A Reminder to Employers to Be Thoughtful About DEI Initiatives – And DOCUMENT!

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Following the increased interest in diversity, equity and inclusion (DEI) initiatives in the context of the murder of George Floyd and the #BlackLivesMatter movement, we warned employers to be careful about rushing into anti-discrimination initiatives, like diversity hiring quotas, that could, in fact, violate Title VII. We reiterated this warning more recently in light of the Supreme Court’s decision rejecting the use of affirmative action in college admissions. And now a recent case from the U.S. Court of Appeals for the Fourth Circuit again emphasizes this point.

Background of the Case. In Duvall v. Novant Health, Inc., a major healthcare system developed a “Diversity and Inclusion Strategic Plan” that incorporated three phases that essentially boiled down to (1) assessment of the organization’s D&I culture, (2) implementation of goals, including increasing diversity in the executive and senior leadership teams, and (3) evaluation of progress with additional actions to close identified gaps.

During phase 1, it was noted that there was a substantial overrepresentation of white males in leadership. Then during phase 2, a white male senior vice president (SVP) with strong performance reviews and significant professional accomplishments was abruptly terminated. He was told that the employer was “going in a different direction.” He was initially replaced by two female subordinates, one of whom was Black, and eventually by another Black woman. A potential employer was told by the SVP’s manager that he was a high performer, but was let go due to a desire for “new leaders,” “a different point of view,” and a “different flair.”

The SVP sued, alleging that his termination during a substantial D&I initiative was due to his race and/or sex. A jury agreed. The employer then appealed the jury’s decision to the Fourth Circuit.

The Court’s Ruling. The Fourth Circuit found there was “more than sufficient evidence” to sustain the jury’s verdict. The SVP “was fired in the middle of a widescale D&I initiative” that sought to ensure that leadership reflected the community served through the three-phase plan. The employer collected data that showed a decrease in white workers and leaders and an increase in Black workers and leaders over the life of the plan. The employer also tied executive bonuses to achieving certain minority percentages.

Moreover, the Fourth Circuit noted that the employer offered “shifting, conflicting, and unsubstantiated explanations” for the SVP’s termination. At trial, the SVP’s manager testified for the first time that he fired the SVP because the SVP lacked engagement and support from the executive team – which was not the reason given at the time of termination. Moreover, there was a complete lack of contemporaneous documentation as to that supposed reason or any other performance deficiency. To the contrary, there was extensive evidence regarding the SVP’s “superb” performance – and the manager himself told the SVP’s potential employer that he was not let go for performance. Of additional relevance, during phase 2, another high-performing white male SVP was also terminated and replaced with a Black male.

Lessons for Employers. The Fourth Circuit specifically noted that employers may utilize D&I programs – but what they may not do, as we have previously explained in the blog posts linked above, is take employment actions based on an employee’s race or gender. This case also offers some additional pointers for employers:

  • Do not use quotas or numerical targets based on race or sex.
  • Do not tie executive bonuses to the accomplishment of numerical diversity metrics, including the achievement of minority or female representation percentages.
  • If there is a performance issue, make sure to address it and document it!