The Intersection Between Corporate Free Speech Rights and the Recent DEI Executive Orders
As summarized in detail here, President Trump’s recent executive order entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (the “Order”) takes aim at non-compliant Diversity, Equity and Inclusion (“DEI”) programs in both the public and private sectors. With the prospect of “civil compliance investigations” and other actions, the Order is a warning to private employers that have allegedly “adopted and actively use[d] dangerous, demeaning, and immoral race-and sex-based preferences under the guise of so-called ‘diversity, equity, and inclusion’ (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA) that can violate the civil-rights laws of this Nation.” Many private employers have struggled with how to respond to the Order, particularly given the Order’s vagueness and contradictory state and local laws. One of the questions that has emerged is how the Order impacts employers’ commercial free speech rights given the U.S. Supreme Court’s view that such rights are critical to the “uninhibited marketplace of ideas[.]”
A corporate First Amendment right, known as “commercial speech,” occurs when the speaker is an entity engaged in commerce, communicating a corporate message with an intended audience being customers, potential buyers, employees, or persons who engage in transactions. As described more fully here, after concluding that relevant portions of the Order likely constitute an unconstitutional viewpoint and content-based restriction on commercial speech, one federal court has issued a nationwide injunction.
The injunction arose from a case brought by the Association of Diversity Officers in Higher Education, the Restaurant Opportunities Centers United, and the Mayor and City Council of Baltimore, Maryland alleging that the Order, among other things, violated of the First Amendment’s Free Speech Clause given the Order’s enforcement threat against private employers based on the content and viewpoint of their speech. The federal court agreed, ruling at the preliminary injunction stage that the Order likely impermissibly stifles pro-DEI commercial speech while permitting anti-DEI commercial speech in violation of the U.S. Constitution. However, the United States Court of Appeals for the Fourth Circuit recently granted the government’s emergency motion to stay the district court’s order enjoining parts of the Order, as discussed here. Two concurring opinions did cite to “serious” concerns regarding the Order’s potential implications on free speech. Chief Judge Albert Diaz’s concurring opinion, for example, emphasized the importance of the “most basic tenets of the First Amendment,” the freedom to engage in “open discussion and principled debate about DEI programs,” and the ability to “consider how to continue empowering historically disadvantaged groups. . . .”
At least four other federal lawsuits have been filed challenging the Order on First Amendment grounds. Other First Amendment-related challenges have also been made against the separate Executive Order 14168, which addresses gender ideology. For example, four nonprofits filed a federal action in Rhode Island that seeks to enjoin Executive Order 14168 on the grounds that it imposes impermissible content-based speech restrictions on federal funding. As alleged, such restrictions interfere with the plaintiff organizations’ mission to create and promote art affirming the experiences of transgender and nonbinary people.
The Order and the associated legal challenge come at a time when the Supreme Court has expanded corporate First Amendment rights and lauded the constitutional protection of commercial speech as an “effective and powerful means [for corporations and employers] to challenge government policies and regulations.” In its landmark ruling, Citizens United v. Federal Election Commission, the Supreme Court focused on the corporation (or the employer) as the “speaker” for First Amendment purposes and protected corporate political speech in the form of political donations. In subsequent decisions, the Supreme Court applied strict scrutiny (i.e., the highest level of review) for the first time to evaluate whether a governmental actor was infringing upon commercial speech. In Reed v. Town of Gilbert, Arizona, the court struck down a local Arizona law that imposed restrictions on commercial signage based on the signs’ content (in that case, temporary directional signs for church services), where the local government failed to demonstrate that limiting the content of the signs was “necessary to eliminate the threats of traffic safety[.]” In National Institute of Family & Life Advocates v. Becerra, the Supreme Court struck down a local California law as violating corporate free speech rights because it: 1) required pro-life clinics to disclose whether the clinic was licensed; and 2) required pro-life clinics to disclose that there were publicly-funded family planning services, including abortions and contraception, available to patients. In so ruling, the Supreme Court reasoned that the government should not regulate “good faith” disagreements about ethics in a professional field because “people lose when the government is the one deciding which ideas should prevail.”
It remains unclear how the Supreme Court would analyze the Order’s impact and whether it has the effect of regulating “good faith” disagreements about DEI practices. As lower federal courts continue to analyze this issue in light of Supreme Court precedent, uncertainties remain for private employers. For the time being, private employers should continue to monitor legal developments in this area and balance the desires of their particular stakeholders, including their workforce against the potential reputation costs and the possibility of enforcement actions and litigation.
Given the rapidly evolving DEI landscape, Mintz’s employment team will continue to monitor the private sector’s response and legal challenges to the Order and will provide relevant updates. Mintz stands ready to assist employers that are evaluating their diversity, equity and inclusion programs and policies.
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