When Inclusivity Excludes: Diversity, Equity, and Inclusion Programs and Title VII

Originally published in IRMI’s Winter 2023 issue of Employment Practices Liability Consultant (EPLiC)

By Kristin A. Zech

Social movements in the United States over the past several years have given rise to a renewed focus on the workplace environment. As a result, diversity, equity, and inclusion (DEI) programs have become a top priority for many employers seeking to attract—and retain—talented employees. Businesses, however, need to be aware of the guardrails for these initiatives to minimize legal exposure.

Why DEI?

DEI is a voluntary business initiative that involves an organizational commitment to promote the representation and participation of individuals from broadly diverse racial, ethnic, gender, cultural, and other backgrounds. A DEI program is a company-specific set of goals, policies, and activities designed to ensure that diverse individuals are recruited, hired, retained, and feel valued and supported at work. Each component of DEI has a separate focus.

• Diversity. Attracting, recruiting, hiring, and retaining a diverse workforce
• Equity. Ensuring nondiscrimination and equal employment opportunities
• Inclusion. Fostering a respectful, supportive, and inclusive workplace that values all employees and allows all employees to thrive

Research has shown a link between workplace diversity and enhanced profitability. [1] In 2019, it was reported that “[c]ompanies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies in the fourth quartile.” [2] Additionally, companies with the most ethnically diverse executive teams are 33 percent more likely to outperform their competitors on profitability. [3] The benefits of implementing an effective DEI initiative may include the following.

• A more dynamic and culturally responsive work environment
• A better understanding of the needs of employees
• A supportive and inclusive workplace
• A reputation as a committed and responsible employer in the community
• Increased productivity and greater innovation
• Enhanced financial performance
• Ability to outperform competitors

Businesses need to take care, however, in developing and implementing DEI programs to ensure that these initiatives do not run afoul of federal, state, and local antidiscrimination provisions.

When DEI Goes Awry: Duvall v. Novant Health, Inc.

A recent case from the US District Court for the Western District of North Carolina, Duvall v. Novant Health, Inc., reminds companies that even well-intended DEI programs may not insulate employers from discrimination claims. In 2015, Novant Health signed onto the American Hospital Association’s #123forEquity campaign, focused on eliminating racial, ethnic, and cultural disparities in health care. [4]

One goal of this nationwide campaign is to increase diversity in leadership and governance. [5] Shortly thereafter, Novant Health implemented a diversity and inclusion (D&I) initiative “with an expressed timeline to remake the workforce to reflect the community and ’embed’ a culture of ‘D&I’ at NovantHealth between late 2016 and 2019.” [6] The D&I initiative included executive-level review of employee demographics, a declaration in 2018 setting targets “to remake the workforce until it mirrored the community,” and executive bonuses premised on the diversity and inclusion goals. [7]

Plaintiff David Duvall, a Caucasian man, joined Novant Health as the senior vice president of marketing and communications in August 2013. [8] During his tenure, Duvall consistently received high performance ratings and national recognition for marketing initiatives under his leadership. [9] Despite his success, Novant Health abruptly terminated his employment shortly before his fifth anniversary; his responsibilities were thereafter reassigned to a Caucasian woman and an African-American woman. [10] Duvall’s termination followed the termination of several other senior Caucasian male executives who, he claimed, were similarly replaced by women and/or individuals of a racial minority. [11]

In November 2019, Duvall sued Novant Health, asserting race and gender discrimination in violation of Title VII and wrongful discharge, premised on Novant Health’s avowed D&I initiative to “remake the workforce.” Following a 7-day trial, the jury returned a verdict for Duvall, concluding that his race and/or sex were motivating factors in his termination and that Novant Health would not have otherwise terminated his employment. [12] Duvall received nearly $3,200,000 in backpay and front pay. [13] In overruling Novant Health’s motion for judgment as a matter of law, the court stated, “There was clearly sufficient evidence for a reasonable jury to have found in Plaintiff’s favor on the intentional discrimination claims.” [14]

In addition, the jury awarded Duvall $10 million in punitive damages. [15] Similarly upholding the punitive damages award, the court noted, “A reasonable juror could infer that Cureton [Duvall’s supervisor] had knowledge of federal anti-discrimination laws, understood the goals of theD&I Program, and was willing to terminate a white male in order to advance diverse candidates and promote [Novant Health’s] clearly stated goal to promote diversity and inclusion.” [16] Here, although Novant Health’s “robust” D&I initiative was intended to ensure compliance with antidiscrimination laws, its implementation instead violated them.

Lessons from Duvall

Companies considering DEI initiatives should take to heart the lessons of Duvall. While it is important to understand the demographics of the workforce and develop opportunities to increase diversity, Title VII expressly prohibits discrimination in employment “because of [an]individual’s race, color, religion, sex, or national origin.” [17] That is to say, the law forbids employment decisions made because of, for example, an employee’s race—regardless of that race.

