Is DEI really 'dead'? Part one: What now and what next for Australian employers

Introduction

Re-elected President Donald Trump’s flurry of executive orders targeting Diversity, Equity and Inclusion (DEI) programmes hastened their discontinuation by some major US-based companies, prompting wider consideration about the future of DEI.

In this two-part series, we attempt to cut through the noise to assist Australian employers and their boards to reach a considered position in relation to DEI in 2025 and beyond.

PART 1

• Sets out key context to the current debate;
• Explains key legal and political differences between Australia and the US, including in relation to Australia’s workplace health and safety and Respect@Work laws, that will impact the extent to which DEI initiatives are unwound here; and
• Considers whether the executive orders signed by President Trump may directly or indirectly impact Australian businesses, particularly those with US parent companies caught between conflicting regulatory regimes.

PART 2

• Provides practical guidance to employers about what to do when faced with resistance, confusion and potentially backlash to DEI and related Respect@Work initiatives; and
• Answers the question: are affirmative action initiatives such as gender targets now unlawful?

We also speak with David Glasgow, KWM alumnus and New York University Adjunct Professor of Law and Executive Director of the Meltzer Center for Diversity, Inclusion, and Belonging, about what is driving these trends, and why it is that Australia may be less likely to follow the American trajectory. 

How did we get here?

The backlash to DEI in the USA has been brewing for some time. President Trump promised that scrapping DEI would be a priority for his administration, and in the first few days of his current term signed numerous executive orders targeting DEI, some of which have implications for the private sector. 

The full implications of these executive orders for Australian businesses with US related companies in respect of their DEI programmes are not yet entirely clear. Private employers in the United States who do contract work with the federal government will now need to certify that they do not operate any DEI programs that violate federal anti-discrimination law. Another executive order tasks each relevant federal agency with developing a list of nine organisations (including corporations) to target for ‘civil compliance investigations’, meaning that the federal government may be required to use its enforcement powers to pursue private-sector organisations engaging in allegedly unlawful DEI activities.

The DEI debate is not new to Australia. Rio Tinto is two years into its efforts to address concerning levels of gender-based harm canvassed in Elizabeth Broderick’s Everyday Respect report. The progress review of the Everyday Respect programme found that, although progress in reducing the incidence of harmful behaviours had been made in some areas, backlash, resistance and even retaliation against women was also evident, consistent perhaps with a small but growing percentage of Australian workers resistant to DEI more broadly, particularly young men.^[1]

The Everyday Respect review found that, although the initial report had provided an important catalyst for change, a material cohort of men within the organisation - and some women - were resistant to the reform agenda. For some of the men surveyed, opposition was based in the view that ‘reverse discrimination’ was occurring, including the appointment of women who were not suitably qualified to some roles.^[2] For others, opposition arose from a sense of feeling ‘undervalued’ or ‘overlooked’ due to a stronger focus on gender balance and diversity.^[3]

The progress review also found that the increased focus on gender inequality and diversity had, for some women, ‘undermined women’s credibility in the workplace because of the perception of special treatment’.^[4]

The reasons for rising anti-DEI sentiment to initiatives such as Rio’s Everyday Respect programme are complex. ‘Overreach’ by social movements, corporates overly focussed on ‘woke’ agendas at the expense of the priorities of the broader community, and DEI which has ‘gone too far’, are often nominated by critics as the source of the backlash. Equally, those on the other end of the spectrum point to the tokenism and superficiality of some corporate DEI efforts as the reasons they are being rejected by workers, cynical about the ability and desire of businesses to make meaningful change or for those initiatives to deliver benefits.

A purported broader fracturing of social cohesion, and an increasing political divide between women and men in general – with women generally becoming more progressive, while men are generally becoming more conservative – has also been identified as contributing to some workers’ opposition to DEI and related reforms.

