IE&D Hot Topics for Employers: Looking Back at 2022 and … – Littler Mendelson PC

In the past few years, the global trend towards prioritizing inclusion, equity, and diversity (IE&D) has inspired and challenged employers in every industry. On the one hand, there is a significant business case for IE&D initiatives—namely, increased profitability, improved hiring and retention, enhanced innovation, and more alignment with the communities being served. But as the pendulum has steadily swung towards enhancing IE&D programs, such efforts have been subject to mounting judicial scrutiny.1 From single-plaintiff cases to class and collective actions and shareholder derivative suits, private employers are facing legal challenges to their IE&D programs.
This back-and-forth is apparent in the state and federal legislative context as well. For instance, some cities and states have leaned into the IE&D trend by enacting pay transparency laws, mandating board member diversity, and guarding against race-based hair discrimination in the workplace. Meanwhile, some states have actively opposed the trend towards IE&D training and programming in the workplace and the classroom. Along those same lines, two high-profile cases pending before the U.S. Supreme Court are challenging affirmative action programs at private and public institutions of higher learning—challenges that may affect voluntary diversity programs initiated by employers.
While this complex landscape continues to take shape, we look back at the major IE&D trends in 2022 and prepare for what may lie ahead in 2023.
Increased Surveillance of Pay Transparency and Pay Equity Practices
In 2022, pay equity took center stage at the local, state, and federal levels.2 Several cities and states have enacted pay transparency laws requiring employers to disclose wage information to job applicants and—sometimes—to current employees. President Biden has further supported the pay equity movement in the federal contracting context. But as discussed further in this section, federal efforts at pay equity have proven contentious.
Local and State Legislation
Effective November 1, 2022, the New York City Human Rights Law (NYCHRL) requires employers advertising jobs in New York City to include “a good faith salary range for every job, promotion, and transfer opportunity advertised.” The requirement applies to employers with four or more employees or one or more domestic workers. The requirement further applies to positions that can or will be performed “in whole or in part, in New York City, whether from an office, in the field, or remotely from the employee’s home.”
Likewise, California’s new pay equity law (S.B. 1162) requires employers with 15 or more employees to include the pay scale for the position in job postings. Employers with 100 or more employees must report pay data of their employees and contractors by race, ethnicity, and gender to the state. All employers must now provide employees with the pay scale for their position upon request. Although the California Civil Rights Department has not yet issued guidance on the new “Annual Pay Data” requirements, the California Labor Commissioner’s Office has recently updated its Frequently Asked Questions on a few key elements of this law—including the 15-employee threshold, the remote worker, the definition of “pay scale,” and available remedies.3
Similarly, Illinois Equal Pay Act Amendments took effect in March 2022.4 The amended law requires employers with 100 or more employees in Illinois to apply for an Equal Pay Registration Certificate (EPRC) through the Illinois Department of Labor (IDOL) between March 24, 2022, and March 23, 2024. Thereafter, Illinois applicants must submit a compliance statement, Employer Information Report EEO-1, a list of employees by gender and race/ethnicity with the total wages paid to each employee in the previous calendar year, and a filing fee to IDOL’s EPRC Portal.5
Finally, effective January 1, 2023, Rhode Island will prohibit employers from inquiring into or considering a job applicant’s wage or salary history. The purpose of Rhode Island’s new law (R.I. Gen. Laws § 28-6-22) is to “comprehensively address wage discrimination, based on religion, race, color, sex, sexual orientation, gender identity or expression, disability, age or country of origin by expanding employee protections and the scope of the remedies available to employees who have experienced wage discrimination.”
Pay Equity in the Federal Contracting Context
At the federal level, President Biden issued Executive Order 14069, “Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency,” in March 2022. The Executive Order directs the Federal Acquisition Regulatory Council to consider enhancing pay equity and transparency by limiting or prohibiting federal contractors and subcontractors from seeking and considering information about job applicants’ and employees’ current or past compensation when making employment decisions.
