During Ward and Smith’s annual In-House Counsel Seminar, four attorneys from the firm placed a spotlight on recent topics that are striking a chord in the workplace.
The playlist outlined best practices for dealing with Immigrations and Customs Enforcement (ICE), changes related to the Equal Employment Opportunity Commission (EEOC) and National Labor Relations Board (NLRB), the lawfulness of DEI, and upcoming developments with potential impacts for employers. This article tackles the topics of DEI and considerations for the year ahead. Our last article addressed Immigration and the NLRB.
Lawful Diversity, Equity and Inclusion
X. Lightfoot, a member of the firm’s labor/employment group and a North Carolina State Bar Board Certified Specialist in Employment Law, shared ideas on the continuously shifting narrative related to Diversity, Equity and Inclusion.
“When I entered this field in 2019, the racial and social justice movement was going on,” mentioned Lightfoot, “and we were receiving numerous inquiries from our corporate clients about how they should respond. Because of this, our Labor and Employment Group leader Ken Gray and I decided to earn our certifications on these issues to ensure that we can provide our clients with knowledgeable guidance.”
DEI has experienced periods of support as well as periods of attack in the past six years. “Like the pulse of a sound wave, the DEI field has experienced a variety of peaks and troughs,” adds Lightfoot, “so that’s proof I tried to stay aligned with our musical theme.”
Several controversial executive orders from 2025 were focused on DEI. The text of “Ending Radical and Wasteful Government DEI Programs,” for example, referenced terminating all discriminatory programs, including illegal DEI programs.
A reference to “illegal DEI programs” is also contained in the Executive Order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The vagueness of the term caused a federal court in Maryland to issue a temporary injunction based on due process concerns and the idea that it could have the effect of chilling free speech.
The injunction was ultimately overturned, however. “This opened the door for the termination of all DEI programs, positions and mandates within the federal government,” added Lightfoot. “Under the Biden administration, certain federal contractors and grant recipients were obligated to include equity action plans and describe how federal dollars were used to promote DEI efforts and initiatives. The current administration wiped that out.”
The executive order also required federal contractors and grantees to certify they do not have “illegal” DEI programs. “The implication for private sector employers is that anyone found to be engaging in unlawful and illegal DEI could become the target of a civil investigation,” commented Lightfoot. “The government is using the False Claims Act as an enforcement measure, and contends that a contractor or grantee has committed fraud against the government if it maintains an unlawful DEI practice while certifying compliance with anti-discrimination laws.”
The False Claims Act, however, has never been used as a means of targeting allegations of discrimination. “The DOJ recently instituted a civil fraud investigative unit to investigate private sector employers and determine if there has been a violation of these executive orders,” added Lightfoot.
A federal court in Illinois issued a temporary injunction blocking the enforcement of the certification provision by the US DOL. “It will likely continue to be required for federal contractors and grantees, because only the DOL has been prohibited from enforcing it,” said Lightfoot, “and the executive order doesn’t apply to private sector employers unless they are federal contractors or grant recipients.”
The courts have offered clarity on DEI programs and initiatives, stating they are not all illegal. Notably, liability under the False Claims Act can potentially be avoided if the organization can prove there was a good faith effort to ensure that DEI activities comply with federal anti-discrimination laws.
Lightfoot shared a personal definition of illegal DEI to eliminate confusion: “Illegal DEI is a discriminatory practice based on a protected characteristic. Part of my role as a professional in this field is to help my clients ensure they are compliant and mitigate risk. It is worth noting that your DEI program is probably not illegal if it doesn’t violate a protected characteristic or federal anti-discrimination statute.”
Lawful and Unlawful DEI Scenarios
Lightfoot shared examples published by US Attorney General Pam Bondi in July of 2025 to help define what may constitute illegal DEI practices:
- A federal contractor launches an internship program aimed at increasing diversity. It advertises a “Black Student Excellence Internship” and only students identifying as Black may apply. Other academically qualified students from different racial groups are explicitly excluded.
