The U.S. Equal Employment Opportunity Commission

Meeting of February 28, 2007, Washington D.C. to Launch E-Race Initiative

Statement of Weldon H. Latham, Esq.

Good morning, Chair Earp and members of the Commission. Thank you for this opportunity to share my views and those of my clients a number of the nation's leading companies, as well as champions for fairness and equity in the workplace.

My name is Weldon Latham and I am senior partner with the international law firm Davis Wright Tremaine LLP and Ch air of its Corporate Diversity Counseling Group. I represent a wide range of Fortune 500 companies, minority businesses , and government agencies in legal matters involving diversity, inclusion, crisis avoidance and management, complex employment audits and disputes, investigations, and litigation involving race and sex discrimination/ harassment. I advise clients on the development and implementation of best practice diversity initiatives and comprehensive diversity action plans, ranging from executive management and workforce diversity to ethnic marketing/supplier diversity, government/community relations, and targeted philanthropic efforts (see attached Biographical Sketch).

The Commission has asked me to speak today on the general topic of Striking a Balance: EEO and Diversity, and more specifically on (a) emerging best practices in corporate diversity, and (b) "downsizing the workforce without downsizing diversity".

Diversity in the workplace is a hot topic in the boardrooms of many of our nation s largest and most forward thinking companies, as well as in our national media. It is clear that a growing number of leading companies regard diversity not merely as a regulatory requirement but as either a business imperative or the basis for a competitive edge. These companies recognize not only the historic discrimination and hostility minorities, women, and other protected classes have faced in the corporate world, but also the perpetuation of stereotypes, prejudices, and barriers that have prevented these groups from securing equal access to the opportunities that would have naturally allowed them to achieve representative levels of success in all fields of endeavor. Thus, corporate diversity programs have become increasingly popular as a product of enlightened corporate self-interest.

Many major corporations have implemented strong diversity initiatives and have become recognized as employers of choice for all em ployees enhanced recruitment and retention of minority and female employees have significantly improved their bottom line. As a result, many of these companies have sought to institutionalize rigorous programs to ensure more opportunity for traditionally underutilized employees , i.e., greater fairness and inclusion in their workplaces for all employees.

While many leading corporations have been proactive in overcoming institutional barriers to workplace inclusion i.e., seeking diversity from the boardroom to the mailroom 1 there are hundreds of other large corporations that have totally neglected or avoided any efforts to diversify their organizations. In fact, studies of the boards of the Fortune 500, which are the companies traditionally most focused on workplace inclusion, found that minorities account for only 10% of board seats 2 and women account for only 15%.3 This neglect of workplace diversity is further supported by scholarly studies of the subject, as well as daily media accounts of lawsuits filed by minorities and women alleging discrimination, and the multi-million dollar settlements paid by companies4 that have since agreed to aggressively address this common workplace problem a problem that so-called ultra conservatives wou ld like EEOC, the rest of the Federal government, and the nation to ignore. They falsely propose that American business has achieved workplace equality (i.e., a level playing field).

Despite a forty year, well-established legal framework, created by the Federal government and sanctioned by the Supreme Court, to eradicate the pernicious barriers to inclusion, widespread corporate discrimination still persists. Major lawsuits filed by minorities and women alleging discrimination and hostile work environments, and frequent headlines of costly discrimination settlements, evidence a continuing problem. As discussed below, Federal laws, regulations, and Supreme Court precedent make clear that affirmative inclusionary efforts are an appropriate means to eliminating the treatment and prejudices that prevent equal employment opportunity for minorities and women.

LEGAL FRAMEWORK: STATUTES, REGULATIONS, AND CASELAW

A. Statutes and Regulations

Contemporary corporate anti-discrimination, anti-harassment, and diversity policies and practices implicate various Federal laws and regulations, including the Commission s enabling legislation, Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e, et seq.; the Commission's Guidelines on Affirmative Action Appropriate Under Title VII of the Civil Rights Act of 1964, as Amended, 29 C.F.R. Part 1608 (the Guidelines); and Executive Order 11246 and implementing regulations of the U.S. Department of Labor, Office of Federal Contract Compliance Programs ( OFCCP), 41 C.F.R 60-2.1. Title VII prohibits employment discrimination based on race, color, religion, sex, and national origin; the U.S. Supreme Court recognizing this nation s long and embarrassing history of de jure and de facto discrimination and the exclusion of women, African Americans, and other minorities, as well as the continuing need to remedy actions of the past and practices that continue to this day has ruled that provisions of a private employer s voluntarily adopted affirmative action plan may constitute a legitimate nondiscriminatory reason for an employment decision that takes race or gender into account.5

