Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Dear Littler: Our boss is really pushing for us to increase our number of diverse employees. I see his point—we are a predominantly white and male workforce, though we have more than 150 workers. My managers had a meeting to set some hiring targets and now we are evaluating some recruiting ideas. We are considering: (1) giving bonuses to managers who hire diverse candidates; (2) asking recruiters to send us only women and racial minorities; and (3) rolling out a Refer-A-Friend program with a small payment to employees who bring in diverse coworkers. What do you think? We want to choose options that will bring results.
—Brainstorming in Boston
Dear Brainstorming in Boston,
First of all, I applaud your employer’s commitment to expanding the diversity in your workplace. I also appreciate your enthusiasm for exploring options that will get you there!
As your boss probably already knows, research consistently shows that diverse and inclusive workplaces achieve better business outcomes.1 As a result, your employer is smart to acknowledge its status quo and work to enhance diversity, both because it’s the right thing to do and because it can be great for the bottom line.
Nonetheless, and despite your best intentions, your question tells me that your employer probably should slow down and spend some more time planning its approach. These three suggestions strike me as either potentially risky, unlikely to achieve your goals, or both. I will explain in more detail below, so please stick with me. We will consider how Title VII affects your employer’s choices in this area, as well as each of your suggestions and some alternatives.
Background on Title VII
Title VII prohibits employers from discriminating against an individual on the basis of race, color, national origin, sex, or religion with respect to hiring, firing, referral, compensation, promotion, classification, training, or other terms, conditions, and privileges of employment.2 While Title VII was passed to increase equal opportunities for minorities, it is important to remember that the law is entirely neutral. In other words, employers generally may not adopt practices that discriminate against any individual on the basis of any protected category, even if those practices are otherwise well-intentioned. Employers, for example, cannot deliberately choose to promote only Hispanic women in order to rectify underrepresentation, just as they cannot choose to promote only white males.
Given the scope of Title VII, your use of the words “goals” and “targets” in your question raises some concerns for me. Your note doesn’t explain what is meant by those references or what “hiring targets” were discussed by your managers. Please bear in mind, however, that it is presumably unlawful for a private employer to adopt quotas based on race or any other Title VII classification. Your employer may be hurtling into a Title VII problem if, for example, it is considering a specific plan to hire non-whites into 30% of all open positions in the next year or to promote five women.
That being said, different rules apply to government contractors. Certain government contractors at both the federal and state levels are required to adopt affirmative action plans (AAPs).3 They are obligated to track employee and applicant demographics, among other things. Unless these AAP requirements apply to your employer, however, it likely should steer clear of setting specific “goals” or “hiring targets.”
In sum, while employers are encouraged to develop recruiting and retention strategies to increase diversity in the workplace, they also should be thoughtful and careful about it. When it comes to enhancing diversity and inclusion, the end does not justify the means. The means must be lawful, too. With that in mind, let’s look more closely at your three suggestions.
Managerial Bonuses …
The first option mentioned in your letter is to award bonuses to managers who hire diverse candidates. Given our review of Title VII, you can probably appreciate the potential pitfalls of directly compensating managers when they choose one candidate over another because of race, sex, or ethnicity. Needless to say, it not a great idea to incentivize managers to make hiring decisions based solely on a candidate’s protected characteristics.
Some employers have experimented with a related idea—including diversity as a component in a broader bonus calculation for managers, executives, and others with responsibility for diversity within an organization. This proposal surely would get the attention of leadership, as it affects their compensation in some manner—but it still poses risk. The extent of that risk may depend on various factors, such as how success is measured and rewarded within the structure of the bonus program. As with all business decisions, employers considering this type of approach should thoroughly evaluate and weigh the associated risks and rewards.
… And The Importance of Corporate Culture
Of course, Brainstorming, even if these internal bonus proposals were risk-free, there is no guarantee they would drive results. To the contrary, diversity initiatives like manager incentives can sometimes backfire and create dysfunction.