Shortly thereafter, the Office of Federal Contract Compliance Programs (OFCCP) followed suit. On August 18, 2022, the OFCCP issued a revised version of its Directive 2022-01—Advancing Pay Equity Through Compensation Analysis Directive, which was originally issued on March 15, 2022. The original Directive faced scrutiny, as it was interpreted as claiming a right for the OFCCP to compel contractors to disclose their pay equity analyses, even if they are protected by attorney-client privilege.6 In its revised Directive, the OFCCP clarified its authority to review contractors’ pay equity analyses to determine whether there are gender-, race-, or ethnicity-based disparities, but also acknowledged that contractor’s analyses may be properly withheld from production to the OFCCP based on privilege.
The next day, on August 19, 2022, the OFCCP published a Notice in the Federal Register of a “Request under the Freedom of Information Act for Federal Contractors’ Type 2 Consolidated EEO-1 Report Data” for the period 2016–2020. A “Type 2 Report” consists of consolidated demographic data for all employees in a company—categorized by race/ethnicity, sex, and job category.7 This Request was submitted by the Center for Investigative Reporting (CIR), and the OFCCP cautioned that “the information requested may be protected from disclosure under FOIA Exemption 4, which protects disclosure of confidential commercial information. The OFCCP therefore advised employers that filed Type 2 Reports as federal contractors between 2016-2020 to submit Exemption 4 objections. However, in its Revised Notice, issued on September 27, 2022, the OFCCP estimated that nearly 24,000 companies filed reports subject to the Freedom of Information Act (FOIA) request. The Revised Notice again advised employers of FOIA Exemption 4. 
The CIR filed suit8 in the U.S. District Court for the Northern District of California on November 15, 2022.9 The lawsuit alleged that the OFCCP had yet to comply with the CIR’s Type 2 Reports Request. Thus, the CIR demanded the records, asserting the “data is instrumental to ensuring that federal contractors, obtaining taxpayer dollars, diversify their workforces in compliance with the federal law.” The CIR further argued that FOIA Exemption 4 did not apply.
On November 22, 2022, the OFCCP contacted individual contractors directly to confirm that the contractor did not file a timely Exemption 4 objection. The OFCCP warned that if contractors did not have good cause for their untimely objections, the agency would release CIR’s requested Type 2 Reports after January 2, 2023.
With these complex developments in 2022, it will be important to stay abreast of pay equity updates in 2023—at the federal, state, and local levels.
Enhanced Protections against Race-Based and Religious Discrimination in the Workplace
Hair Discrimination and the CROWN Act
This past year has also seen increasing protection against an unsuspecting potential source of race-based discrimination in the workplace: dress and grooming policies. After examining how neutral dress and grooming policies may be preferential towards white/Caucasian and European beauty standards,10 various cities and states have drafted or enacted legislation prohibiting workplace discrimination based on a person’s hair texture or hairstyle if that style or texture is commonly associated with a particular race or national origin.11
California led the charge at the state level in July 2019, when it enacted the first Creating a Respectful and Open Workplace for Natural Hair (CROWN) Act.12 The California CROWN Act bars dress and grooming policies that prohibit protective hairstyles and natural hair, including Afros, braids, twists, and locs, because these policies have a disparate impact on Black or African American applicants and employees. Since California’s legislation in 2019, at least seventeen other states13 and localities14 have passed hair discrimination laws.15 Numerous other states have legislation in the works.16
The trend towards protecting natural hair textures also reached the federal level in 2022. On March 18, 2022, the U.S. House of Representatives passed a federal iteration of the CROWN Act. The CROWN Act, as passed by the House, expressly prohibits employment discrimination against an individual “based on the individual’s hair texture or hairstyle, if that hair texture or that hairstyle is commonly associated with a particular race or national origin (including a hairstyle in which hair is tightly coiled or tightly curled, locs, cornrows, twists, braids, Bantu knots, and Afros).” It is uncertain whether the House of Representatives under the 118th Congress will similarly pass the CROWN Act, and the legislation has yet to pass the Senate. If enacted, however, the federal CROWN Act would be treated as if it were incorporated in Title VII of the Civil Rights Act of 1964 for enforcement.
Regardless of whether a federal law is enacted this year, the rise of state and local CROWN Acts provides employers with an opportunity to be more proactive in detecting and preventing bias against race and traits associated with race, including hair texture and natural hairstyles in 2023.
