Courts Issue Three Significant DEI Decisions

Last week, three federal courts issued significant decisions impacting the diversity, equity, and inclusion (DEI) legal landscape. Together, the cases demonstrate the rapidly evolving state of the law with respect to DEI.

• In Honeyfund.com Inc., et al. v. DeSantis, the US Court of Appeals for the Eleventh Circuit (Eleventh Circuit) upheld an injunction that blocks enforcement of Florida’s Stop Wrongs to Our Kids and Employees (WOKE) Act, a law which effectively prohibited certain forms of DEI training by private employers, on the grounds that it impermissibly violates the First Amendment
• In Nuziard, et al. v. Minority Business Development Agency, a district court invalidated a federal agency’s application of a presumption that certain racial groups are economically or socially disadvantaged on the grounds that it violated the US Constitution’s Equal Protection Clause under the Fifth Amendment.
• Finally, in Do No Harm v. Pfizer, the US Court of Appeals for the Second Circuit (Second Circuit) held that the advocacy group challenging Pfizer’s diversity fellowship program did not have standing to challenge the program.

11th Circuit Blocks DEI Workplace Training Restrictions

On March 4, the Eleventh Circuit affirmed a decision that blocks the portion of Florida’s Stop WOKE Act—or the Individual Freedom Act—that would effectively prohibit employers from conducting certain forms of mandatory DEI training.

In August 2022, the lower court had issued a preliminary injunction preventing enforcement of the provision of the Stop WOKE Act that prohibited employers from requiring employees to attend any workplace training that “espouses, promotes, advances, inculcates, or compels” employees to believe a specified list of ideas related to race, color, sex, or national origin, holding that it violated the First Amendment's right to freedom of speech, as it was an impermissible viewpoint-based regulation on speech. 

The Eleventh Circuit affirmed the district court's order. The State of Florida had argued that the Stop WOKE Act only prohibits the conduct of employers by prohibiting the commissioning of DEI trainings, not the speech of employers to discuss DEI concepts. The Eleventh Circuit disagreed, noting that mandatory DEI trainings would be permitted under the act only if the training endorses the viewpoints that Florida’s current administration holds, which constitutes “an illegal per se ban on speech the state disagrees with.”

Applying strict scrutiny, the Eleventh Circuit also rejected Florida's arguments that "it has a compelling interest in protecting individuals from being forced, under the threat of losing their jobs, to listen to speech 'espousing the moral superiority of one race over another,' 'proclaiming that an individual, by virtue of his or her race, is inherently racist,' or 'endorsing the racially discriminatory treatment of individuals because of past racist acts in which they played no part,'" and that "[t]hese categories of speech . . . . qualify as 'invidious discrimination' that the state can regulate." The Eleventh Circuit reasoned, "[the fact] that many people find these views deeply troubling does not mean that by banning them Florida is targeting discrimination." 

The Eleventh Circuit also found that the Stop WOKE Act is not narrowly tailored, explaining:

"Still, even if we presumed that the Act served the interest of combating discrimination in some way, its breadth and scope would doom it. Banning speech on a wide variety of political topics is bad; banning speech on a wide variety of political viewpoints is worse. A government's desire to protect the ears of its residents ‘is not enough to overcome the right to freedom of expression.’"

Accordingly, the Eleventh Circuit held that the plaintiffs had a substantial likelihood of success on the merits of their claims and affirmed the district Court's preliminary injunction order.

Implications for Employers

This decision is welcome news for employers which promote within their businesses training and other policies focused on equity and inclusion. The Florida law was the first state law seeking to regulate the content of private employers’ trainings on DEI-related topics. It is possible the ruling will have a chilling effect on other state legislation that seeks to do the same thing.

That said, employers should continue to carefully review the content of their DEI trainings and weigh the pros and cons of making such trainings mandatory in consultation with counsel. Trainings that suggest that certain racial groups are inherently biased or have engaged in systemic racism may give rise to harassment claims under Title VII and analogous state laws.

For example, at least one court recently held that requiring an employee to attend mandatory DEI trainings that “discussed racial issues in essentialist and deterministic terms—ascribing negative traits to white people or white teachers without exception and as flowing inevitably from their race” might create a hostile work environment on the basis of race.

