The campaign against affirmative action shifts to corporate America

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SAN FRANCISCO – Weeks after George Floyd died at the hands of Minneapolis police, sparking nationwide protests over racial inequality, Microsoft joined an avalanche of companies announcing lofty plans to diversify their overwhelmingly White workforces.

The tech giant promised to double the number of Black employees in senior leadership roles by 2025. It also pledged to double the number of Black- and African American-owned suppliers by 2023, as well as its percentage of transactions with Black- and African American-owned banks.

Three years later, Microsoft said it has met most of those goals. But now its pledge is drawing scrutiny from a group of Republican state attorneys general who say it set “racially discriminatory quotas and preferences.” In the wake of a recent Supreme Court decision outlawing affirmative action in college admissions, the officials argue, such “explicitly race-based initiatives” in the corporate world “are similarly illegal.”

Companies “need to understand there is a debate and legal risk here,” Tennessee Attorney General Jonathan Skrmetti said in an interview. “We want companies to know that they may not be able to do all these things that they’ve been doing.”

Last week, Skrmetti and Kansas Attorney General Kris Kobach sent a letter urging Microsoft and other Fortune 100 companies to reexamine their policies in response to the June 29 Supreme Court ruling. Though the decision applies only to college admissions, the letter – signed by GOP attorneys general from 13 states – is part of a growing conservative campaign to target affirmative action in hiring and other settings.

Legal experts said most companies, especially employers with large human relations staffs like Microsoft, are likely to be in compliance with current law, which has long prohibited discrimination on the basis of race or gender. On Wednesday, July 19, 2023, a group of 17 Democratic attorneys general sent their own letter to the Fortune 100, urging the companies to “double-down on diversity focused programs because there is still much more work to be done.”

The Democrats condemned the GOP’s letter, saying it had a “tone of intimidation” that “purposefully seeks to undermine efforts to reduce racial inequities in corporate America.” And while legal experts called the Republicans’ argument dubious, many worry that the growing clamor could have a chilling effect on corporate efforts to counter generations of discrimination.

“This is political grandstanding, but it’s grandstanding that is really dangerous,” said Y-Vonne Hutchinson, CEO and founder of ReadySet, a diversity, equity and inclusion (DEI) consulting firm based in Oakland, Calif. “We should be taking it seriously.”

Since last year, America First Legal, a group run by former Trump aide Stephen Miller, has filed at least nine complaints with the Equal Employment Opportunity Commission (EEOC) accusing a host of major companies of “hiring people based solely on immutable characteristics, like race or sex, rather than qualifications or abilities,” which the group argues is a violation of federal civil rights law. America First Legal also has targeted an Amazon program that awards $10,000 grants to certain Black, Latino and Native American entrepreneurs to start delivery businesses.

In the case of Microsoft, the Republican attorneys general take particular aim at its 2020 pledge regarding its suppliers. The letter argues that the company not only “set a quota for the number of Black-owned approved suppliers,” but also implied that suppliers that “did not adopt their own racially discriminatory policies would suffer consequences.”

The Microsoft pledge also came under scrutiny in the waning days of the Trump administration, when the Labor Department asked Microsoft – a federal contractor – to defend the initiative. The inquiry was closed after the company provided a response in December 2020.

Microsoft declined to comment on the GOP attorneys general letter but pointed to a 2020 blog post from Dev Stahlkopf, corporate vice president and general counsel, responding to the Labor Department inquiry.

“We have every confidence that Microsoft’s diversity initiative complies fully with all U.S. employment laws,” Stahlkopf said in the post. “. . . We have decades of experience and know full well how to appropriately create opportunities for people without taking away opportunities from others.”

Brandon Smith, Skrmetti’s chief of staff, said Labor’s decision to close the 2020 probe has little bearing in 2023, when signs abound that the legal ground under affirmative action may be shifting. “Something that predates the [Supreme Court’s affirmative action] decision does not provide much illumination as to the potential ramifications of that decision,” Smith said via email.