Available evidence suggests that a failure by employers to properly explain the rationale for DEI initiatives, and inadequate efforts to bring workers along on the journey, may be partially at fault.^[5] More fundamentally, however, experts say that opposition to change by those who feel that they may be disadvantaged by greater inclusion and diversity are an expected part of any process of reform, and in fact may be a sign that meaningful change is occurring.^[6]

It is difficult – and perhaps, impossible – to isolate the increasingly vocal opposition to DEI in some quarters from the broader social and economic context in which such opposition is occurring, both here and abroad. Although progress followed by backsteps are a natural part of the change cycle, there is perhaps something else afoot in the global zeitgeist, and the fault lines are not the same as they once were. As David Glasgow told us:

One problem of DEI is that it’s embedded in the cultural and economic ‘elite,’ such as large corporations, big universities, and the media. For as long as talk about DEI is limited to diversifying the C Suite at wealthy corporations, the average working person will continue to feel this has no impact on their life, and this fuels the backlash.

What we know is that there’s a class of people in the US who don’t feel they have the same opportunities. There is a strong feeling that university-educated professional elites are doing great, but the working class of the US feel overlooked and mistreated, regardless of race and ethnicity.

What is DEI, and why do we do it?

Corporate DEI and ESG programs have been mainstream business practice for many years. In 1985, the Business Council of Australia and the Australian Chamber of Commerce and Industry jointly launched the Council for Equal Employment Opportunity (renamed in 2005 as the Diversity Council of Australia (DCA)). The purpose of the DCA when it was launched was to ‘demonstrate the business community’s commitment to equal opportunity for women’. This purpose and vision has since grown to include all aspects of diversity in employment.  As an influential piece in the Harvard Business Review published in 1990 put it:

[W]omen and minorities no longer need a boarding pass, they need an upgrade. The problem is not getting them in at the entry level; the problem is making better use of their potential at every level, especially in middle-management and leadership positions. This is no longer simply a question of common decency, it is a question of business survival.

For over 20 years, DEI initiatives have been commonplace among some of Australia’s largest businesses, and – leaving the present debate aside – DEI generally continues to enjoy broad support among Australian workers.^[7] There is broad support for the intrinsic benefits that diverse teams deliver whether through better decision making, creativity, efficiency or productivity. For instance, the DCA’s Inclusion@Work Index 2023-2024 demonstrated that workers were largely supportive of DEI, with three out of four workers supportive or strongly supportive of their organisation taking action to create a workplace that is diverse and inclusive.^[8]

In addition to broad worker support for DEI, DCA research has found that DEI is good for worker wellbeing and retention, and minimises legal risk for employers. For instance: 

• Workers in inclusive teams were ten times more likely to be very satisfied than workers in non-inclusive teams, and three times less likely to leave their organisation;
• Employees in inclusive teams were five times less likely to experience discrimination and/or harassment at work compared to those in non-inclusive teams; and
• Employees in inclusive organisations were four times less likely to experience discrimination and/or harassment compared to those in non-inclusive organisations.^[9]

Much of the current commentary suggests that some of the fundamental principles and benefits underpinning DEI remain poorly understood. Some criticism unhelpfully reduces the broad spectrum of DEI initiatives solely to rigid targets or ‘quotas’ for the recruitment and promotion of women and people from marginalised groups.

There is much more to the concept. The DCA defines ‘diversity’ as the mix of people in an organisation, and the differences in relation to their social identity (for example, racial and ethnic background, age, gender, caring responsibilities, LGBTIQ+ status, culture or faith) and their professional identity (for example, profession, education, organisational level). Inclusion is defined as:

[G]etting the mix of people in an organisation to work together to improve performance and wellbeing. Inclusion in a workplace is achieved when a diversity of people (e.g. ages, cultural backgrounds, genders, perspectives) feel that they are [respected; connected; contributing; and progressing].^[10]

In practice, DEI initiatives encompass a very broad range of programmes and policies, from flexible working policies and parental leave entitlements, through to targeted mentoring programmes. In some instances, businesses may adopt targets aimed at increasing diversity in recruitment and promotion, particularly to more senior and executive roles, in whose ranks women and people from marginalised groups continue to have disproportionately low representation.^[11]

