DEI litigation as a driver of change

In recent years, the United States witnessed a surge of high-profile litigation against major corporations and institutions over diversity, equity and inclusion (DEI) issues. These claims are reshaping the U.S. workforce and legal landscape and are prompting employers to address DEI concerns more proactively. In this article, we examine DEI-related litigation trends in the U.S. and their potential ripple effects in Canada. Canadian employers should stay informed about these developments and consider implementing strategies to mitigate potential future risk in their workplaces.

What is DEI litigation?

DEI litigation refers to claims brought by employees or groups of employees against employers over perceived failures to provide inclusive and equitable workplace practices. These claims typically allege inequitable treatment at various stages of the employment lifecycle based on employees’ protected characteristics (for example, race or gender). The claims can be framed as a breach of statutory obligations, or as a result of negligence or breach of contract. Issues of this nature are not new to the workplace, but there has been a notable increase in class action activity, particularly within the U.S. private sector.

DEI litigation in the U.S.

The U.S. has seen numerous DEI-related class actions certified, tried and settled in recent years, including several high-profile lawsuits against major national and multinational private sector employers. Allegations have spanned a wide array of DEI issues, including systemic workplace harassment, violations of equal pay laws, and discriminatory promotion and performance evaluation practices impacting women and racialized employees. Many of these actions have resulted in high-value settlements totaling hundreds of millions of dollars. For example, in 2023 a major investment bank settled a class action involving pay and promotional inequities affecting female employees for US$215 million¹. In 2022, a multinational corporation that offers internet-related products and services settled a class action alleging pay and promotional disparities based on gender for US$118 million². The same company is currently facing a new class action brought on behalf of Black employees alleging discriminatory pay, job allocation, promotion and hiring practices, and harassment³.

The U.S. has also seen a rise in claims based on allegations that organizations failed to fulfil their DEI commitments. These claims have been brought both by employees, who argue that DEI statements or commitments constitute binding contractual obligations owed to them, and by stakeholders, who allege breach of fiduciary and other duties. In one recent case, board members of a major U.S. bank were sued for breach of fiduciary duty for ignoring the bank’s alleged practice of conducting “sham interviews” to nominally fulfill a diversity-enhancing policy⁴. The same bank is also subject to a securities class action alleging misrepresentations in DEI-related disclosures, which are claimed to have misled investors over the bank’s efforts to increase the diversity of its workforce⁵.

DEI litigation as a driver for change

DEI litigation has driven change across many U.S. workplaces. As these class actions highlight systemic issues, they have pushed employers to reevaluate their DEI policies and practices and have compelled organizations to adopt more transparent, accountable and inclusive workplace practices to avoid costly litigation and reputational damage. To that end, several large U.S. employers have taken proactive steps to review their DEI practices. This includes conducting enterprise-wide equity audits to identify and address actual and perceived disparities in outcomes for employees based on protected characteristics. These audits not only aim to remediate existing issues but also serve as a means to demonstrate a genuine commitment to DEI. 

Students for Fair Admissions v. Harvard

By the same token, in the recent landmark decision of Students for Fair Admissions v. Harvard⁶, the U.S. Supreme Court ruled that admissions policies which allow for race to be considered as part of the college admissions process violated the U.S. Constitution’s Equal Protection Clause and Title VI of the Civil Rights Act. While this decision is currently limited to the college admission process in the U.S. (prior Supreme Court rulings in the U.S. held that private sector employees may voluntarily adopt race-conscious affirmative action programs), it has led some corporations in the U.S. to reevaluate or eliminate their DEI initiatives. It has also led to an increase in stakeholder pressure to stop “reverse discrimination”: in July 2024, a number of Republican attorneys general issued a warning that large U.S. companies would face reprisals if they did not stop “reverse discriminating” on the basis of race⁷.

In light of the result of the U.S. election, we expect this trend to continue. U.S. employers will likely exercise greater caution in how they implement DEI initiatives and review their practices to ensure that they promote DEI without limiting opportunities for employees based on protected characteristics.

Impact in Canada

To date, much of the DEI-related class action activity in Canada has been against public sector employers, including the federal government. These cases have been high-profile, resulting in settlements reaching hundreds of millions of dollars. For example, in 2017, the Federal Court approved a C$125.4 million settlement in a class action which alleged gender- and sexual orientation-based harassment and discrimination against female RCMP officers and public service employees. More recently, a proposed class action was commenced against the federal government on behalf of current and former Black civil servants seeking damages for career opportunities allegedly denied due to race. The claim asserts that Black employees faced dismissive attitudes and comments about their performance and received fewer accommodations, training and advancement opportunities than their non-Black colleagues⁸.

As we have previously reported, we anticipate that DEI-related class actions will soon begin to impact Canadian private sector employers, following other U.S. litigation trends. In light of this, Canadian employers may wish to consider proactive steps to mitigate risk, such as conducting DEI audits. Notably, some large Canadian employers in the financial sector have already conducted or announced plans to conduct racial equity audits. For further information about best practices and key considerations for an equity audit, please consult our bulletin.

We do not expect that the “reverse discrimination” concerns that have arisen in the United States will have the same impact in Canada. Both the Charter and most Canadian human rights legislation specifically allow for the creation of programs that aim to ameliorate the circumstances of disadvantaged individuals or groups, including those who are disadvantaged because of race, gender or other protected characteristics. Legislative protections for affirmative action programs, together with Canada’s different political climate, make it much less likely that Canadian courts would take issue with such programs.