Accommodation of Religious Beliefs and Practices in the Workplace
Title VII of the Civil Rights Act of 1964 prohibits religious discrimination and requires employers to reasonably accommodate employees’ sincerely held religious beliefs unless doing so would create an undue hardship for the employer. Notably, the Supreme Court recently agreed to review a case this term that may alter the standard for what constitutes an employer’s undue burden for religious accommodation purposes.17
Religious accommodation cases have been hotly contested in 2022, with lawsuits by both individuals and the U.S. Equal Opportunity Commission (EEOC).
In the wake of COVID-19, objections to vaccination policies on religious grounds have led such religious-based litigation, but some employees have also challenged IE&D initiatives and training on religious grounds. Given the nuance of sincerely held religious beliefs, and the pending Supreme Court decision on religious accommodation, employers should carefully consider the intersections of religion as they develop IE&D programs. Indeed, employers should be ready to assess religious accommodation requests on a case-by-case basis. A consistent/uniform process for evaluating religious accommodation requests, combined with training for Human Resource personnel and managers, may prove beneficial to employers in this context.  Employers may also refer to the OFCCP’s guidance on additional recommended practices for religious accommodations to IE&D training in 2023.
Other High-Profile IE&D Legislation and Litigation
Federal and state courts have seen an uptick in litigation over the scope and validity of various public and private IE&D measures in recent years—particularly as it relates to reverse-discrimination.18 
The Stop Woke Act
In Florida, on April 22, 2022, Governor DeSantis signed the Individual Freedom Act (IFA)—deemed the “Stop Wrongs to Our Kids and Employees Act,” or “Stop WOKE Act.”19 The law, which was set to go into effect July 1, 2022, dramatically restricted communications and trainings about diversity, non-discrimination and anti-harassment in the workplace and classroom. As it relates to employers, the IFA amended the Florida Civil Rights Act (FCRA), by prohibiting discussion of eight topics purportedly influenced by “critical race theory” (CRT), including institutional racism, racial bias, and gender expansiveness. The broad and vague language of the IFA caused many Florida employers and multi-state employers with Florida operations to hit pause on their EEO and IE&D training and efforts.
Several months later, on August 18, 2022, Chief Judge Mark Walker of the U.S. District Court for the Northern District of Florida issued a preliminary injunction, partially blocking enforcement of the IFA against employers by the Florida Commission on Human Relations and the Florida attorney general.20 In blocking enforcement, the court held that “the challenged provision of the Act is a naked viewpoint-based regulation on speech that does not pass strict scrutiny.” However, while the attorney general’s power to prosecute employers for IFA violations has been enjoined, IFA still provides a private right of action for individual employees who feel aggrieved.
Florida has appealed the decision to the U.S. Court of Appeals for the 11th Circuit. If Judge Walker’s injunction is overturned on appeal, the attorney general may be free to prosecute violations that occurred while the IFA remained in effect.
Florida employers should monitor IFA developments and consider consulting experienced IE&D counsel before rolling out EEO and IE&D trainings, initiatives, or programs.
University Affirmative Action Cases Pending Before SCOTUS
On October 31, 2022, the U.S. Supreme Court heard oral arguments in two cases challenging the affirmative action programs at Harvard University and the University of North Carolina (UNC).21 More specifically, Students for Fair Admissions, Inc.—a non-profit group opposed to racial preferences in college admissions—alleged that Harvard and UNC violated Title VI of the Civil Rights Act of 1964 by, among other things, intentionally discriminating against Asian-American applicants, employing “racial balancing,” failing to use race as a mere “plus factor” in decisions, and failing to utilize race-neutral alternatives.
Although the legal framework for academic affirmative action programs and corporate IE&D initiatives meaningfully differ, the outcome of these high-profile cases is bound to have implications for private employers.22 If the Court prohibits race consciousness in university admissions, its decision may inspire the Justices to revisit case law governing voluntary employer diversity programs. 
A decision in the two cases is not expected until the latter part of the Supreme Court’s 2023 session, but meanwhile, employers should consult experienced IE&D counsel to help assess the validity of their IE&D programs.
