The companies standing up to Trump on DEI
Companies like Costco and Levi’s are rejecting the White House’s position on diversity, equity and inclusion.
While testifying before the Senate Judiciary Committee in July, Harmeet Dhillon, the assistant attorney general for civil rights, issued a warning about the Trump administration’s crackdown on diversity, equity and inclusion initiatives.
“Either DEI will end on its own,” Dhillon told senators, “or we will kill it.”
Just hours after he took the oath of office, President Donald Trump issued executive orders to dismantle diversity programs and directed federal contractors to end “illegal DEI discrimination.” Fearing lawsuits and the loss of government contracts, dozens of the nation’s largest companies from McDonald’s to Facebook owner Meta rolled back or eliminated DEI programs.
Worried the Trump administration will target them next, executives are doing everything they can to comply with the president’s directives and stay out of his crosshairs, said one lawyer on the condition of anonymity so he could discuss private client matters.
“What you see are companies bending themselves to the will of the president,” he said. “The White House is in charge.”
Government scrutiny has only intensified as the Trump administration moves aggressively to pressure employers into overhauling hiring practices to align with the president’s political agenda. In recent months, the Justice Department has signaled its intention to investigate federal contractors and grant recipients who “knowingly” violate civil rights laws.
“If a corporate DEI plan reads like a quota, then expect a subpoena,” Brandon Smith, a partner with the Holtzman Vogel law firm and former chief of staff and assistant solicitor general in the Tennessee Attorney General’s Office, recently wrote in National Review. “The era of accountability for violating state and federal civil rights laws has begun.”
DEI investigations loom
During her Senate testimony, Dhillon promised the Trump administration would bring “numerous investigations and lawsuits against institutions that continue to offend our federal civil rights laws.”
In May, the Justice Department created the “Civil Rights Fraud Initiative” and threatened legal action under the False Claims Act, a civil law that allows the government to recover funds lost to fraud.
In a first step, the Justice Department has begun issuing civil investigative demands to employers across a broad range of industries, directing them to turn over information about their DEI programs.
The use of CIDs – a legal tool that allows the government to gather information during a civil investigation – rattled corporate America.
“There is no doubt there is a new sheriff in town,” said Al Chakravarty, a partner with the Saul Ewing law firm. “It absolutely puts the corporate community in a very challenging situation because in many cases, not only was it tolerated in prior administrations, it was actually encouraged to have programs that increase diversity.”
False Claims Act lawsuits are costly to defend and damages and penalties can quickly add up, the Morrison & Foerster law firm said.
Violators can be held liable for up to three times the total value of the contract in addition to per-claim penalties of $14,000 to $28,000 for each time the government contractor billed the government.
What’s more, the DOJ is encouraging whistleblowers to file lawsuits on the government’s behalf and potentially receive a portion of the windfall. Last year, the DOJ took in nearly $3 billion in False Claims Act settlements and judgments.
Just the mere threat of a False Claims Act investigation is a powerful cudgel, lawyers say. Becoming a target of the Trump administration carries significant business risks, from reputational damage to shareholder class action lawsuits.
“I’ve had many leaders say to me, ‘we are very confident from a purely legal perspective in what we are doing,’” said David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging at the NYU School of Law. “And then a lot of them will say to me, ‘none of that really matters if we have been dragged through the mud by this administration.’”
Cities, states targeted in DEI probe
In a sign of what could come in the private sector, the Justice Department is probing the employment practices of state and local governments.
The DOJ has announced investigations into possible employment discrimination, the state of Minnesota and the California Environmental Protection Agency. In May, the DOJ said it was probing Chicago’s hiring decisions after Mayor Brandon Johnson touted the number of Black officials in his administration.
Private-sector employers should expect “similar aggressive positions,” the Perkins Coie law firm warned.
Corporate America may face challenges from states as well. Attorneys general in red states have launched investigations into private-sector employment practices.
In July, the Tennessee Attorney General’s Office sent a letter to Deloitte, one the state’s largest vendors that manages its Medicaid eligibility system, ordering the firm to hand over records on its DEI initiatives, reported The Tennessean, part of the USA TODAY Network. The contract is worth hundreds of millions to Deloitte, which said in February that it would end its DEI programs.
EEOC prepares DEI crackdown
This month, the Senate confirmed Trump’s pick of Brittany Panuccio as a commissioner of the Equal Employment Opportunity Commission, which investigates employment discrimination in the private sector. The confirmation established a Republican majority at the agency and cleared the way for the EEOC to make major policy changes again.
In January, Trump fired two Democratic commissioners before their terms were up, leaving the EEOC without a quorum.
Acting EEOC Chair Andrea Lucas has said eliminating “illegal DEI” in the workplace is a top priority.
“As head of the EEOC, I’m committed to dismantling the identity politics that have plagued our civil rights laws,” Lucas said during her confirmation hearing for a second term as a commissioner.
The EEOC is likely to reverse guidance on workplace harassment, which last year strengthened protections for LGBTQ+ workers, such as the right to use bathrooms and pronouns that align with their gender identity.
“The confirmation of a second Republican EEOC commissioner will allow the agency to more aggressively push forward Trump-era priorities, including challenges to diversity programs and reducing LGBTQ+ protections,” Bloomberg reported.
(This story has been updated to refresh headlines.)