- A federally funded nonprofit organization requires job applicants to submit a “cultural competence statement” describing their lived experience with diverse communities. Hiring managers infer candidates’ racial or ethnic background from these statements, and this becomes an unofficial way to favor certain racial or ethnic identities without explicitly stating racial preference.
- A university that receives federal funding organizes mandatory DEI training. Attendees are split into separate sessions: one exclusively for “White Allies” and another only for “BIPOC Faculty.” Employees not in the designated group are barred from joining the other session.
Small changes can convert the previous situations into lawful DEI programs:
- The internship program is open to all students regardless of race, but includes outreach efforts to underrepresented communities, such as hosting informational sessions at HBCUs or Hispanic-serving institutions. Selection is based on race-neutral factors such as academic performance, leadership, and interest in the field.
- Applicants are asked about experience working in diverse teams or inclusive settings, but responses are evaluated based on job-related skills, not personal identity or lived experience. The same criteria apply to all applicants.
- The university offers voluntary affinity group discussions open to all employees, regardless of race, and also provides general DEI training sessions where everyone participates together. No one is excluded based on race, and participation in affinity groups is optional.
Looking Ahead
Will Oden, a North Carolina State Bar Board Certified Specialist in Employment Law, provided a glimpse into the continuously evolving field of employment law. One trend he predicts will continue is the use of AI for recruiting and screening applicants.
“This is partially because hybrid work and remote hiring practices are likely to increase, and AI can be useful for streamlining the selection process,” Oden explained. “Of course, employers still need to comply with the laws pertaining to employment relationships.”
If an employment action is challenged as being discriminatory, the employer will likely be asked to provide a “legitimate, nondiscriminatory reason” for the decision. “With AI, it may be difficult if not impossible to explain why it made the decision. This is often referred to as a ‘black box’ problem, and it can make it more difficult to successfully refute a claim,” said Oden.
Lawsuits are starting to appear in the courts based on the use of AI for employment decisions. “It is also interesting to note that the courts are cracking down on the use of AI for writing briefs,” added Oden.
A development related to gender-based wage disparities was introduced in Congress in March of 2025, the Paycheck Fairness Act. Though it is not expected to pass, it would prohibit employers from using an applicant’s wage history and retaliating against employees for disclosing salary information, the latter of which is already considered an unfair labor practice under the NLRA.
The Unlocking Benefits for Independent Workers Act is another recent bill that could potentially impact the workplace. If passed, it would make it possible to provide health insurance and retirement benefits to independent contractors in certain circumstances without creating a need to reclassify them as employees.
“The takeaway here is that providing benefits would not be considered as a reason why someone should be classified as an independent contractor,” explained Oden.
The need to accurately classify workers is projected to remain a significant issue. Employers should ensure they are current with the rules pertaining to worker classification due to the impact that proper classification has on unemployment insurance, overtime pay and workers’ compensation coverage.
A bill that made its first pass in the North Carolina legislature was the Workforce Freedom and Protection Act. It would void any contract that restrains an employee who is earning less than $75,000 per year from entering a lawful profession, trade, or business.
“This would make it unlawful to make those persons sign a noncompete agreement as a condition of their employment,” Oden explained.
A bombshell development related to the structure of the NLRB was recently dropped by the Fifth Circuit Court of Appeals. “This one really caught my attention, since it said the structure of the NLRB is probably unconstitutional,” said Oden. “It’ll be interesting because it could be appealed to the Supreme Court, and it could certainly have an impact on the agency’s ability to enforce labor laws.”
The ruling has temporarily halted the NLRB from conducting ULP hearings against employers in the Fifth Circuit’s jurisdiction, which is Texas, Louisiana and Mississippi. The justification for the decision relates to statutory protections against removal of NLRB members and “administrative law judges.”
SpaceX and other employers filed the lawsuit, which argues that the structure of the NLRB violates Article II of the U.S. Constitution by undermining the executive authority of the President.
“It is unlikely this will end the NLRB, but the NLRB’s structure may ultimately have to change,” concluded Oden.