Shareholder Demands for More IE&D Progress
Over the past several years, shareholders across the country have increasingly demanded that companies put words into action. Over a dozen shareholder derivative suits claim that large public companies (including their boards of directors and officers) have failed to follow through on public statements about their commitment to IE&D. Through these lawsuits, shareholders have demanded more racially diverse representation in board membership and public disclosure of detailed data about hiring, advancement, promotion and pay equity of historically underrepresented groups within the given company.
While many have been dismissed, substantial resources and costs are associated with defending or settling such suits. Adverse publicity resulting from the litigation is also a concern. Thus, employers should remember that in successful IE&D programs, one size does not fit all. IE&D initiatives should be carefully tailored to each company, industry, and market.
State Legislation Requiring Racial and Gender Diversity on Public Company Boards
Amid the rising number of shareholder derivative lawsuits, some states have attempted to improve board member diversity by legislative means.
For instance, on September 30, 2020, California Governor Gavin Newsom signed AB 979 (Cal. Corp. Code § 301.4) into law, stating that the legislation was to tackle the persistent absence of underrepresented groups on corporate boards in the state.23 The bill required publicly held corporations, whose principal executive office was in California, to include at least one director from an underrepresented community24 by December 31, 2021. The passage of AB 979 followed California SB 826 (Cal. Corp. Code § 301.3), enacted in September 30, 2018, which mandated similar requirements for gender diversity on corporate boards.
These laws were swiftly challenged. On August 6, 2019, three California taxpayers, represented by Judicial Watch, a self-described conservative non-profit organization, sued in Los Angeles County Superior Court alleging that §301.3 violated the equal protection provisions of the California Constitution.25 A similar suit was filed by the same plaintiffs in the same court on September 30, 2020, challenging §301.4.26 Likewise, in July 2021, Alliance for Fair Board Recruitment, a Texas-based organization that states its mission is “to promote the recruitment of corporate board members without regard to race, ethnicity, sex and sexual identity,” sued in U.S. District Court for the Central District of California,27 challenging both laws on the grounds that they violated the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution and the prohibition against race discrimination in 42 U.S.C. §1981.
Ultimately, both laws were blocked by California courts. First, on April 1, 2022, the court granted the plaintiff’s motion for summary judgment in the lawsuit challenging Cal. Corp. Code §301.4, relating to individuals from underrepresented communities, finding it violated the Equal Protection Clause of the California Constitution because it treated similarly situated qualified potential corporate board members differently based on their race, sexual orientation, and gender identity without sufficient justification, as required by the California Constitution. Less than a month later, on May 13, 2022, Cal. Corp. Code §301.3 met the same fate; Judge Maureen Duffy-Lewis found that that the statute violated the Equal Protection Clause of the California Constitution.
Over the past few years, other states and agencies have taken different legislative and regulatory approaches to encouraging corporate board diversity. In 2020, the State of Washington enacted Wash. Rev. Code Ann. § 23B.08.120, which required certain corporate boards to have, by January 1, 2022, at least 25% of their makeup be members self-identifying as women. Unlike California’s laws, Washington’s legislation does not impose fines for non-compliance; the corporation must instead disclose to its shareholders how it considers diversity of its board and any measures taken to address a lack of diversity. Additionally, the Securities and Exchange Commission (SEC) recently approved a rule proposed by Nasdaq that requires companies listed on its exchange to have at least two self-identified “diverse” board members (a woman and underrepresented and/or LGBTQ+ individual) or explain in writing why they are not doing so. Nasdaq maintains that its disclosure-based framework is not a mandate or quota; it merely sets forth “aspirational diversity objectives.”28 But even the SEC’s efforts have not gone unchallenged—Alliance for Fair Board Recruitment sued the SEC in the Fifth Circuit in August 2021.  
In developing their IE&D strategies, employers should remember that it is generally unlawful to implement workforce quotas (e.g., setting aside a specific number of opportunities to be occupied only by persons with a particular protected characteristic). As discussed in the next section, it is possible for employers to encourage diversity throughout the organization, while carefully remaining within the bounds of the law.