Last month’s Supreme Court decision found that programs at Harvard and the University of North Carolina at Chapel Hill violate the Constitution’s guarantee of equal protection. The opinion hinged on Title VI of the 1964 Civil Rights Act, which prohibits discrimination on the basis of attributes such as race and gender in programs that receive federal funds. Title VII of that same act makes it illegal for an employer to discriminate against someone because of race or gender.

But courts have repeatedly upheld the right of employers to recruit qualified female and minority job applicants to counter existing discrimination in the workplace. In 1997, the U.S. Court of Appeals for the 8th Circuit held that “an employer’s affirmative efforts to recruit minority and female applicants does not constitute discrimination” but instead allows employers to “generate the largest pool of qualified applicants.”

The EEOC, the federal agency that enforces workplace civil rights, also has advised employers that encouraging minorities to apply for positions or seeking out minorities for job opportunities or promotions is both legal and a good way “to develop an applicant pool that reflects the demographics of the qualified labor force.”

Additionally, federal contractors like Microsoft are encouraged to diversify their workforces under a 1964 executive order. Quotas are “strictly forbidden,” and the Office of Federal Contract Compliance Programs has said hiring goals are “not to be interpreted as a ceiling or floor for the employment of particular groups.” Instead, the goals should be seen as a “benchmark against which the contractor measures the representation of persons within its workforce.”

The same rules apply to nongovernment suppliers and contractors, said Chris Dolan, founder and chief legal counsel with the San Francisco-based Dolan Law Firm: Goals for diversity are fine, so long as companies do not set strict quotas. Especially in the wake of the recent Supreme Court ruling, Dolan said, companies could open themselves to legal challenges if they have numerical goals for how many people of a certain race they want to hire.

“Once you put a number on your goal, people are likely to call it a quota. And then you’re more vulnerable to application of this current [Supreme Court] decision,” Dolan said.

Sherrilyn Ifill, founding director of the 14th Amendment Center for Law & Democracy at Howard University’s law school, said companies with DEI hiring goals should be insulated from conservative attack under existing law. She dismissed the Republican letter as “premature” showmanship by Kobach and Skrmetti, both of whom have held their offices for less than a year.

“I think it’s fascinating that these particular attorneys general regard themselves as needing to teach the nation’s most powerful – and, in many ways, careful – business leaders what their obligations are,” Ifill said.

Kobach, who took office in January, is known for his hard-line stance against immigration. He helped lead President Donald Trump’s Election Integrity Commission, established to promote voter ID laws and review claims of voter fraud after Trump said without providing proof that he lost the popular vote to Democrat Hillary Clinton in 2016 because of millions of illegally cast ballots.

Skrmetti, a formal federal prosecutor, has generated controversy over restrictive stances toward LGBTQ+ rights since taking over as Tennessee’s appointed attorney general in September. In 2022, the attorney general’s office began requesting patient records for underage transgender individuals from Vanderbilt University Medical Center as part of a fraud case. And he has defended recent state laws restricting drag performances and gender-affirming health care for minors.

In interviews, Kobach and Skrmetti said they believe the Supreme Court ruling has far-reaching consequences for employers. Their letter urges Fortune 100 companies “to immediately cease any unlawful race-based quotas or preferences your company has adopted for its employment and contracting practices.”

In addition to the Microsoft pledge, the letter cites a 2019 diversity commitment by Goldman Sachs for new analysts and entry-level associates, as well as an effort by JPMorgan Chase to increase the number of Black interns. It also mentions “racial quotas and other explicitly race-based practices” at other tech companies, including Google and Facebook. Those companies did not respond to requests for comment.

“If these corporations continue as if nothing happened in the Supreme Court,” Kobach said in an interview, “I think it is quite likely that something will happen – if not in my state, than in one of the others.”

In their letter Wednesday, July 19, the Democratic attorneys general noted that the corporate diversity efforts cited by the Republicans set recruiting goals and ambitions – not official company policy or quotas – and therefore are permissible under current law.

Still, Dolan, the San Francisco-based attorney, called the rising debate about affirmative action “frightening.”

America’s civil rights laws “were designed to make sure that minorities were not excluded, but it is being flipped to being used as a weapon,” Dolan said. Instead of “leveling the playing field, it is tilting the playing field back 50 years.”