Amid legal challenges, companies quietly modify their diversity, equity, and inclusion initiatives.

A legal battle against a small venture capital firm that has provided funding to Sophia Danner-Okotie's Nigerian-inspired clothing line has caused her optimism to be punctured, despite her ambitious plans for her boutique brand's growth.

One of the Fearless Fund's grant programs is being accused of discrimination against non-Black women, and a lawsuit is being filed to compare it to a program designed only for white applicants. This is just one of several lawsuits against corporate diversity and inclusion programs currently being heard in court.

Conservative activists, inspired by the Supreme Court's June ruling against affirmative action in college admissions, are now seeking to establish a similar precedent in the working world by filing most of the cases.

Despite the ongoing struggle between the two sides, some companies are already revising their diversity programs in anticipation of legal challenges and the conservative-majority Supreme Court's potential involvement in the issue.

This month, another victory was claimed by conservative activist Christopher Rufo with the resignation of Harvard's first Black woman president, Claudine Gay, following allegations of plagiarism and a backlash over her congressional testimony about antisemitism.

Rufo, who considers Gay's appointment to the job as the pinnacle of diversity and inclusion efforts that have suppressed conservative voices in higher education, has pledged on social media platform X, formerly known as Twitter, to continue his efforts until DEI ideology is eradicated from every institution in America.

Numerous notable corporations have been hit, along with a range of diversity initiatives, such as fellowships, hiring objectives, anti-discrimination instruction, and contracts for minority or women-owned enterprises.

While some challenges have centered on policies implemented following the 2020 protests over George Floyd's killing by police, others have zeroed in on decades-old diversity programs that anti-affirmative action proponents have long sought to dismantle.

Corporate efforts to tackle workplace inequality are being hindered by legal backlash, which is having a chilling effect, at a time when investment and interest in such initiatives have decreased following the post-Floyd surge.

The number of job openings for diversity officers and similar positions has decreased in recent months. Despite briefly reaching a 1.05% combined share of venture capital funding for Black and Latina women's businesses in 2021, this figure has now dropped back to less than 1% after a decline in 2020, as reported by the nonprofit advocacy group digitalundivided.

The unpredictable legal landscape is illustrated by the case against the Fearless Fund, which supports early-stage businesses led by women of color.

In late September, a federal judge in Atlanta denied a request to block a Fearless Fund grant contest for Black women business owners, stating that the donations were protected by the First Amendment and the lawsuit was unlikely to succeed. However, a three-judge federal appeals panel later suspended the contest, classifying it as "racially exclusionary" and predicting that the lawsuit would succeed.

Will I be eligible to apply for grants like these, or will they cease to exist?" questioned Danner-Okotie, who received $10,000 from a separate Fearless Fund grant. "Given the recent ruling, it seems unlikely.

Danner-Okotie initially recognized the potential for expanding her clothing brand when the Covid-19 pandemic forced the closure of boutiques and fairs that sold her designs. In search of ways to boost her online sales, she secured a contract with a subscriber-based retailer and utilized a government pandemic relief loan to fulfill the order. However, she encountered obstacles when banks rejected her loan applications, classifying her business model as risky due to her handmade clothes being made by Nigerian tailors.

Danner-Okotie stated that the Fearless Fund helped her achieve her goal of creating clothing for American women who wanted to express their African heritage. The grant allowed her to establish a factory in India to produce distinctive fabrics for her team of tailors in Nigeria.

The lawsuit against the Fearless Fund, a program that provides funding for low-income students, is being brought by the American Alliance for Equal Rights, a nonprofit founded by anti-affirmative action activist Edward Blum. The outcome of the case could set a precedent for similar diversity programs.

Oral arguments in the case are scheduled for Jan. 31.

Adjusting diversity programs

Companies are being cautious in the face of a complex legal environment. Despite pressure from shareholders, employees, and customers, many major companies have maintained their diversity initiatives. Some of these companies have successfully defended their inclusion policies in court.

