Dive Brief:
- The U.S. Department of Labor on Monday rescinded a Biden-era advisory opinion that acknowledged a proposed racial equity program at Citi and provided fiduciary guidance, saying it no longer reflects the department’s views.
- The prior advisory “assumed that the Racial Equity Program was lawful and went on to discuss fiduciary issues that follow from that assumption,” DOL’s Employee Benefits Security Administration said. “But the Racial Equity Program is not lawful — its allocation of benefits on the basis of race clearly and unambiguously violates the civil rights laws.”
- “Citi never implemented this racial equity program related to diverse asset managers,” Citi said in a statement provided to HR Dive. “The hypothetical program described in Advisory Opinion 2023-01A was never put into effect, and Citi has no plans to do so. Citi prohibits race discrimination across the board in its programs and policies, and complies with all applicable federal, state and local laws.”
Dive Insight:
According to the letter, Citi’s program paid some or all of the investment management fees for “diverse managers” if retained by Citi’s employer-sponsored benefit plans, which are covered by the Employee Retirement Income Security Act. “This provides Diverse Managers with a competitive advantage, allocated on the basis of race,” wrote Jeffrey Turner, director of EBSA’s Office of Regulations and Interpretations.
“Citi further claims that its Racial Equity Program may benefit the company because certain stakeholders, such as the general public and its shareholders, might look favorably on it,” Turner noted. “This is not now, nor has it ever been, a justification for violating the law.”
The subagency pointed to the U.S. Supreme Court opinion Students for Fair Admissions v. Harvard to explain its rescission, along with Trump’s executive order and a few other court cases. Attorneys previously predicted that SFFA v. Harvard, which found the use of race in college admissions unconstitutional, could chill corporate DEI programs.
Citi is among the early private companies to be targeted for DEI practices the administration considers illegal; Trump’s Jan. 21 executive order called for the preparation of reports by agency heads that would target “up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.”
“Citi should take immediate action to end all illegal activity within its Racial Equity Program and any other initiative, plan, program, or scheme it operates under the banner of diversity, equity, and inclusion,” Turner wrote, although he stopped short of announcing an investigation into the company.
The Trump administration has also targeted law firms for DEI activity — a move some congressional Democrats have criticized as a politically motivated “shakedown.”
If they haven’t done so already, employers should review their DEI programs for quotas, set-asides, preferences and other “clearly unlawful” elements, Jonathan Segal, partner at Duane Morris, wrote for HR Dive in January.