Companies Standing Up to Trump on DEI
Companies like Costco and Levi’s are rejecting the White House’s positions on diversity, equity, and inclusion.
Testifying before the Senate Judiciary Committee in July, Harmeet Dhillon, the assistant attorney general for civil rights, warned of the Trump administration’s crackdown on diversity, equity, and inclusion efforts.
“Either DEI takes care of itself, or we abolish it,” Dillon told senators.
Just hours after taking the oath of office, President Donald Trump issued an executive order eliminating diversity programs and directing federal contractors to end “unlawful DEI discrimination.” Fearing lawsuits and the loss of government contracts, dozens of the nation’s largest companies, from McDonald’s to Facebook owner Meta, have scaled back or eliminated their DEI programs.
One lawyer, speaking on condition of anonymity to discuss private client matters, said executives are doing everything in their power to follow the president’s lead and stay out of the crosshairs because they fear the Trump administration will target them next.
“What you’re seeing is corporations bending to the will of the president,” he says. “The White House is in charge.”
Government scrutiny is only increasing as the Trump administration moves to aggressively pressure employers to review their hiring practices in line with the president’s political agenda. The Justice Department has indicated in recent months that it intends to investigate federal contractors and grant recipients who “willfully” violated civil rights laws.
“If a company’s DEI plan resembles a quota, it should expect a subpoena,” Brandon Smith, a partner at Holtzman Vogel and a former chief of staff and assistant attorney general in the Tennessee Attorney General’s Office, recently wrote in the National Review. “The era of accountability for violations of state and federal civil rights laws has begun.”
DEI investigation approaches
In his Senate testimony, Dillon promised that the Trump administration would launch “numerous investigations and lawsuits against organizations that continue to violate federal civil rights laws.”
The Justice Department created the Civil Rights Fraud Initiative in May and threatened to bring suit under the False Claims Act, a civil law that allows the government to recover funds lost to fraud.
As a first step, the Department of Justice began issuing civil investigative demands to employers in a wide range of industries, directing them to submit information about their DEI programs.
The use of CID, a legal tool that allows the government to collect information during civil investigations, has upset American companies.
“There’s no question there’s a new sheriff in town,” said Al Chakrabarty, a partner at the Saul Ewing law firm. “The corporate world is definitely in a very difficult situation because in many cases, previous administrations have not only tolerated it, but actually encouraged it to have programs that increase diversity.”
False Claims Act lawsuits are expensive to defend, and damages and fines can quickly add up, according to Morrison & Foerster LLP.
Violators could be subject to fines of $14,000 to $28,000 per claim, as well as liability for up to three times the total contract amount, each time a government contractor files a claim with the government.
Additionally, the Department of Justice encourages whistleblowers to file lawsuits on behalf of the government and receive a cut of the profits. Last year, the Justice Department received nearly $3 billion in False Claims Act settlements and judgments.
Lawyers say even the threat of a False Claims Act investigation is a powerful cudgel. Being a target of the Trump administration carries significant business risks, from reputational damage to shareholder class action lawsuits.
“Many leaders have said to me, ‘We’re very confident in what we’re doing from a purely legal standpoint,'” said David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging at New York University School of Law. “And many of them will say, ‘If we’re dragged into the mud by this administration, none of that matters.'”
Cities and states covered by DEI research
In a sign of what’s to come for the private sector, the Justice Department is investigating the hiring practices of state and local governments.
The Department of Justice announced an investigation into possible employment discrimination by the Minnesota and California Environmental Protection Agencies. The Justice Department announced in May that it was investigating Chicago’s hiring decisions after Mayor Brandon Johnson touted the number of Black employees in his administration.
Private sector employers should expect “a similarly aggressive stance,” Perkins Coy LLP warned.
American companies may also face challenges from the states. Red state attorneys general have launched investigations into private sector hiring practices.
In July, the Tennessee Attorney General’s Office sent a letter to Deloitte, one of the state’s largest vendors managing the Medicaid eligibility system, ordering it to turn over records related to its DEI efforts, The Tennessean, part of the USA TODAY Network, reported. The deal is worth hundreds of millions of dollars to Deloitte, which announced in February that it was ending its DEI program.
Preparing for EEOC and DEI enforcement
The Senate this month confirmed President Trump’s nomination of Brittany Panuccio to serve on the Equal Employment Opportunity Commission, which investigates employment discrimination in the private sector. The approval establishes a Republican majority in the agency and clears the way for the EEOC to make another major policy change.
In January, President Trump fired two Democratic commissioners before their terms were up, leaving the EEOC without a quorum.
EEOC Acting Chair Andrea Lucas said eliminating “unlawful DEI” in the workplace is a top priority.
“As head of the EEOC, I am committed to dismantling the identity politics that have plagued our civil rights laws,” Lucas said during his confirmation hearing for his second term as commissioner.
The EEOC is likely to rescind guidance on workplace harassment that it strengthened protections for LGBTQ+ workers last year, including the right to use restrooms and pronouns consistent with gender identity.
“The confirmation of a second Republican EEOC commissioner will allow the agency to more aggressively advance Trump-era priorities, including challenging diversity programs and reducing LGBTQ+ protections,” Littler Law Firm said.
