Fear and Fallacy:  Unpacking the DEI Executive Order for Your Organization

The new administration wasted no time doing its best to dismantle DEI last week by signing several Executive Orders, including the one entitled Ending Illegal Discrimination and Restoring Merit-Based Opportunity (the Order). And while we knew it was coming, it still hit hard. Some headlines were misleading and required a closer look, but many accurately reflected the purposeful attempt to roll back our civil rights. The onslaught of articles and varied analysis was relentless and the fear, uncertainty and confusion was palpable. The dismantling of DEI within the federal government and its agencies will have lasting impact. The unwinding of the Equal Employment Act of 1965 is disheartening.

Loutel works primarily with private and public companies. The Order contains provisions that caused particular angst for our clients. It is important to understand legally what that the Order does – and does not – do so you are equipped with the tools to continue to invest in your people and culture.

The Order begins with the premise that the administration “supports federal civil-rights laws that protect individual Americans from discrimination based on race, color, religion, sex, or national origin.” That is Title VII. Then it purports to articulate that organizations have essentially been discriminating — violating Title VII – through adoption and use of race and sex-based preferences under the guise of DEI. This is referred to as “illegal DEI discrimination and preferences.” Then the Order directs federal agencies to identify companies that should be the subject of civil compliance investigations resulting from illegal DEI programs. All in the name of Title VII.

But what exactly does “illegal DEI discrimination and preferences” mean? Title VII is the law that prohibits discrimination. The administration asserts that DEI programs violate Title VII because they discriminate and prefer people based on race and sex. If an organization’s DEI program was discriminating and preferring people based on race and sex, then that organization was already violating Title VII long before this Order. [For example, if a company had a mentor program for women only and did not allow men to participate, such a program arguably violates Title VII].

The real issue here is not that DEI is illegal, but the Order demonstrates a lack of understanding about DEI and the law. DEI is about ensuring all people have access and opportunity, and feel valued, respected and included in the workplace. DEI is culture –the overall experience every employee has each day as a member of your organization. Culture reflects and is shaped by the company’s values, as consistently embodied in behavior, actions, and interactions within the workplace. DEI works to ensure that an organization’s culture is healthy and safe for everyone. In other words, a culture free from discrimination and preferences.

January 28, 2025 

Some companies will cower and succumb to the fear of external pressures. The reality is that internal risk of losses or potential lawsuits resulting from an unhealthy culture is far greater. For those organizations that understand the value in optimizing people and culture to drive organizational success, here are three things to think about to insulate your organization from potential legal risk:

1. Conduct a comprehensive audit of policies, processes, programs, and systems to ensure they align with your organization’s core values, are equitably applied to all employees, and remain responsive to the evolving legal landscape. This includes all talent and performance management processes from acquisition to promotion.
2. Use culture assessments to uncover employee insights and set metrics on communication, trust, respect, fairness, and psychological safety, identifying risks and tracking outcomes. This approach reduces legal exposure, improves retention, safety, service, and productivity, and ensures measurable progress through relevant KPIs.
3. Engage employees at all levels and implement broad culture solutions, such as mentorship programs, robust communication strategies, leadership training, Culture Committees, and innovative initiatives that foster engagement, inclusion, and psychological safety.

Many organizations recognize the importance of this work in attracting and retaining both talent and customers. If your organization is among them, Loutel’s legal and consulting team is here to guide you through these challenges, helping you emerge stronger, more sustainable, competitive, and successful.