District Court Judge Finds MBDA’s Presumption of Disadvantage Unconstitutional

On March 6, the US District Court for the Northern District of Texas sided with a group of plaintiffs that challenged the eligibility criteria for access to the US Minority Business Development Agency (MBDA), a federal agency with the explicit purpose of assisting minority-owned businesses. The specific legal question in this case was whether the program's presumption that certain racial groups are economically or socially disadvantaged, and thus eligible for the agency’s services, violated the Equal Protection Clause.

The court applied a strict scrutiny analysis and found no compelling government interest and granted a permanent injunction barring MBDA from "using an applicant's race or ethnicity in determining whether they can receive business center programming."

The court first considered whether MBDA had a compelling interest in remedying discrimination in credit access. The court applied the holding from Students for Fair Admissions Inc. v. Pres. & Fellows of Harv. Coll., 600 U.S. 181 (2023) (SFFA), which requires a showing of specifically identified instances of past discrimination that violated the US Constitution or a statute. Here, while the court acknowledged minority businesses still face economic disadvantages, it concluded the government had not shown specific instances of past discrimination that are causally linked to disadvantages today.

The court did find that MBDA has a compelling interest in remedying past discrimination in government contracting. However, the court held that MBDA's program was not narrowly tailored to meet that compelling interest, reasoning that it was both under and over-inclusive because MBDA “uses a codified list of preferred races/ethnicities to determine who gets benefits and who doesn’t," which “presumes anyone from the listed groups is ‘socially or economically disadvantaged’ and is thus entitled to services” while “[a]nyone outside those groups—white or otherwise—is presumptively not disadvantaged and thus not entitled to benefits."

The court noted that under MBDA’s program, even Oprah Winfrey would be considered "disadvantaged." Thus, the court concluded that MBDA's eligibility criteria for providing assistance to small businesses violated the Equal Protection Clause and was unconstitutional.

This is not the first court to find such a presumption unconstitutional. As explained in this prior LawFlash, a similar program operated by the US Small Business Administration was found unconstitutional by a Tennessee district court in July 2023, and a challenge to a US Department of Transportation program with a similar race-based presumption in its eligibility criteria is currently pending in the US District Court for the Eastern District of Kentucky.

Implications for Employers

This decision does not have a direct impact on private sector employers because it involved a federal government program, which was analyzed under the Fifth Amendment’s equal protection guarantees and not under any anti-discrimination statutes. It does, however, show how lower courts may apply the decision in SFFA in other contexts where there are race-based eligibility criteria. As a result, employers should carefully evaluate whether their DEI programs contain any race, national origin, or gender-based eligibility criteria and consult with counsel to determine whether they create legal risk and balance such risk against the goals of such programs.

2nd Circuit Determines Advocacy Group Lacks Standing

Do No Harm, an advocacy group comprised of physicians, nurses, medical students, patients, and policymakers, had filed a lawsuit challenging a Pfizer fellowship program that required applicants to "meet the program's goals of increasing the pipeline for Black/African Americans, Latino/Hispanic, and Native Americans," among other qualifications.

Do No Harm had alleged that Pfizer's fellowship program unlawfully excludes White and Asian-American applicants on the basis of race and, therefore, violated federal and state laws. The US District Court for the Southern District of New York dismissed the suit because it held that the group did not have standing to challenge Pfizer's fellowship program.

On March 6, the Second Circuit agreed, holding that Do No Harm lacked standing because it failed to identify by name a single member of Do No Harm who was injured by Pfizer's fellowship program. The Second Circuit did not address the substantive question regarding the legality of the program.

Implications for Employers

This decision highlights one of the arguments available to defendants in challenges to DEI programs filed by legal advocacy groups. For example, in Alexandre v. Amazon, a case challenging an Amazon DEI grant program, the court dismissed the plaintiffs’ initial complaint for lack of standing (although it granted plaintiff leave to amend, which it did). And in Do No Harm v. Project HOPE, the same association that brought the Pfizer case challenged a health equity fellowship. Plaintiffs voluntarily dismissed the case, while Project HOPE’s motion to dismiss on standing grounds, among others, remained pending.

While standing arguments are fact specific, they can be used to ensure that those who challenge private sector DEI programs have an actual factual connection to such programs.