Preparing for 2023
Research consistently shows that businesses meaningfully benefit from thoughtful IE&D initiatives. But developing and instituting lawful IE&D programming requires thoughtful planning, and organizations should consider identifying experienced legal, business, and culture partners for counsel and guidance. Employers should be mindful that the increased visibility of IE&D efforts has caused individuals, groups, and federal and state legislative and regulatory agencies to scrutinize organizational IE&D initiatives closely. As this back-and-forth continues to show no sign of stopping, how can employers lean into the global IE&D trend without running afoul of state and federal anti-discrimination laws?  
Employers should keep the following guardrails in mind:
As demonstrated by 2022’s major trends, developing and implementing lawful IE&D initiatives requires tact, flexibility, and sound legal advice. In 2023, employers should remain open to meaningful IE&D efforts, but also stand prepared for challenges in this complex landscape.29
1 For example, regulatory agencies such as the Securities and Exchange Commission (SEC) approved a rule requiring Nasdaq-listed companies to disclose information about the diversity of a company’s board of directors. In California, however, mandates for board diversity stalled because of litigation and are pending appeal. On the other hand, efforts that encourage voluntary reporting of board diversity have garnered more attention.
2 See Trish Martin, Breanne Martell, Denise Visconti, Corinn Jackson, Thelma Akpan, and Jenny Orr, Minding the Pay Gap: What Employers Need to Know as Pay Equity Protections WidenLittler Report (Sept. 2, 2022).
3 See Joy C. Rosenquist and Denise Visconti, California Labor Commissioner Releases Limited Guidance on Pay Transparency LawLittler ASAP (Dec. 28, 2022).
4 See Barry Hartstein, Victoria Vanderschaaf, and Jennifer Jones, Illinois DOL Provides Guidance on Equal Pay Registration Certificate Application Process, Littler ASAP (Apr. 20, 2022).
5 The IDOL has posted a list of FAQs providing more detailed information.
6 See David Goldstein, Chris Gokturk, and Carroll T. Wright, OFCCP Revises Compensation Analysis Directive But Leaves Questions About Documentation Created Under Attorney-Client Privilege, Littler Insight (Aug. 19, 2022).
7 Employers with 100 or more employees that are subject to Title VII are required to file EEO-1 reports annually. Employers with 50 or more employees that hold certain federal contracts are also required to file EEO-1 reports annually even if they have under 100 employees.
8 Center for Investigative Reporting v. U.S. DOL, 3:22-cv-07182-SK (N.D. Cal. Nov. 15, 2022).
9 See David Goldstein and Jim Paretti, OFCCP Sued to Compel Release of EEO-1 Data (Nov. 22, 2022).
10 New York City Commission on Human Rights, NYC Commission on Human Rights Legal Enforcement Guidance on Race Discrimination on the Basis of Hair (Feb. 2019). In this guidance, the NYCCHR explains that negative sentiments towards Black hairstyles and textures date back to times of slavery. For example, “white slave traders initially described African hair and locs as ‘dreadful,’ which led to the commonly-used term ‘dreadlocks.’” The NYCCHR provided examples of how, over time, such sentiments crept into many modern workplace settings and shaped the parameters of dress and grooming policies, as well as other general employment practices. The NYCCHR emphasized that these policies can be preferential towards white and European beauty standards and require Black or African-American individuals with certain hairstyles and textures to uncomfortably conform with those standards for the sake of their employment.
11 See Corinn Jackson and Lysette Roman, Hands Off My CROWN! What Employers Should Know About the Rise of Hair Discrimination Laws, Littler Insight (Apr. 27, 2022).
12 See Corinn Jackson, You Can’t Touch My Hair: California Bans Racial Discrimination Based on Hairstyle with CROWN ActLittler ASAP (July 12, 2019).
13 Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Nebraska, Nevada, New Jersey, New Mexico, New York, Oregon, Tennessee, Virginia, Washington, and the U.S. Virgin Islands.
