Mintz on Air: Practical Policies - Bridging the State and Federal DEI Chasm

In the latest episode of the Mintz on Air: Practical Policies podcast, Member Jen Rubin hosts a conversation on the divide between state and federal DEI initiatives. This episode is part of a series of conversations designed to help employers navigate workplace changes and understand general legal considerations.

Jen is joined by Associate Evan Piercey, to discuss:

1. Federal and state DEI policies in conflict
2. Understanding preemption and federal-state conflicts
3. Employer compliance amid federal and state tensions
4. Legal challenges and court rulings on DEI policies
5. Navigating policy uncertainty and next steps for employers

Listen for insights on how businesses can bridge the divide between state and federal DEI policies, ensure compliance with evolving regulations, and adapt to the changing legal landscape.

Bridging the State and Federal DEI Chasm - Transcript

Jen Rubin (JR): Welcome to Mintz On Air, the Practical Policies podcast. Today's topic, Bridging the State and Federal DEI Chasm. I'm Jen Rubin, a Member of the Mintz Employment Group with the San Diego-based Bicoastal Employment Practice representing management, executives, and corporate boards. Thank you for joining our Mintz On Air podcast, and I hope you have had the opportunity to tune into our programs previously.    

If you have, you know that my guests and I have been discussing a variety of employment-related topics and developments. If you have not had a chance to hear our previous podcasts and you would like to access more of our content, please visit us at the Insights page at Mintz.com.    

Today, I'm really pleased to be joined by my colleague, Evan Piercey, who is also an employment lawyer, but who is based in the firm's New York office.

Evan guides clients on a wide range of issues from pre-litigation dispute resolution through discovery, dispositive motions, and appeals. Evan advises clients on a range of employment issues, including claims of discrimination, harassment, retaliation, and sexual harassment, as well as claims involving trade secrets, restrictive covenants, and wage and hour disputes. Greetings, Evan, and thank you for joining Mintz on Air .

Evan Piercey (EP): Thanks for having me, Jen. Looking forward to talking today.

Federal and State DEI Policies in Conflict

JR: Today's topic is one that I find both intellectually interesting and very challenging from a practical perspective. As you know, Evan, the new Trump administration has been issuing executive orders at a breakneck pace, and the courts have been addressing those orders in an equally nearly unsustainably speedy fashion. But the upshot of these developments, which also include missives from the new Attorney General of the United States and state attorneys general, all seem focused on one thing: either limiting or rolling back DEI initiatives or, on the other side of the political divide, continued support by the states for these initiatives. So, the interesting intellectual point for me, and I'm sure for you, Evan, as a legal geek, and one that I'd like to discuss with you today, is how, if at all, we can bridge the federal and state DEI divide.

I'd like to start our discussion with a focus on what seems to be a very simple scenario. Let's assume the federal government tells a private employer that the employer cannot do something that is DEI related. And if the employer does so, the Attorney General of the United States and the Justice Department will investigate the employer for violating federal law. But here's the trick. At the same time, this same employer has employees in New York City and California. Both of those jurisdictions tell you as an employer that you must do certain things and take certain actions in order to fulfill your legal obligations as an employer under those local laws. So, we're going to get to the practical approach to this scenario soon as part of this podcast. But let's start with the legal background first, if you don't mind. How are federal-state conflicts resolved in the employment sphere?

Understanding Preemption and Federal-State Conflicts

EP: Sure, Jen. Just a simple little scenario. Hopefully, we can distill it to maybe make it simpler than it is. I want to take a step back and describe the type of government that we have. I think one of the core principles of that is federalism, which is derived from the Constitution, and essentially is a system of government that shares power between the national or federal government and the states. So put differently, federalism is really the principle that there are certain powers given to the federal government and others that are accorded to states. It's really a bedrock principle upon which much of our current legal framework, national government, and system of laws is built. Within that, as you alluded to Jen, you have the question of how state laws interact with federal laws.

And the term that many probably think of is preemption. Now, what preemption literally means is that if there is a federal law on a certain point, it may, and I say may because there are certain circumstances where it doesn't, it may preempt or otherwise supersede state laws on that issue. There are lots of different types of preemption and I know we don't want to get into that because we have limited time and you know that's a very legally geeky topic, but for our purposes, preemption comes into play really in two scenarios, at least the way I see it, you can correct me if you disagree.

We have a certain type of preemption which is often referred to as field preemption, and that is essentially when the federal government says we are the only body that can regulate a certain issue. Then there's also just general preemption where you look to see whether a federal law conflicts with a state law.