The Commission's own Guidelines also provide Federal regulatory support for voluntary affirmative action efforts under Title VII. The Guidelines recognize that decisions taking race, sex, and national origin into account are often necessary in order to achieve equal employment opportunity and address institutional barriers to a fair and inclusive workplace. The Guidelines clearly state that Title VII was never intended to discourage voluntary affirmative action undertaken to improve employment opportunities for minorities and women,6 and provide that an employer that adopts a voluntary affirmative action program in conformity therewith can assert "good faith" reliance as a defense to allegations of so-called reverse discrimination.7 Such an affirmative action plan or program must contain three elements: (1) a reasonable self analysis designed to determine whether employment practices disadvantage or adversely impact those previously excluded; (2) a reasonable basis for concluding affirmative action is appropriate; and (3) reasonable action in relation to the problems disclosed by the self analysis, which may include goals and timetables or other appropriate employment tools that recognize the race, sex, or national origin of applicants or employees.8

Executive Order 11246 , issued in 1967, and the OFCCP implementing regulations obligate significant Federal contractors to establish and implement affirmative action programs and to ensure nondiscrimination in employment practices. This Executive Order has been reaffirmed for 40 years through eight Presidential Administrations, and remains needed to address patterns and practices of discrimination that continue today. According to OFCCP regulations, an affirmative action plan must contain the following elements: (i) an organizational profile; (ii) a job group analysis; (iii) determination of minority or female availability; (iv) a comparison of incumbency to availability; and (v) placement goals, where indicated. Simply put, the regulations require that a contractor compare the percentages of minorities and women in its workforce with their availability in the labor pool and set goals to remedy shortfalls. The regulations also require employers to regularly analyze workforce policies and practices in a continuing effort to eliminate barriers to hiring and advancement of women and minorities.

These laws and regulations make clear that companies may employ appropriate affirmative inclusionary efforts when implementing diversity and inclusion initiatives. The underlying premise is clear, obvious, and all too often ignored discrimination, hostility, and exclusion of minorities and women in American workplaces is still too common, particularly as relates to denial of access to the highest positions representing power, influence, and individual financial success.

B. High Court Interpretations

As the Commission well knows, the leading case addressing voluntary affirmative action efforts in private employment is Weber,9 where the Supreme Court upheld a voluntary affirmative action plan, finding that it mirrored the purpose of Title VII, attempting to break down patterns and practices of institutional discrimination, and even segregation, and to create opportunities for traditionally excluded employees.

In Weber, a white employee challenged the legality of an affirmative action plan that reserved for black employees 50% of the openings in the craft training program until the percentage of black craft workers was commensurate with the percentage of blacks in the local labor force. In upholding the training program, the Court set forth the seminal three-part test; a plan is valid provided it: (1)isjustifiedbya manifestimbalance in traditionally segregated job categories; (2) does not unnecessarily trammel the interests of the groups not benefited by the program, nor create an absolute bar to the advancement of non -minority employees; and (3) is temporary.

Weber was reaffirmed in Johnson,10 in which a male employee who was passed over for promotion in favor of a female alleged his employer impermissibly took gender into account in violation of Title VII. The Court upheld the plan , as it represented a moderate, flexible, case-by-case approach, effecting a gradual improvement in the representation of minorities and women in the work force . . . fully consistent with Title VII. The Court elaborated on manifest imbalance, explaining that an employer can determine whether a manifest imbalance exists by comparing th e percentage of minorities or women in the employer's work force with th e percentage in the area labor market or general population.11

Weber and Johnson make clear that voluntary affirmative action efforts are legally permissible under Title VII provided that employers comply with the legal standards set forth therein. The Supreme Court has not revisited the issue since 1986, but in its most recent affirmative action ruling, Grutter v. Bollinger,12 the Court expanded its affirmative action jurisprudence by finding an additional compelling interest: seeking and attaining a diverse student body.

