The DEI Divide: An Overview of the Varying Positions on Corporate DEI Policies Across the U.S.
As corporate diversity, equity, and inclusion initiatives (“DEI”) face increasing legal and political scrutiny, a deep divide is emerging among states on how they view these initiatives. Some states are doubling down on their commitments through actions that encourage diversity in hiring, professional development, and corporate governance. Other states are actively restricting or even banning race- and gender-based programs, citing concerns over discrimination and compliance with recent court rulings and President Trump’s Executive Order that purports to target “illegal DEI and DEIA policies.” This growing patchwork of state-level and federal guidance and legal action is forcing businesses and other organizations to navigate a complex legal landscape, where diversity, equity, and inclusion strategies that are encouraged in one state may be legally challenged in another. Below we provide an overview of the differing approaches states are currently taking related to diversity, equity, and inclusion initiatives in corporate America.
States Taking Action to Restrict Diversity, Equity, and Inclusion Initiatives
In a letter sent on January 27, 2025, nineteen Attorneys General called on Costco to end its DEI policies within thirty days. This push came after Costco defended the legality of its DEI efforts by rejecting an investor proposal which would have required Costco to study and report on the financial risks associated with its DEI policies. Iowa’s Attorney General co-led the letter with Kansas, and they were joined by Attorneys General of Alabama, Arkansas, Georgia, Idaho, Kentucky, Louisiana, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, and Virginia.
On February 11, 2025, the State of Missouri filed a federal lawsuit against Starbucks accusing Starbucks of maintaining unlawful DEI policies that violate Title VII of the Civil Rights Act of 1964 and Section 1981 of the Civil Rights Act of 1866. Missouri alleges Starbucks discriminates based on race and sex in training and advancement opportunities and with respect to its board membership. The lawsuit also claims Starbucks utilizes race- and sex-based quotas in hiring, advancement, executive compensation, and training programs, as well as segregating employees by race and sex for certain mentorship programs.
States Taking Action to Protect Diversity, Equity, and Inclusion Initiatives
On January 9, 2025, thirteen Attorneys General led by Illinois’ Attorney General Kwame Raoul, sent a letter to Walmart’s President and CEO publicly expressing their concerns regarding Walmart’s decision to step away from its prior commitment to DEI initiatives. The letter urged Walmart to reconsider its decision. The Attorneys General specifically state that Walmart’s actions undermine important social progress and antidiscrimination efforts. The letter references Walmart’s decision to phase out supplier diversity programs, close their Center for Racial Equality, end equity trainings for staff, and remove the words “diversity” and “DEI” from company documents and employee titles.
On February 13, 2025, the Attorneys General of Massachusetts, Illinois, Arizona, California, Connecticut, Delaware, Hawaii, Maine, Maryland, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, and Vermont issued joint guidance to ensure businesses and other organizations operating in their respective states understand the continued viability and importance of diversity, equity, inclusion, and accessibility efforts. The joint guidance acknowledges the private sector’s concerns following President’s Trump’s Executive Order encouraging the private sector to end “illegal DEI discrimination and preferences” and asserts that diversity, equity, and inclusion programs remain legal and effective under state and federal civil rights laws. The Attorneys General argue that these initiatives help prevent workplace discrimination, improve compliance with civil rights laws, enhance business performance and success, and foster inclusive work environments. The joint guidance concludes with the Attorneys General reiterating that they stand ready to support businesses and other organizations implementing diversity, equity, and inclusion policies.
What to Expect Moving Forward
Ultimately, this evolving landscape presents businesses with the complex challenge of navigating often conflicting pronouncements while striving to maintain inclusive workplaces that attract top talent and mitigate legal risks.
From a legal perspective, employers should be aware that the terms “diversity, equity and inclusion” and “DEI” refer to an endless variety of practices and programs and referring to a company practice as “DEI” says absolutely nothing about whether the practice is lawful. While reliance on race or gender based “quotas” in hiring or other employment decisions is likely unlawful in most circumstances, many other practices that fall under the broad rubric of “DEI” should raise few legal concerns, notwithstanding the current heated rhetoric surrounding the topic on all sides.
For further guidance specific to your business or organization, please contact any Franczek attorney.