Now in the employment context, it's a little bit different because we're not often looking at field preemption. What we're dealing with is federal law often sets what is the floor for different laws. Minimum wage is a good example to look at when we're thinking of how federal laws in the employment context interact with state laws.

In that sense, federal law sets a minimum wage, I believe it's $7.25 right now, relatively low, certainly if you're in New York. States often then set a minimum wage that is above that, meaning if you're a state, workers must be paid at least $7.25 an hour. But if you're say, New York, you can set the minimum wage higher than that.

And often states do set minimum wages higher than that, meaning if you're a private employer and you have employees in that state, you have to pay them whatever the state deems is the minimum wage for that state.

Employer Compliance Amid Federal and State Tensions

JR: Okay, so let me just stop you there and ask two questions. First, it sounds like what preemption means is that if there's no conflict, the states can provide greater benefits than federal law. But secondly, and just to go back to being a legal geek for a moment, with respect to the two systems of government we have between the federal and national government and of course the 50 states, how if at all does the Tenth Amendment impact how the state and federal governments interact? Let's just start with that and then I want to come back to the most favored nation concept.

EP: The Tenth Amendment provides that powers not delegated to the United States or the federal government in what we're talking about are reserved to the states. In essence, it prevents the federal government from expanding its powers beyond what is granted by the Constitution and reserves this, which is referred to as unenumerated powers, to the states.

Now, it's obviously not as simple as the wording of the Tenth Amendment might lead you to believe because unenumerated powers are really a list that is growing or is created by case law. Because it's essentially referring to a negative, something that's not in the Constitution. We think of these as running elections, establishing schools, issuing certain professional licenses, and in some respects regulating the workplace. These are all issues or items that states are often given the power to regulate.

JR: Understood. Again, it sounds like this is something that's subject to court decisions and legal developments that happen as a result. But also, I think the important takeaway here, as I understand it, is that if there is something that, I'm going to use the term local, that's of local interest. And when I use local, I mean a state taking the position, for example, that it wants to define its own anti-discrimination law. That would be something that would be deemed local in nature. And I'm sure you'd agree, Evan, at the time the Ten Amendments were passed as part of our Constitution known as the Bill of Rights, there weren't really concepts of discrimination. We're going back to 1779 and thereafter, 1789 when this was adopted.

It's interesting to think about what was deemed local then and what is deemed local now. Okay, I promise everybody we're going to stop with this constitutional geekiness, but I do think it's important to understand the origination of where some of this conflict comes from and how it actually creates practical problems for employers today.

Let's get to the practical because I think that's why a lot of people tune into our podcast. They want to know; How do I deal with these things now? I need to run my workplace. I need to plan for my business. These are important things.

Legal Challenges and Court Rulings on DEI Policies

Dealing with the practical issues, I want to go back to this kind of practical scenario I posited at the beginning. The obligation to train employees in California. I think it's a pretty clear obligation for employers of five or more employees in the state of California. California requires employers to train their workforce on concepts such as gender identity, gender expression, and sexual orientation. There are clearly more, but I just want to focus on these right now because the federal government has now declared that there are only two genders, male and female. Now, if that's the case, if you train your employees along the lines that California requires, are you violating the recent federal executive orders that might make such training an example of illegal DEI?

EP: It's a great question and I'm sure one that lots of employers in California and probably New York, where similar requirements exist, are thinking about. I think it's important to take a step back and look at the wording of what the executive order that you're referencing is specifically targeting. Technically there is no legal violation here, we can get into what enforcement actions might look like and what they might be derived from, but technically it's not illegal per se to refer to different genders. The executive order, I believe the one you're referencing, really relates to federal documentation. Some people have probably seen it in the form of passports or different documents issued by the federal government, but technically it wouldn't be illegal to train people in the manner that California requires. But I think it's important to distinguish between what is a technical violation and let's note, of an executive order, which is not a law that was passed by Congress. A lot of what we're talking about are either executive orders issued by the president or memoranda that are issued by different executive branch agencies, which in and of themselves do not have the force of law as they would if Congress had enacted a law saying you must only refer to two different genders. That would be a very different scenario. Hopefully not one that we are encountering, but at this point I'm not going to rule anything out.

JR: What about the recent executive orders that are targeting employers for passing policies or putting in place programs that the federal government calls illegal DEI? What is that about?

EP: What constitutes illegal DEI is certainly very vague, particularly if you look at how the executive order refers to it, especially vis-a-vis private employers. I know we're going to talk a little bit about the injunction that was issued by the Maryland judge in part, which was because of this vagueness. But, that is a tough question because yes, even though an executive order is not a law, it is certainly portending future enforcement actions by the Trump administration or Department of Justice that could look into, identify, and conduct investigations or even bring lawsuits against companies that it deems are engaging in illegal DEI.