While the Gru tter opinion addressed university admissions, the Court s reliance on amici briefs of major corporations in support of affirmative action stressing the value of diverse workforces implies a recognition that diversity and affirmative action efforts exist beyond the university.13 The decision makes clear that properly crafted affirmative action programs are valid and provides insight into how affirmative action may be used in the employment context once there is a justifiable reason for its use (i.e., eliminating a manifest imbalance in traditionally segregated job categories, or, perhaps, diversity alone; see Petit v. City of Chicago, 352 F.3d 1111 (7 th Cir. 2003) (accepting diversity alone as a compelling interest and applying the Grutter standards to uphold the Chicago Police Department s affirmative action plan in the employment context)).14

PRACTICAL GUIDANCE FOR CORPORATE AMERICA

In determining a company's approach to diversity, executives should recognize that they are able to select from a range of available diversity and inclusion initiatives. The most common diversity programs are designed to enhance representation throughout the company of minorities and others in legally protected categories (e.g., women) and/ or company policies prohibiting discrimination (e.g., against sexual orientation, a protected class under various state and local laws). It is also not uncommon for large companies to adopt multi-year strategic plans for diversity recruitment, hiring, mentoring, retention, and advancement, as well as other initiatives designed to overcome the lack of fair representation of minorities, women, and others in their workforces.

Supreme Court precedent, regulatory guidance, and other pertinent authority, while purporting to establish rules of conduct for employers , nonetheless leave room for interpretation. One end of the diversity continuum is basic compliance with EEO/non-discrimination legal requirements. The potential risks of such a minimalist policy are substantially greater than the risks of a legitimate reverse discrimination lawsuit and may result in legal fees and expenses, settlements/judgments, adverse press coverage, damage to company brand, lost management/employee time and distraction, and depressed employee morale attendant to addressing growing complaints, external claims, investigations and even class action discrimination lawsuits. It is difficult to overstate the financial risk of major employment discrimination claims to employers. Some of the most noteworthy recent race and gender class action settlements include those noted above in Diversity Inc,15 e.g., Coca-Cola, $192 million (race, 2000); Texaco, $176 million (race, 1996); MetLife, $160 million (race, 2002); Boeing, $90 million (gender, 2004); and others . Moreover, in 2006, the Commission recovered $ 61.4 million in monetary benefits for charging parties in race discrimination cases alone (not including monetary benefits obtained through litigation).16 Similarly, OFCCP recovered a record $51.5 million for workers who had been subjected to employment discrimination in 2006.17 In the past two years there has been a resurgence in judicial certification of huge employment discrimination classes, involving m illions, and perhaps billions, of dollars in potential judgments. It is no wonder that 63% of corporate general counsel describe employment litigation as their greatest risk.18

The other end of the continuum is exemplary energetic and motivated pursuit of employment diversity and inclusion. This involves aggressive corporate policies and procedures designed to achieve workforces that are representative of their customer bases at all levels of the corporate hierarchy, from boardroom to mailroom, and to eliminate all types of discrimination, harassment, and hostile work environment. The benefits associated with aggressive diversity policies include those associated with diverse, inclusive workforces and reduction of major litigation risks of non-diverse, non-inclusive workforces, and often hostile work environments, described above. Such an approach in most instances will result in minimal risk of factually sustainable reverse discrimination cases.19 In short, the extremely lower risk of such litigation must be balanced against the known risk and substantial exposure of discrimination litigation experienced by major American corporations over the past ten years.

A. Emerging Best Practices

A growing number of major corporations have been developing, assessing, and refining diversity practices, particularly over the past decade, and there are scores of such practices that could be included on best of lists. What these companies have learned, however, is that no single practice will meet every company's needs and objectives; diversity policies, programs, and practices must be designed and implemented to address each company's unique history, culture, and business case. That said, the following best practices, when properly designed, implemented, and overseen by senior management consistent with the applicable legal principles, should result in more effective achievement of corporate diversity objectives while reducing the likelihood of internal complaints, EEOC charges, adverse OFCCP audit findings, and employment discrimination litigation.

