Diversity, equity and inclusion was a key battleground in the US elections and, with Trump now elected for a second term, employers are expected to face increased scrutiny and pressure on their workplace DEI initiatives. We previously wrote about the implications of a Trump administration on global mobility and now we are turning our attention to DEI.

Affirmative action and training under threat

Trump’s second term is likely to evidence a continuation of his first, with the reinstatement of an executive order banning racial sensitivity training by federal contractors (revoked by Biden) and the adoption of a much more conservative position on DEI more generally. Last year’s landmark Supreme Court ruling against affirmative action in college admissions programmes - celebrated by Trump as ‘a great day for America’ – led to affirmative action programmes in the workplace becoming a new target for conservative activists. Many companies reportedly reviewed their workplace affirmative action policies in light of a growing concern that they would be targeted. Legal action against companies potentially overstepping the mark will now continue with the likely support of the new administration.

Changes at the EEOC

The composition of the Equal Employment Opportunity Commission (EEOC) is expected to become more conservative.  It is widely anticipated to revisit or reserve several pro-DEI and anti-discrimination measures implemented under Biden. This will have the effect – among other things – of narrowing the scope of protections for pregnant and LGBTQIA+ workers.

Any immediate attempts by a second Trump administration to shift the EEOC’s stance on these issues is likely to be constrained by the agency’s current Democratic majority which will remain in place until 2026.  In the more immediate term, Trump is expected to appoint the only Republican commissioner, Andrea Lucas, as chair and to pick a new general counsel. These appointments would likely impact the EEOC’s litigation focus.  Ms Lucas has been a vocal critic of the agency’s interpretation of anti-discrimination legislation to include accommodations for abortion, menopause and infertility and has publicly cautioned employers about workplace DEI initiatives and the need to ensure that they do not cross legal lines. When it comes to interpreting anti-discrimination legislation, the EEOC is likely to align with the Supreme Court’s more conservative stance over time.

Project 2025

Project 2025 is a set of policy proposals published by a right-wing think tank and created with contributions from conservative organisations and many former Trump advisers. It proposes, among other things, ending the collection of race and ethnicity data by the EEOC and eliminating disparate impact liability (similar to indirect discrimination in the UK) altogether. It states that “crudely categorizing employees by race or ethnicity fails to recognize the diversity of the American workforce and forces individuals into categories that do not fully reflect their racial and ethnic heritage.” Trump repeatedly distanced himself from Project 2025 during the election campaign and is unlikely to implement the wish list in its entirety, but it nonetheless indicates the types of measure that key stakeholders and supporters would like to see him adopt.

Divisions intensify in the US

Some large US corporates have already announced plans to roll back their DEI initiatives in the face of the growing political and cultural backlash and increasing legal risks. This is impacting budgets and the number of people employed in DEI. We are aware that many DEI specialist teams at US based employers have been significantly impacted by recent redundancy rounds. It is also impacting executive compensation. According to the pay consultancy Farient, DEI measures in compensation plans reached their height in 2022 at 53%, before falling to 48% in 2023.

Yet this is not a universal trend, with other companies standing firm and restating their commitments and efforts to improve DEI and their belief that diversity is ultimately good for business. At the same time, states have continued to advance legislation promoting DEI and anti-discrimination measures. For example, 15 states have now enacted pay transparency legislation.

Meanwhile, the Labour government in the UK has the opposite agenda

In stark contrast to the position in the US, the Labour government has come into power in the UK on a promise to enact more anti-discrimination legislation.

Specifically, the Labour government intends to expand the pay gap reporting regime in Great Britain to require ethnicity and disability pay reporting for employers with 250 or more employees. It also plans to extend the right to equal pay to cover race and disability.  These measures are not in the Employment Rights Bill so have not had the same attention as, for example, the government’s plans for day one unfair dismissal rights, but they are expected to form part of a second major Bill (the Equality (Race and Disability) Bill) to be published in draft soon. The measures look set to be highly significant for UK workplaces and will drive an even greater focus on DEI.

UK employers are also likely to be impacted (directly or indirectly) by the reporting requirements in the EU Pay Transparency Directive and Corporate Sustainability Reporting Directive.

Implications for employers operating in the UK and US

What does this mean for organisations caught in the middle of these counter currents?

First, we are likely to see most US companies being very cautious about workplace affirmative action programmes. This may actually result in the position in the US moving closer to that in the UK, where the legal framework has always been more restrictive.

Second, we may see the UK and US diverging when it comes to a focus on collecting and disclosing diversity data. UK-based lawyers and DEI professionals will need to be ready to explain the UK and EU direction of travel and its implications for US-headquartered multinational employers. To take one example, large UK workplaces will soon want to start getting ready for ethnicity pay gap reporting by collecting and driving up disclosure of ethnicity data.  Given the political sensitivities of this, it may be important to communicate the legal imperatives of doing so to colleagues in the US.

For the wider and more longer-term implications, time will tell, but US-headquartered organisations may, on average, continue to scale back DEI budgets and programmes. The reduction may be felt in the UK as well as the US. The UK’s uncertain economic outlook and employment costs associated with the recent budget may have put UK DEI budgets under pressure in any case, but it would be risky to drop the focus on DEI in the UK at the moment.  Compliance with upcoming EU and Labour reforms is going to require significant investment.  And employee resource groups are playing a significant role in supporting legal compliance (for example with the new duty to prevent sexual harassment) and providing staff with a voice at work - which is important if employers do not see the benefits of partnering with trade unions.

Perhaps more likely we will continue to see substantial numbers of US corporates continuing their DEI initiatives and resisting pressure to roll them back, but subtly reframing them. We may see, for example, more explicit emphasis on respect, inclusion, fairness and the “S” in ESG while “diversity” becomes a less well-used term. This shift in terminology could well be experienced in the UK as well as the US.

Ultimately, creating global DEI policies may become an even harder exercise than it was before – culturally, politically and legally.