Now, if we think of what is illegal DEI, in this context right now, it would be some kind of policy that in the Trump administration's estimation violates federal law. And the federal law on that issue we'd be looking at is Title VII. Title VII, as most employers or anyone listening knows, is the federal law that regulates anti-discrimination.

That is the law under which I would imagine the Department of Justice would be seeking to enforce or investigate DEI programs that it deemed illegal or violative of that statute.

JR: I agree with that and I'm not going to try to put a pin in where that Maryland court decision will be at the time this podcast actually hits the air. I will note that there's already been an appeal to the Fourth Circuit and a motion for stay that's going to be addressed. I think it's going to end up before the Supreme Court, but it is important to note that the Maryland court issued the injunction in part because the government was unable to articulate what illegal DEI was. In other words, you can't make something illegal and tell somebody you can't do something if you, as the government, don't even know what that something is.

EP: Exactly right. And that's another bedrock principle of laws, in general, is that you cannot make a law that is so vague that the people who are trying to abide by it or conform their actions to ensure that it doesn't violate the law are so vague that they cannot actually understand how to comply. What do I do to comply? Well, you don't have illegal DEI programs. Well, what is that? Anything that we deem illegal. It's this circular logic that makes it impossible for people to comply.

JR: A little bit of due process issues there. We have clearly Title VII, which protects against discrimination in the workplace, which just for those of you who are not familiar with these issues, is not quite as broad as many states' anti-discrimination statutes. But nonetheless, it is still the law of the land that applies to employers of 15 or more employees.

And there are enumerated protected categories that are set forth in that statute that remain the law of this land as federal law, going back to the concept of preemption, and clearly to the extent of state, and I'm going to come back to the practical now, a state such as New York or California can decide that it wants to create different categories that state law wants to protect. Because again, going back to the local, is this something that was kind of preserved under the Tenth Amendment to the states to do? But it still leaves employers with this proverbial chasm between the state and federal government.

For example, Evan, this is going to become an important part of this podcast because people really want to know the answer to this, an employer has employees in New York City and California. What should that employer do in order to walk this fine line or bridge this gap between state and federal law?

EP: When you're thinking about how you abide by this mosaic of different laws that exist across the country, I think first and foremost, you need to think about this really in the way that you would have even before the Trump administration and that's that if I'm an employer and I have employees in several different states, like New York and California that have their own anti-discrimination laws and own requirements, you need to abide by the laws that exist in that state. I think right now, based on the landscape that we're seeing, that would still hold true. Where there's a distinction now is that you need to be much more meticulous in how you are going about complying with those laws.

To take it back to the training example, it's very important that you ensure that your training adheres as closely to the letter of the California law as possible. Now that would be if you are really trying to mitigate risk as much as humanly possible because you also don't want to be in a scenario where you decide, I'm just going to bank on the federal government not enforcing this law or bank on the federal government kind of protecting me if I don't abide by California's laws. Well, then you still have the California attorney general to deal with. You still have the New York state attorney general, or you know the New York Department of Labor or any of these other groups which I can almost guarantee would equally bring enforcement actions if you decided to flaunt their rules because you think the federal government is going to protect you. Because it won't.

Unfortunately, the federal government likely will only enforce it. It's not going to serve as a shield if you decide to violate state laws or even local laws in the case of New York City. And I know San Francisco and Los Angeles have their own ordinances that often address these issues.

Navigating Policy Uncertainty: Next Steps for Employers

JR: It's a kind of clarion call for doing an audit of your existing policies. I like the word you used, meticulous, being meticulous about compliance because it's becoming so much more complex. I also like the word you used, mosaic, as employers try to comply. And particularly those with employees in all 50 states, it becomes really difficult, not impossible. But being mindful and thoughtful about those policies, where your employees are located, and how you're actually administering those policies becomes really important. This is where doing an audit really may make sense in order to prepare for what's coming. I'm not going to make a prediction as to what's coming. I certainly hope we continue with this status of hewing to the two systems of government where states and localities are permitted to expand upon protections if they find that that's appropriate and pursuant to the Tenth Amendment, that is something that is upheld as part of the locality's ability to regulate itself. We'll see what happens. We're in a very interesting paradigm right now and I think we need to be ready for anything.

But in any event, I want to thank you, Evan Piercey, and thanks to those who have tuned into our Practical Policies podcast. If you are interested in accessing our content, I invite you to visit us at Mintz.com and visit our Insights page and learn about our practice and our firm. We look forward to having you continue to tune into our podcast. Thank you.

EP: Thanks Jen, I appreciate you having me on.

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