  1. Strong Corporate Diversity Policy : A widely-publicized, strong mission/ policy statement usually incorporating the company's business case for, and commitment to, diversity and inclusion, and recognizing diversity across all company functions as a company goal and management responsibility;
  2. CEO Leadership: As with any major corporate initiative, the CEO's active participation in the diversity initiative demonstrates commitment, creates credibility for the initiative, and sets clear, mandatory expectations for company executives and managers;
  3. Executive Diversity Council (EDC): Consisting of members of senior management that meet regularly and act as an oversight and policy board for diversity programs;
  4. External Advisory Council: Consisting of prominent external executives who bring objectivity, a broader diversity perspective, and demonstrated knowledge of corporate diversity issues in serving as advisors for a company's diversity initiatives;
  5. Diversity Goals, Metrics, and Reporting: Consisting of company-specific goals tied to the diversity policy, tools to measure progress toward achieving the goals, and periodic reporting of results to the CEO, senior management, and the EDC;
  6. Employee Diversity Councils : Councils composed of employees, and often management "sponsors", that meet regularly to discuss diversity issues affecting employees and act as internal a dvis ory groups to the company;
  7. Diversity as a Performance Objective : Achievement of diversity objectives is factored into annual performance reviews for all employees responsible for such objectives;
  8. Credible Internal Complaint System : Uniform/aggressive enforcement of policies and practices of reporting and investigating internal complaints and regular audit of effectiveness of the process;
  9. Aggressive Anti-Harassment Policy and Enforcement : Policies concerning discrimination, harassment, and retaliation should provide best available guidance as to the types of conduct prohibited. Ensure consistency in enforcement and administration of corrective action/discipline;
  10. Dedicated Diversity Communications Program : A comprehensive internal and external diversity communications strategy that optimizes communication of diversity initiatives and the Company s commitment to fairness to all employees;
  11. Diversity Champion : Although not every major corporation recognized as a leader in diversity has a single officer dedicated to diversity, many do, and many include the position among the direct reports to the CEO.

B. Downsizing the Workforce without Downsizing Diversity

In today's challenging business and economic climate, downsizing the workforce (also known as right-sizing, a reduction -in-force, or RIF) has become a common phenomenon in many corporations.20 The decision to implement downsizing is sometimes easier than devising an appropriate process that accomplishes the company s short-term fiscal objectives without sacrificing long-term business imperatives including, importantly, diversity and inclusion. While most companies understa nd that the challenges of managing a RIF should not deter from their commitment to diversity, achieving a legally appropriate approach requires careful planning and execution.

In designing an effective RIF, companies should conduct a careful, reasoned analysis that ensures the plan does not unfairly and adversely impact any employees, with particular attention to protected classes . Companies that have achieved a significant level of diversity in their organizations, both across functional operations and throughout the corporate hierarchy, prior to downsizing, will, generally, face fewer obstacles.21

Regardless of a company s demographics, the key to planning and implementing a fair and diversity-sensitive downsizing is to base the process on well-formulated, neutral, and practical business criteria. In every case, the process should consist of the following steps:22

  1. Articulate the Reason : Analyze and articulate the reason for, and goals underlying, the RIF. Whatever the reason, it is important that it be business -related and the goals well-articulated. The reason/goal will determine the elements of the downsizing plan.
  2. Determine the Effect : If a RIF is determined to be the best alternative, next consider the RIF's effect on the workforce, which will determine the scope of the RIF and guide the selection criteria.
  3. Employee Identification: Once the rationale, goal, and effect on the workforce have been identified, the most difficult task will be determining the selection criteria for implementing the RIF. Legitimate selection criteria that bear a rational relationship to the articulated business goals should be chosen for making individual RIF determinations. The selection criteria can vary widely depending on the stated business goals, but can include, for example, performance measures, seniority, or job function.
  4. Adverse Impact Analysis : The company should conduct a rigorous adverse impact analysis to determine whether the facially neutral selection criteria will disproportionately impact any protected classes. If any adverse impact is detected, particularly one undermining workforce diversity, careful consideration should be given to other legitimate selection criteria that could be used.
  5. Implementation: When implementing the RIF, the selection criteria should be applied consistently and adhered to without departure in any instance. This will often require comprehensive training and oversight of managers implementing the RIF.

While there are no guarantees that following these steps will satisfy all of the company's (often competing) objectives including diversity when well-planned and implemented they should optimize the prospects of an effective RIF that does not jeopardize a company's diversity progress or legal position.

CONCLUSION

One conclusion is clear for corporations: doing nothing to achieve or advance diversity and inclusion not only allows for the perpetuation of institutional barriers to an inclusive workplace, but also could very well expose a company to risks of significant legal action from members of protected classes and limit the company s ability to harness the power of a diverse, inclusive, and highly talented workforce. The most prudent course is to continue aggressive diversity efforts, but with ongoing review and revision of policies and programs in light of Federal legislation, regulations, and Supreme Court precedent, as well as constantly evolving best practices.

