Powerful companies and well known organizations have made headlines in the weeks since President Donald Trump’s Jan. 20 executive order targeting diversity, equity, and inclusion in the private sector, whether by announcing changes or rollbacks to their DEI programs, by defending their policies and practices, or by declining to wade into the debate at this early stage.

Danielle Conley, a partner at Latham & Watkins who leads the law firm’s anti-discrimination and civil rights practice, spoke with the Washington Blade on Wednesday about how companies and organizations are navigating an uncertain and rapidly evolving landscape.

“So much of this is it just comes down to what is the risk tolerance of the leadership of your company or your organization,” she said, noting that some firms have taken steps to avoid scrutiny from the federal government while others are standing firm in their policies and practices concerning DEI with the expectation that they would be ruled lawful if challenged. “We’ve seen organizations and institutions on both ends of the spectrum.”

Conley said private sector companies and the types of organizations specified in Trump’s order are working on “making sure that they’re on the right side of the legal lines, in the way that the civil rights laws exist right now, and also reviewing their practices and policies for political risks, and seeing whether there are potential changes that they need to make in order to not come under federal scrutiny.”

She stressed, however, that this type of audit is “very difficult to do in light of all of the uncertainty” about how to interpret the orders and how the lawsuits challenging them will ultimately be decided.

“Folks expected that there would be a domestic policy priority around diversity, equity and inclusion issues,” as Trump promised during his campaign, “but at the same time, the language of those executive orders sweep very broadly, and so there were certainly aspects of the executive orders that clients are still very much grappling with and trying to understand the implications of,” she said.

Issued on the first day of Trump’s second term, the first order stipulates that “the director of the Office of Management and Budget (OMB), assisted by the attorney general and the director of the Office of Personnel Management (OPM), shall coordinate the termination of all discriminatory programs, including illegal DEI and “diversity, equity, inclusion, and accessibility” (DEIA) mandates, policies, programs, preferences, and activities in the federal government, under whatever name they appear.”

The directive issued on the following day includes a section titled “Encouraging the Private Sector to End Illegal DEI Discrimination and Preferences,” which mandates that the attorney general takes “appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI,” “deter” such “programs or principles” and “identify … potential civil compliance investigations” to accomplish such “deter[rence.]”

Conley noted that DEI is not well defined, nor has the administration given “any specifics about what amounts to illegal DEI,” let alone an indication of “how the federal government is going to read the civil rights laws and interpret the civil rights laws to preclude certain DEI programs, and where they’re going to draw those particular lines.”

Risks and how to mitigate them

On one end of the spectrum are the “things that we’ve always known that you couldn’t do under the law, like using race based and gender based preferences in hiring programs,” she said—conduct covered by longstanding federal anti-discrimination laws like Title VII of the Civil Rights Act of 1964, which prohibits “employers from considering race or gender in employment based decisions outside very narrow circumstances.”

On the other hand, “In light of the failure to really define DEI or to really set out any specific guidance of the kinds of programs that the government believes, under their interpretation of the civil rights laws, run afoul of those particular laws, that’s where the questions are coming from,” Conley said.

Companies, their lawyers, and the broader public are likely to soon find out, though, how and in which circumstances the Trump administration will bring an enforcement action or file a lawsuit against a company over “illegal” DEI.

The second executive action directs Attorney General Pam Bondi “to within 120 days of this order, in consultation with the heads of relevant agencies and in coordination with the Director of OMB, shall submit a report to the Assistant to the President for Domestic Policy containing recommendations for enforcing federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.”  

Along with other types of information and recommendations, the report must include “a plan of specific steps or measures to deter DEI programs or principles (whether specifically denominated “DEI” or otherwise) that constitute illegal discrimination or preferences. As a part of this plan, each agency shall identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, state and local bar and medical associations, and institutions of higher education with endowments over one billion dollars.”

Broadly, the sectors targeted by each agency will correspond with its remit, Conley said. “HHS has an office for civil rights, and they enforce both Title VI, which prohibits race discrimination in federally funded programming, and also section 1557 of the Affordable Care Act, which prohibits race and gender-based discrimination and other forms of discrimination in health care programming.”

She continued, “So, based on their authority, you can imagine the Office for Civil Rights at HHS, would open up investigations, potentially, into health care companies, medical schools, other health care providers.”

Meanwhile, “the Department of Education has an Office for Civil Rights. Obviously, their enforcement authority is over institutions of higher education that receive federal funds. They enforce VI, that same statute that prohibits race based discrimination in federally funded programming. And so you can imagine the Department of Education opening up investigations into colleges and universities over these issues.”

With the DOJ’s authority under Title VI, the department would be able to investigate and bring enforcement actions or litigation against healthcare companies or institutes of higher education or “any company that receives any sort of federal funding,” Conley said.

In the meantime, as companies look for clarity as evaluate the extent to which their policies and practices may draw legal or political scrutiny, Conley said there has been an “uptick in private litigation” over DEI, which means recent cases have been brought before federal courts—and, in some cases, have been decided by their judges.

