By Staff Report
Oct. 22, 2015
Multinational companies are under greater legal and social pressure to increase the representation of women on their boards of directors, and by extension, their workforces.
These pressures come principally from Europe, which has passed a spate of laws requiring publicly traded companies to adopt quotas mandating a minimum percentage of women on their boards.
The most recent example is Germany, which in March passed a law requiring boards of companies listed on the German stock exchange to be composed of at least 30 percent women. Companies that fail to meet this fixed requirement risk the nullification of their existing boards.
Germany is not the only European country imposing quotas. In 2003, Norway passed the first legislated mandatory quota aimed at publicly listed companies, requiring a fixed 40 percent quota level for female board members. Shortly thereafter, France, Spain, Italy, Iceland, Belgium and the Netherlands followed suit, enacting similar legislation.
In response to these initiatives, many European companies have committed to increase diversity beyond their boards and into their general workforce. Daimler, for example, set an internal goal to increase the percentage of women in its workforce from 10 to 20 percent by 2020, and other companies are making similar efforts.
Diversity in the workplace is a noble goal. Notably, the U.S. Supreme Court, in its groundbreaking 2003 decision Grutter v. Bollinger, endorsed the view that “the skills needed in today’s increasingly global marketplace can only be developed through exposure to widely diverse people, cultures, ideas and viewpoints.”
That endorsement was made in the context of the court’s finding that a public university’s use of race in its admissions decisions did not violate the U.S. Constitution’s 14th Amendment Equal Protections Clause. In the United States, though, a private employer’s use of race (or gender or any protected class) in employment decisions may be unlawful because of the laws prohibiting discrimination in employment on the basis of these protected classes. Likewise, quotas may also violate these anti-discrimination laws. While these laws encourage voluntary diversity and affirmative action, such efforts are subject to extremely strict scrutiny to ensure that they do not constitute unlawful “reverse discrimination.”
In a more recent decision, the U.S. Supreme Court has perhaps chipped away at Grutter’s broad endorsement of diversity. In Ricci v. DeStefano, the city of New Haven, Connecticut, had discarded the results of a pre-employment firefighters’ examination that resulted in mostly white candidates having better scores, because the city feared that minority test-takers could sue for discrimination. As a result, nonminority firefighters sued, claiming that the decision constituted unlawful “reverse discrimination.”
The Supreme Court ruled in favor of the nonminority firefighters. The court held that before an employer can engage in intentional discrimination to avoid or remedy classwide discrimination, the employer must have a strong basis in evidence to believe it will be liable for classwide discrimination if it does not take the discriminatory action.
The court implicitly acknowledged that its decision could hamper employers’ promotions and their participation in the process by which promotions are made.
What other challenges exist to workplace diversity efforts in the United States? Quite simply, one person’s progressive goal is another’s barrier to advancement. Efforts to increase workplace diversity in the United States must include considering people from a wide range of protected classes.
Companies confronting the ever-widening rights of individuals to equal employment opportunity, including individuals with disabilities, individuals of varied sexual orientation and older workers struggle to comply with the sometimes conflicting laws (i.e., the requirements of federal, state and local law are not always consistent) while seeking to increase diversity.
Many people perceive quotas as providing a ceiling which, when satisfied, ends the discussion as well as the advancement of the quota subjects.
Quotas may put employers at risk of lawsuits. Recruiters or human resources representatives who review or screen job applications simply may not decide whether to hire a candidate based on gender. Instead, the decision must be based solely on the applicant’s qualifications including work history, education and other job-related criteria.
Nevertheless, companies can take steps to recruit and hire more women without crossing the line into discrimination. Searching for candidates in organizations that promote women or putting job advertisements in venues where potentially qualified women might look would not likely pose a risk of appearing to discriminate.
Companies should identify themselves as equal opportunity employers, so there’s no doubt that applicants of all kinds will be considered and included. The key to accomplishing diversity is to seek diverse candidates — that may entail recruiting at places where more diverse candidates are likely to be found, such as historically African-American colleges and schools known to attract Asian-Americans. To recruit women for traditionally male roles, including board of director positions, an organization might need to look beyond its normal recruiting channels and rely less on the recommendations of, for example, its current male-dominated board.
Diversity remains a worthy goal for multinational employers. European companies can and should make every effort to increase their diverse employee populations. But exporting quotas mandating minimum numbers or percentages of any minority members to the United States can create significant legal risks.
Philip M. Berkowitz is the U.S. practice co-chair of Littler’s International Employment Law Practice Group. To comment, email firstname.lastname@example.org.
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