To safeguard diversity programs from legal challenges, some have implemented modifications.

Two prominent law firms, Morrison Foerster and Perkins Coie, opened their diversity fellowship programs to all applicants of all races in October, changes that the companies said were in the works before Blum's lawsuits, which he subsequently dropped.

In February, Pfizer removed race-based eligibility requirements for a fellowship program intended for college students from Black, Latino, and Native American backgrounds, despite a judge dismissing a lawsuit against the program two months prior. Nevertheless, conservative nonprofit Do No Harm is appealing the lawsuit's dismissal, asserting that the fellowship's objectives remain unchanged.

In May, business owners of all backgrounds will be eligible to apply for a grant program originally intended for women and people of color when it launches in 2020. The telecommunications giant settled a lawsuit last year over the program brought by the conservative Wisconsin Institute for Law & Liberty on behalf of the white owner of a commercial cleaning business.

In October, the Wisconsin Institute filed a lawsuit against the U.S. Department of Transportation, representing two construction firms, seeking to dismantle the Disadvantaged Business Enterprise program, which was established in the Reagan administration and mandates that 10% of federal assistance program funds be allocated to small businesses owned by women, minorities, or other disadvantaged individuals.

Comcast's changes are considered progress by attorney Dan Lennington of the Wisconsin Institute, but the anti-affirmative action movement seeks a broader victory that could alter case law on workplace diversity programs, and the lawsuit against the DOT presents this opportunity.

The Supreme Court's ruling on affirmative action "injected new life into the whole debate," according to Lennington.

A gray area on hiring

The Civil Rights Act of 1866, which prohibits racial discrimination in contract agreements, is being used by conservative activists to challenge diversity programs, including those against Pfizer and the Fearless Fund. The law was initially intended to protect formerly enslaved people, but it is now being used to challenge programs designed to benefit racial minorities.

The Meltzer Center for Diversity, Inclusion, and Belonging at New York University's School of Law's executive director, David Glasgow, stated that proving companies make hiring decisions based on race is a more challenging task than targeting programs with clear race-based eligibility components.

It is illegal to consider race when making hiring or promotion decisions under Title VII of the 1964 Civil Rights Act. There is ongoing discussion about whether companies are going too far by setting targets for increasing the representation of Black and other minorities. Companies argue that these goals are not quotas but rather aspirational targets they aim to achieve through policies such as expanding the pool of candidates and eliminating bias in the hiring process.

Glasgow stated that the issue of discrimination in corporate policies is a "gray area" that can be influenced by a court's interpretation of company policies. He explained that it can be challenging to prove discrimination even if a company publicly announces its desire to have more people of color in management. However, plaintiffs may argue that Diversity Equity and Inclusion policies are putting pressure on hiring managers to make race-based decisions.

Efforts to increase the representation of underrepresented groups in the workforce are being promoted by conservative activists, who are using corporate documents to highlight this progress, albeit modest.

In November, America First Legal, led by former President Donald Trump adviser Stephen Miller, sent a letter to the federal Equal Employment Opportunity Commission, alleging that efforts to strengthen DEI policies amount to discriminatory hiring practices.

In 2019, Macy's set a goal of achieving 30% ethnic diversity among its leadership at the director level and above by 2025. To achieve this, the retailer launched a leadership training program for selected managers of color and required that candidates for director roles include ethnically diverse applicants. Additionally, Macy's incorporated its DEI goals into annual performance reviews for directors and company-wide incentive calculation.

Macy's has been accused of setting racial and other quotas for hiring by America First Legal, which cited the company's initiatives as evidence. The group has also sent similar letters to the EEOC targeting companies from to .

While Macy's declined to comment on the letter, outgoing CEO Jeff Gennette stated in a previous interview with The Associated Press that the company is sticking with its DEI policies while closely monitoring legal developments.

Gennette stated that our commitment to DEI strategy and enthusiasm for its implementation remains, but we may express it differently based on court rulings in the future.