It may sound obvious, if not trite, but corporate culture makes a huge difference in the success or failure of diversity and inclusion plans. Within any organization, it matters why people choose to take certain actions. Setting aside all the corporate buzzwords, this is where culture plays a role: is this manager backing a diverse candidate because he or she is well-qualified and would be a great addition to the team, because the candidate’s contributions would be welcome and fresh, or because the manager wants a bonus? If the primary goal is a bonus, that underlying motive and attitude will resonate through and beyond the hiring process.
Employers that roll out diversity programs without laying the appropriate cultural groundwork often stumble. Even if they may make strides in hiring, they may not be able to retain or advance their diverse staff. Employers simply can’t tackle a company-wide issue like diversity in a vacuum. Adopting diversity and inclusion initiatives often requires a review of other personnel matters, such as performance review and promotion procedures, family leave policies, and other company protocols that may affect different populations differently. A flex-time policy, for example, may not be significant to an employer’s current workforce but could be a key competitive advantage in hiring and retaining a more varied staff.
In many ways, adopting a new diversity and inclusion strategy is like adopting a baby. It requires dedication, research, patience—and real preparation. After all, new parents usually don’t bring home a baby without first setting up a nursery. Whether it’s the home office or a spare storage closet, parents tend to clear out all their old junk to make room for the arrival. Moreover, they take parenting classes, paint walls, build cribs, buy diapers, install car seats, etc.—whatever they can do to prepare. In much the same way, an employer embarking on a diversity initiative must ensure that the overall environment, including the existing “family,” is ready to accept and accommodate the changes. Employers should consider cleaning out their cultural “spare rooms,” purging old habits that may no longer serve the goals of the organization. Instead, employers may wish to implement new policies, provide training to current staff, and foster updated and inclusive messages. Employers should also keep in mind that the highest levels of leadership must not only be onboard with any cultural assessment and shift but should lead the way.
Beyond the internal steps involved with instituting a diversity and inclusion program, employers should consider how to present and promote their commitment outwardly. In addition to any recruiting and marketing pushes, employers may wish to revisit their goals with any recruiters.
It sounds like your employer currently relies on recruiters for at least some of its hiring needs. According to your question, a second option under review is for your employer to ask recruiters to send only female and minority candidates. This instruction, however, presumably runs afoul of Title VII, which expressly covers the referral practices of both employers and employment agencies, such as temporary staffing agencies or recruitment companies.4 In other words, your recruiter may not unlawfully segregate applicants on your behalf.
An alternative might be to offer an incentive of some kind to a recruiter for including more diverse people in your pool of qualified candidates, which carries far less risk. Some employers have implemented variations of the “Rooney Rule,” a policy in the National Football League conceived by and named after an owner of the Pittsburgh Steelers. The Rooney Rule generally requires teams to interview at least one minority candidate before filling head coaching or senior managerial positions. There are no quotas or hiring preferences, but the policy forces teams to look harder at a broader range of capable candidates before interviewing. In any event, there are plenty of creative ways to find well-qualified, diverse applicants. Your recruiters should be able to help you branch out and search for applicants from varied sources, perhaps through particular schools or organizations. But your employer should try to avoid deliberately excluding anyone from the candidate pool based on any protected characteristic.
Finally, let’s turn to your third proposal: employee referrals. These programs usually offer a cash prize to staff members who refer applicants ultimately hired by the company. Refer-A-Friend policies likely do not carry any noteworthy legal risks. On the other hand, these programs are often unhelpful. While seemingly innocuous, Refer-A-Friend programs can expose and even perpetuate an underlying problem. A quick review of some statistics will help shed some light.
Certain workplaces or industries—like your own—are predominantly white and male. The high-tech sector, for example, has lagged in hiring and advancing female and minority employees, along with older workers. An Equal Employment Opportunity Commission (EEOC) report issued in 2016 concluded that high-tech companies employ greater percentages of white (68.5%) and Asian-American (14%) workers, as compared to private employers overall, and smaller numbers of women (36%) and other minorities (e.g., Hispanics represented 8%).5 According to the EEOC, the disparity was even more pronounced at the leadership level, with males holding 80% of executive positions and whites holding 83.3% of such jobs. The report revealed that only 2% of executive-level positions in high tech are filled by African-Americans.