These lawsuits have tended to focus on “scholarship, internship, or fellowship programs” or “grant programs” that “are restrictive on the basis of race,” or “supplier diversity initiatives” that might “have very prescriptive guidance” like requirements that a certain percentage of a company’s vendors are Black or brown or women-owned businesses, Conley explained.

Still, she cautioned, “It’s super hard to speculate, because some of this stuff just hasn’t made its way through the courts,” she said.

While firms can expect these policies and practices targeted by private litigants are likely to be a focus for the Trump administration, the question, she said, will will be how far “beyond the kind of race based restrictions that we’ve already seen come under significant challenge in the context of private litigation, how far beyond those kinds of programs will they go, as potentially being violative of the civil rights laws?”

Conley added that these firms should focus not on programs and policies that present negligible or no legal risk, like dedicating a private room in an office space for nursing mothers. Rather, she said, they should consider questions like, “What do we do in the hiring and promotion space? What are we doing with respect to scholarship programs, internship programs and our outside partnerships? What are we doing with respect to any grants that we give? Where do we have risk? Do we have any programs that are explicitly race conscious? Because we know that if we do, the legal risk there is significantly elevated.”

The process is about “really assessing each of those buckets,” she said, adding “It’s that careful analysis—it’s really all you can do in this environment, again, as things are sort of constantly shifting.”

At the same time, Conley said, “we have to remember that the vast majority of DEI programs really do remain completely lawful under any interpretation of the civil rights laws.”

“A lot of these programs were put into place to ensure and to protect against discrimination in organizations,” she said. A consequence of “the executive orders and the uncertainty around how the federal government will be interpreting the civil rights laws and the kinds of programs that may violate them could cause a lot of organizations to overcorrect.”

“Big picture,” Conley said:

• “Anytime something restricted on the basis of race, we’ve talked about how that really heightens legal risk. But I would also say [there tends to be risk] anytime that there’s a benefit being given that can be traced to race, or a burden that’s being imposed that can be traced to race.”
• “So, for example, employee resource groups at companies have been completely lawful, and plenty of companies and organizations have them. You can imagine that there could be a legal argument that if there’s an employee resource group where those members are getting certain benefits that would help them in the promotion process, that’s something that could potentially be attacked as being potentially violative of Title VII.”

• “There’s actually danger in in saying this program violates the law and this program doesn’t, because it’s super nuanced, and really does depend on the facts and circumstances of these programs and how they’re designed.”
• “Because, again, I just want to make sure that I’m not on the record [saying] that, like, employee resource groups are illegal. They’re not.”
• “But I do think that if there could be arguments made that those employee resource groups, when they’re not open to all (most are) and those employee members are getting certain benefits that could potentially help them in, let’s say, a promotion process—that could be something that, I would say, as their counsel, that could elevate your legal risk.”

Risks specific to pro-LGBTQ and pro-trans DEI in the private sector

Responding to a question about whether pro-transgender DEI programs will face heightened risk amid the administration’s broader attacks against trans and gender diverse communities, Conley pointed to provisions of Trump’s executive order “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government.”

“That sort of set out this notion that it was the policy of the United States that there were only two sexes, male and female, and that federal funds shouldn’t be used to promote unlawful gender ideology, which seems specifically aimed at transgender individuals,” she said.

In practice, Conley said, “to the extent that an organization is receiving a federal grant, and that federal grant is being used in a way that the government [claims] is promoting unlawful gender ideology, then there’s a very real threat that that grant money will stop.”

Asked whether the administration may target a company for its financial, charitable support for trans people and causes, she noted that “some challenges that we’ve seen have been not to corporate giving, but to grants that were racially restrictive.”

“In the context of corporate giving,” though, “where you’re just talking about a gift—again, this is very fact specific, but if you’re just talking about a gift, then it’s hard to see how just a straight gift violates any federal civil rights laws,” Conley said.

She added, “An internship, a scholarship, something that’s reciprocal, something that is a contract, that’s a different analysis, right? But it is not, to my mind, nor have I ever seen a case suggesting that it’s illegal for organization X to write a $20,000 check to X civil rights organization.”

LGBTQ-focused nonprofit and nongovernmental organizations and charities are grappling with the loss of federal grant funding, particularly for overseas work. If the business community’s move away from DEI means declined corporate giving, these groups would struggle to continue their work, which includes efforts to push back against the administration’s attacks against LGBTQ and especially trans communities.

Courts will soon step in

Importantly, “all of these EOS are caught up in litigation right now,” Conley said, noting that parts of the DEI executive actions were struck down on Feb. 21 by the U.S. District Court for the District of Maryland.

Earlier this month, a federal judge struck down Trump’s executive orders restricting access to transgender medicine for patients younger than 19 and requiring trans women to be housed with cisgender men in prisons.

“I am watching closely to see what happens in the challenges to the DEI executive orders,” Conley said, noting that the Trump administration has already appealed the case, which “will go to the 4th Circuit pretty quickly.”

If the U.S. Supreme Court weighs in, “especially around the arguments that the executive order was unconstitutional because of the lack of clarity and guidance it gave to organizations about what violates the law in a way that wouldn’t allow them to comply, I’m watching that one, because it’ll be interesting to see how the 4th Circuit and maybe even the Supreme Court addresses that particular argument,” she said.