The beginning of this year saw a flurry of headlines announcing the end of workplace Diversity, Equity and Inclusion (“DE&I”) programmes across a range of big-name multinationals in the U.S. (some of whom were once the front runners leading the way in the DE&I space). Below, Aoife Gallagher-Watson, Director with EY Law Ireland discusses the changes taking place in the U.S., the potential impact for Irish businesses and some of the key risks and consequences organisations can face when introducing major changes to company policies and programmes.

What’s in a name?

Although a variety of labels and acronyms exist, the term “DE&I” is typically used to describe practices that are designed to correct inequities within an organisation, government body, school/college and so on, by attempting to break down barriers for historically marginalised groups. In short:-

“Diversity” refers to the representation of people from a variety of backgrounds, including people of different races, genders, sexual orientations, disabilities, religions and so forth.

“Equity” focuses on fairness and justice for all, including, for example, access to employment or remuneration (i.e. equal pay for equal work). 

“Inclusion” is about whether people feel a sense of belonging, and whether they feel heard, valued and accepted.

In the workplace, DE&I initiatives are typically rolled out via training, company policies/practices, as well as organisational culture. It is widely acknowledged that a more diverse group of employees and decision makers has a positive impact on employee culture and morale, client relationships and innovation. 

However, like most policies and concepts, DE&I has had its supporters and its critics (and even amongst its critics, you will find those who say the practice of DE&I initiatives go too far, and those who will argue that it doesn’t go far enough). In particular, across the U.S. we have seen quite a shift in attitudes towards DE&I in recent years. 

What’s brought about the sudden change State-side?

In many ways, the recent change in attitude to DE&I can be linked to two milestone events in the U.S. – (1) the 2023 Supreme Court decision in Students for Fair Admissions, Inc. v President and Fellows of Harvard College and (2) the political climate.

The policies of earlier government administrations enabled hundreds of colleges and universities to factor in students’ racial backgrounds during the admissions process (the consideration being supplementary in nature and taken into account together with a range of factors such as applicants’ test scores, grades and extracurricular activities). In June 2023, the U.S. Supreme Court held that race-conscious affirmative action (that is, the consideration of an applicant’s race as one factor in making an admissions decision particularly to realise the educational benefits of diversity), was unconstitutional, thereby overturning 45 years of legal precedent. The decision coincided with the U.S. presidential campaign, where DE&I was drawn into the fractious debate. 

So what exactly has the political climate got to do with DE&I?

As readers will no doubt be aware, the U.S. presidential campaign brought a new administration alongside announcements about the termination of DE&I initiatives across both federal and corporate America. Some commentators say that the changes that we have seen are an attempt at currying favour with the new administration. Others say that if you drill down into it, many of the “changes” are no more than a rebadging, or a natural step in the company’s DE&I journey, as the organisation’s needs and achievements evolve. Depending on who you want to believe, politics has nothing to do with DE&I, or it has everything to do with it. 

What does all of this mean for Irish business? 

Currently, Irish businesses do not appear to be moving away from their DE&I agenda. In addition to a strong culture of protecting those who are more vulnerable, Ireland and the EU has robust legislation is in place to protect individuals from certain kinds of discrimination, harassment and sexual harassment, and to promote equal work opportunities and equal treatment when accessing goods and services.

Contrary to what is taking place elsewhere, developments in Ireland and across the EU are very much focussed on addressing ongoing inequalities, with the Pay Transparency Directive (“Directive”) to be implemented by all Member States by June 2026. The Directive introduces a range of requirements, including a ban on pay secrecy agreements, information rights for employees/job candidates, enhanced gender pay gap reporting and more. Ireland is the 4th country in the EU to produce draft legislation to introduce some of the simpler requirements of the Directive before the implementation date. Also noteworthy is that, under existing Irish legislation, it is specifically provided that, in certain circumstances, positive action can be taken by employers where such steps are taken with a view to ensuring full equality in practice between men and women in their employments. 

Notwithstanding this, as indicated above, some businesses operating in Ireland may be led by U.S. parents (or other influences) and where it is the case that changes are being introduced, employers can expect some impact (in the legal and non-legal sense), most likely in the form of:-

Culture/morale: The most immediate impact of such changes is likely to be “non-legal” in nature. We can reasonably anticipate a negative impact on culture and morale, particularly among effected minority groups, many of whom would already be struggling for recognition and progression even with the support of DE&I initiatives. 

Grievances: we would anticipate an uptake in grievances connected with a sudden change in company attitude towards DE&I as employees grapple to process and adapt to what will likely be perceived as significant changes. 

Recruitment/retention: Closely connected to these first two points will be the impact on recruitment and retention. It is widely known that employees (and particularly younger generations) place a high value on the non-financial initiatives offered by their employer.

Legal action: depending on the extent of the change and the nature or (legal) status of what is changing, employers may need to prepare for breach of contract claims (e.g. where a policy or procedure was contractual in nature and consent to the change was not obtained) and/or a statutory claim for discrimination/a breach of equality legislation.

Mental health: many of those who would be most impacted by an about turn in DE&I policy will form part of minority groups, some of whom may be particularly vulnerable or susceptible to psychological harm by such a move. Stress related sick leave should not be unexpected. With that foreseeability comes additional responsibility in the form of employer’s common law duty of care (potential personal injury claims) and the employer’s statutory duties under health and safety law to assess and mitigate risks to health and safety in the workplace – including mental health. Legal obligations and consequences aside, the cost to a business caused by lower productivity, potential absenteeism could also materialise.

Reputation: lastly, and as we have seen from recent media coverage, DE&I itself, and drastic changes to DE&I policy in particular, can be particularly divisive and draw significant media attention. Reputational risk cannot be overlooked, and employers introducing change will need to consider how such changes will be received, not just by their employees, but by their clients, shareholders, job candidates, investors/potential investors and other relevant stakeholders.