Employers, rather, should develop a program that focuses on understanding diverse perspectives and increasing opportunities. [18] DEI is not a one-time event—businesses need defined goals and an action plan to guide efforts over the long haul, including mechanisms to track progress. Companies looking to increase diversity in hiring should consider additional recruitment efforts designed to expand the applicant pool, such as participating in recruiting activities at historically black colleges and universities or placing advertisements in publications geared toward women. Similarly, training and mentoring programs can provide developing employees with the formative support needed to advance into leadership roles.

DEI is important not only in a business’s raw demographic composition but also in the company culture. Periodic anonymous employee satisfaction surveys can help a company discover simmering workplace issues; this data also provides a baseline for measuring the effectiveness of DEI initiatives. Employers can increase awareness and inclusivity through simple actions, such as recognizing diverse holidays and celebrations, including cultural awareness in human resources training, and providing DEI-based educational opportunities for employees. Engaging with diverse local communities, whether through business or by charitable work, further fosters inclusion. It is equally important to ensure that the company has—and enforces—antidiscrimination, antiharassment, and antiretaliation policies. However, DEI is not just a human resources issue; to effect change, corporate leadership should be a part of DEI planning and actively participate in initiatives.

Planning for DEI

Companies seeking to develop an effective DEI program should consider the following steps.

• Establish a DEI team or committee composed of employees of diverse backgrounds and roles to advise management on DEI matters
• Identify issues that have created DEI imbalances in the workplace and propose solutions to address those issues going forward
• Create an action plan that does the following.
  • Focuses on eliminating barriers to successful employment or promotion
  • Strives toward an inclusive workplace for all employees, regardless of background
  • Aligns DEI initiatives with the company’s business objectives
  • Educates employees on the DEI program and its intended goals
  • Ensures that the company has and enforces robust equal employment opportunity policies (including antidiscrimination, antiretaliation, and antiharassment)
  • Establishes a timeline for action
• Develop a plan for measuring the effectiveness of the DEI program at set intervals to ensure that the action plan is on point

As a DEI program touches on numerous areas of the business, have enterprise-wide input in planning and implementation. For example, human resources personnel can provide guidance regarding existing policies and practices, while operations can review the action plan for day-to-day feasibility. The marketing department can assist in locating community-based opportunities or resources.

Duvall demonstrates the importance of also involving legal counsel in DEI planning. Any proposed program should be reviewed for compliance with federal, state, and local laws. Similarly, businesses should consult counsel when making personnel decisions in which equal employment may be an issue. Attorneys can help companies develop a strategy to minimize legal risk while still addressing operational needs.

A renewed focus on DEI provides businesses with an excellent opportunity to meaningfully engage with employees and local communities on a personal level. In doing so, however, companies should take care that inclusive activities do not inadvertently—and illegally—exclude.

Footnotes

1. See Mckinsey & Co., Diversity wins: How inclusion matters (May 2020).
2. This estimation has increased from 21 percent in 2017 and 15 percent in 2014. Id. at 3.
3. McKinsey & Co., Delivering through diversity (Jan. 2018): 12.
4. American Hospital Association Institute for Diversity and Health Equity, “#123forEquity Campaign to Eliminate Health Care Disparities.“
5. Id.
6. Duvall v. Novant Health, Inc., 2022 U.S. Dist. LEXIS 143209 (W.D.N.C. Aug. 11, 2022).
7. Id.
8. Duvall, Complaint, ¶ 9.
9. Id. at ¶¶ 18–22; Duvall, 2022 U.S. Dist. LEXIS 143209.
10. Duvall, Complaint, ¶ 23; Duvall, 2022 U.S. Dist. LEXIS 143209.
11. Duvall, Complaint, ¶¶ 25–26.
12. Duvall,2022 U.S. Dist. LEXIS 143209.
13. Id.
14. Id.
15. This amount was reduced to $300,000, in accordance with the Title VII punitive damages cap.
16. Id.
17. Id. 42 U.S.C. § 2000e-2.
18. See Weaver v. Ohio Farmers Ins. Co., 2022-Ohio-2716 (Ohio Ct. App. Aug. 8, 2022) (affirming grant of summary judgment for employer, noting “[t]he fact that Westfield has a DEI policy that includes a goal of increasing the number of women and minorities in leadership positions does not alter this conclusion.”).

Kristin A. Zech is a partner at Berenzweig Leonard, LLP in Tysons Corner, Virginia. An experienced civil litigator, Ms. Zech regularly advises business and executives on a variety of issues, including personnel actions, employment and separation agreements, employment eligibility requirements, Title VII, the Family and Medical Leave Act, and Fair Labor Standards Act compliance. Ms. Zech has repeatedly been included in Virginia Business’ Legal Elite, and was recently named by Northern Virginia Magazine as a Top Lawyer (Immigration). You can reach her at 703-940-3788 or kzech@berenzweiglaw.com.