As today's panel indicates, there is substantial disagreement on this subject. There is, however, a significant volume of case law defining the parameters of acceptable diversity programs within Title VII, the Commission's Guidelines, OFCCP regulations, and the Weber and Johnson precedents. The underlying premise is that discrimination against minorities and women is still a regular occurrence in the workplace, even more than 40 years after enactment of the Civil Rights Act. As Justice O'Connor emphasized in Adarand, [t]he unhappy persistence of both the practice and the lingering effects of racial discrimination against minority groups in this country is an unfortunate reality, and government is not disqualified from acting in response to it. 23 Thus, the Commission must continue to fulfill its mission and act in response to the ongoing patterns and practices of workplace discrimination and embrace voluntary efforts of employers, including the nation's leading corporations, to achieve equal employment opportunity and the eradication of institutional barriers to an inclusive workplace, and ignore the specious rhetoric of groups that seek to distort the reality of today's workplace.


Footnotes

1 See 2006 Top 50 Companies for Diversity, DIVERSITYINC, June 2006, at 40.

2 See, e.g., Business for Social Responsibility, Board Diversity (20 06).

3 See, e.g., Catalyst, 2005 Catalyst Census of Women Board Directors of Fortune 500 (2006) (providing benchmark data for the number of women who serve as directors on Fortune 500 boards and identifying 53 Fortune 500 boards without a female director).

4 See C. Stone Brown, Bias and the Law: Protect Your Reputation, DIVERSITYINC, Special Issue 2006, at 37 (providing chart of largest corporate public settlements for race and sex discrimination, including: Coca-Cola, $192 million (race); Texaco, $176 million (race); MetLife, $160 million (race); Boeing, $90 million (gender); Sodexho, $80 million (race); Morgan Stanley, $54 million (gender); and Abercrombie & Fitch, $40 million (race).

5 See, e.g., United Steelworkers of America, AFL-CIO v. Weber, 443 U.S. 193 (1979); Johnson v. Transportation Agency, Santa Clara Co., 480 U.S. 616 (1986) (discussed below).

6 See 29 C.F.R. 1608.1(a).

7 Id. at 1608.2.

8 Id. at 1608.4.

9 United Steelworkers of America, AFL-CIO v. Weber, 443 U.S. 193 (1979).

10 Johnson v. Transportation Agency, Santa Clara Co., 480 U.S. 616 (1986).

11 Employers need not admit in satisfying the traditionally segregated job categories requirement that they have engaged in discrimination, but rather may rely on underrepresentation in specific job categories in comparison with availability to satisfy the requirement. Justice Blackmun s concurrence in Weber, cited favorably in Johnson, noted that the Court was not requiring such an admission from the employer: The individual employer need not have engaged in discriminatory practices in the past . Weber, 443 U.S. at 213 (Blackmun, J., concurring).

12 539 U.S. 306 (2003).

13 The dramatic change in Corporate America's position on affirmative action over the past 30 years is demonstrated by the response in University of California v. Bakke, 438 U.S. 265 (1978), where only one amicus brief was filed by big business, the U.S. Chamber of Commerce, opposing affirmative action, and in Gru tter where 70 of ou r nation's most prestigious companies, led by General Motors, joined in amicus briefs urging the Court to uphold affirmative action as a successful means of truly leveling the playing field.

14 Grutter left open the question whether diversity alone can serve as the necessary predicate, in addition to Weber's manifest imbalance, for justifying actions to address continuing institutional exclusion of minorities and women in the private sector employment context under Title VII. The validity of affirmative action plans and diversity initiatives continues to be litigated in lower courts, but as of this writing the Supreme Court has spoken, as noted above and in Adarand Constructors v. Pena, 515 U.S. 200 (1995) (announcing that a Federal, state, or local government actor may engage in race-based action, such as affirmative action plans, so long as the action serves a compelling state interest and is narrowly tailored (i.e., the strict scrutiny standard)).

15 See C. Stone Brown, supra note 3, at 37 (listing largest corporate public settlements).

16 Equal Employment Opportunity Commission, Race/ Color Discrimination, http:// www.eeoc.gov/types/race.html.

17 Office of Federal Contract Compliance Programs, Improvements at OFCCP Produce Record Financial Recoveries, http://www.dol.gov/esa/ofccp/enforc06.pdf.

18 Betty Morris, How Corporate America is Betraying Women, FORTUNE, January 10, 2005.

19 Reverse discrimination cases have never approached the magnitude of class action exposure and settlements of cases like Coca-Cola, Texaco, and Boeing.

20 Weldon H. Latham, Downsizing the Workforce Without Downsizing Diversity , PROFILES IN DIVERSITY J OURNAL, Sept./Oct. 2003.

21 Id.

22 Id.

23 Adarand Constructors v. Pena, 515 U.S. 200, 237 (1995).


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