Meanwhile, according to a 2013 study exploring the make-up of Americans’ personal social networks, 75% of white Americans have no non-white friends in their networks with whom they discuss important issues.6 Additionally, for white Americans, 91% of the people in their social circles are also white, with 5% belonging to another race. For African-Americans, “83% of people in their social networks are composed of people who are also black,” with the remainder of their networks including 8% white friends and 6% individuals of some other race.7
With these stark facts in mind, the hidden flaw in the referral plan becomes obvious. If an employer’s workforce is largely white and male, and American social circles overwhelmingly include friends with the same demographics as their own, it seems unlikely that a Refer-A-Friend program will produce more diverse candidates. After all, if employees don’t have close friends of a different race, for whom they would vouch to their employer, how can they refer applicants who don’t look like themselves? Given this unfortunate limitation, and depending on the circumstances, referral programs may have only limited value.
Employers that operate Refer-A-Friend policies should keep in mind that all suggestions should be accepted and treated fairly. That is, employers should not discourage or dismiss referrals from white employees. Despite the above statistics, employers relying on referrals should keep an open mind.
All in all, Brainstorming in Boston, it sounds like your employer is on the right track. Keep on exploring ideas and think carefully through your options with Title VII in mind. Encourage your employer to take the time to plan and prepare on the front end to increase the likelihood of success. Good luck!
1 See, e.g., Vivian Hunt et al., Why Diversity Matters, McKinsey & Co. (Jan. 2015) (finding that companies in the top quartile for racial, ethnic, and gender diversity are “more likely to have financial returns above their respective national industry medians”); Erik Larson, New Research: Diversity + Inclusion = Better Decision Making At Work, Forbes, Sept. 21, 2017 (finding that inclusive teams made better decisions 87% of the time and did so faster, with fewer meetings); see also New research from The Peterson Institute for International Economics and EY reveals significant correlation between women in corporate leadership and profitability, EY (Feb. 8, 2016) (reporting that an entity with 30% or more female leadership “could add up to 6 percentage points to its net margin,” based on a study of nearly 22,000 publicly-traded companies in more than 90 countries).
2 42 U.S.C. §§ 2000e et seq. Other federal laws protect additional categories of workers, including individuals with disabilities (the Americans with Disabilities Act) and workers over the age of 40 (the Age Discrimination in Employment Act). State and local laws may extend further protections. Massachusetts, for example, explicitly outlaws employment discrimination on the basis of a person’s sexual orientation or gender identity. For purposes of this discussion, however, we will focus only on Title VII.
3 See, e.g., Exec. Order No. 11246, 30 Fed. Reg. 12,319 (Sept. 24, 1965) (requiring AAPs for the employment and advancement of women and minorities); 41 C.F.R. § 60-741.5 (requiring AAPs with regard to employees with disabilities pursuant to the Rehabilitation Act).
4 42 U.S.C. § 2000e-2(a), (b); see also EEOC v. AutoZone, Inc., 860 F.3d 564 (7th Cir. 2017) (discussing subsection (a)(2) of section 2000e-2(a), “an infrequently litigated provision in Title VII that makes it unlawful for an employer ‘to limit, segregate, or classify his employees . . . in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin’”). Relatedly, while there may be a narrow exception for some practices if an individual’s religion, sex, or national origin constitutes a “bona fide occupational qualification” (BFOQ), a person’s race or color can never be deemed a BFOQ. 42 U.S.C. § 2000e-2(e).
6 Dr. Daniel Cox et al., Race, Religion, and Political Affiliation of Americans’ Core Social Networks, Public Religion Research Institute (Aug. 3, 2016) (“Americans’ core social networks tend to be dominated by people of the same race or ethnic background.”).