14 See Mark T. Phillis and Taylor N. Brailey, Pittsburgh and Allegheny County, Pennsylvania Pass CROWN Acts, Littler ASAP (Nov. 4, 2020); Daniel Gomez-Sanchez and Cassandra N. Branch, Suffolk County, NY Bans Hairstyle and Religious Garment Discrimination, Littler ASAP (Aug. 12, 2020); Emily Haigh and Devjani Mishra, New York City Commission on Human Rights Provides Legal Enforcement Guidance on Race Discrimination on the Basis of Hair, Littler ASAP (Feb. 21, 2019).  
15 See Corinn Jackson, Lauren Marcus, and Shareef Omar, New Jersey Latest State to Ban Hairstyle DiscriminationLittler ASAP (Dec. 24, 2019); Corinn Jackson and Melissa Logan, CROWN “Love” – Virginia Latest State to Ban Hairstyle DiscriminationLittler ASAP (Mar. 5, 2020).
16 For example, as of the date of publication, Minnesota’s House of Representatives had passed its own CROWN Act, which is expected to be enacted this year. See Susan Fitzke, Kurt Erickson, and Carroll T. Wright, Minnesota Expected to Pass CROWN Act Prohibiting Discrimination Based on Natural Hair, Littler ASAP (Jan. 17, 2023).
17 Groff v. DeJoy, 21-1900 (3d Cir. May 25, 2022), cert. granted, No. (U.S. Jan. 13, 2023) (No. 22-174). The questions presented are: Whether the Court should disapprove the more than-de-minimis-cost test for refusing Title VII religious accommodations stated in Trans World Airlines, Inc. v. Hardison, 432 U.S. 63 (1977), and whether an employer may demonstrate “undue hardship on the conduct of the employer’s business” under Title VII merely by showing that the requested accommodation burdens the employee’s co-workers rather than the business itself.
18 See Cindy-Ann Thomas and Brandon R. Mita, $10 Million “Reverse” Race & Gender Discrimination Verdict Gives DE&I Programs a Halloween FrightLittler ASAP (Oct. 29, 2021).
19 See Jim Paretti, Cindy-Ann Thomas, and Nancy Johnson, Florida Limits Permissible Workplace Training on Diversity, Implicit Bias, and Systemic Racism, Littler ASAP (Apr. 22, 2022).
20 See Nancy A. Johnson and Cindy-Ann L. Thomas, Can Even Stranger Things Still Happen? Florida is Blocked From Enforcing “Stop-WOKE” Law… For NowLittler Insight (Aug. 22, 2022).
21 See Lysette Roman, Alyesha Asghar Dotson, and David Goldstein, How Will the Supreme Court’s Review of Two Affirmative Action Cases Affect Employers?Littler Insight (Nov. 4, 2022).
22 This decision is not expected to have any direct impact on the affirmative action requirements that apply to federal contractors. Although the set of requirements that apply to federal contractors is often referred to as “affirmative action,” the applicable laws do not permit employers to consider race or ethnicity in making employment related decisions and, therefore, do not raise the types of concerns that are at issue in the Harvard and UNC cases.
23 See Alyesha Dotson, Corinn Jackson, Dionysia Johnson-Massie, and Lysette Roman, Corporate Board Diversity: Next Steps for Employers After Court Strikes Down California Board Diversity LawLittler Insight (Apr. 18, 2022).
24 The law defined an individual from an underrepresented community as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”
25 Crest v. Padilla, 19STCV27561(2019).
26 Crest v. Padilla, 20STCV37513(2020).
27 Alliance For Fair Board Recruitment v. Weber, 2:21-cv-01951 (E.D. Cal. July 12, 2021).
28 Philip Berkowitz, Corinn Jackson and Britney Torres, Inclusion, Equity, & Diversity Update–SEC Approves Nasdaq Rule on Board DiversityLittler Insight (Aug. 20, 2021).
29 In addition to the above guardrails, Littler offers other practical resources that may assist employers with navigating the ever-changing IE&D space. One such resource is the Littler IE&D Playbook. Launched in 2022, the Littler IE&D Playbook is a complimentary, self-service, non-privileged collection of resources curated to guide employers in starting or expanding IE&D programs. The Playbook offers an intuitive, easy-to-use knowledge base organized by twelve key IE&D areas—via videos, FAQs, podcasts, and high-level summaries—that meets employers where they are in their IE&D development and implementation journey.
Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.

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