracing their diversity, equity and inclusion policies and practices so it's not necessarily that we need to throw everything out, but we should just be taking a close view to make sure that none of those initiatives are either advantaging groups because of a protected characteristic, or disadvantaging groups because of that.” 

This is an issue that Cara and her colleagues have been flagging with their clients, as you might expect, and next week you have the chance to hear the full interview with Cara talking in more detail about what is going on in the US at moment – important not just to US employers but also for UK-based businesses with a presence in the US. If that applies to you, then clearly navigating the different rules across both countries will be crucial and will require specialist advice on the American side. Cara and the team at Constagny are very well placed to help with that so please do make contact if you need advice. Cara’s details are there on the screen for you.