In Australia, the drivers for DEI initiatives in the first place – the structural and social barriers and conscious and unconscious bias referred to above – have proven stubbornly resistant to change. For instance, although the formal barriers to women’s educational attainment and employment were rendered unlawful in the anti-discrimination legislation of the 1980s and 1990s, WGEA reports that women continue to be disproportionately underrepresented in key decision-making roles across almost all industries in the Australian workforce, comprising only:

On the thorny subject of merit, David Glasgow advises that DEI is in fact a means by which meritorious candidates can be identified, and properly merit-based recruitment and promotion can be facilitated, precisely because it corrects for conscious and unconscious bias:  

DEI approaches to recruitment, promotion and retention seek to correct for the imbalances and preferences that have historically gone the other way. Some of these are what we would call ‘unconscious’ biases - for instance, a white man who gets the job or promotion at expense of a more or comparably qualified woman or person of colour, perhaps because he and his supervisor are buddies or share the same interests. This is a well-established phenomenon – we are drawn to people who look and think like we do. There is also research by Stanford Professor Shelley Correll showing there is a ‘motherhood penalty’ for women who have a child, which negatively affects the workplace evaluations, pay and job opportunities of mothers, while men get a ‘fatherhood bonus’ – that is, rewarded at work because they are seen as ‘breadwinners’.

The argument that DEI stands in opposition to a ‘meritocracy’ is therefore premised on the notion that the disproportionate numbers of heterosexual white males in positions of political power, and in the upper echelons of business, are wholly based on the individual merit of those men. Are they truly saying that white men, as a group, are two or three or four times more qualified than women, or people of colour, for those types of roles?

Will Australia go the way of the USA?

Australia is clearly not immune from this debate. However, there are a number of key differences between Australia and the US that suggest those calling for a wind back of DEI initiatives may not gain the same traction here.

David Glasgow says that the political and social landscape in the US in the leadup to the 2024 Presidential election was particularly volatile. Reaction to the Black Lives Matter movement - and successful social media campaigns led by conservative activists concerned that major brands had ‘pushed’ certain causes, such as LGBTIQA+ inclusion – also shifted the dial.

The ‘special measures’ difference

American anti-discrimination laws do not contain ‘special measures’ exceptions, which permit affirmative action or ‘positive’ discrimination intended to ensure that programmes directed to redressing historical inequalities are lawful. For instance, Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, colour, religion, sex and national origin – therefore entitling plaintiffs who are male, or white, to say they were discriminated against because of DEI programs. In 2023, the US Supreme Court found that selective admissions processes that allowed the universities to consider race violated the Equal Protection Clause of the Fourteenth Amendment to the Constitution of the United States. The decision sparked a flurry of litigation against DEI, and underpins many of the arguments being raised against certain initiatives in the US.^[12]

All anti-discrimination statutes in Australian jurisdictions except NSW (which is subject to Commonwealth laws in any event) contain a ‘special measures’ or similar exemption for ‘affirmative action’ initiatives that are part of some DEI programmes. Examples of ‘special measures’ include targeted recruitment or mentoring for underrepresented groups for the purpose of realising substantive equality for those groups. This means that the special measures exception will often be available as a defence against legal challenges to DEI programmes, depending on the particular circumstances.

Regulation: Positive duties, safety and WGEA reporting

The second key difference is the federal positive duty enshrined in the Sex Discrimination Act 1984 (Cth) (enacted in response to recommendations in the landmark Respect@Work Report), which creates an enforceable obligation requiring employers to take reasonable and proportionate measures to eliminate both direct and indirect discrimination on the grounds of sex.

Given that DEI initiatives often have a substantial overlap with Respect@Work initiatives, it is difficult to see how employers may comply with their new legal obligation to eliminate sex discrimination while also unwinding entirely their DEI initiatives. Although the Federal Human Rights Commission is yet to engage in any public regulatory activity or prosecution of employers in relation to compliance with the positive duty, such action is inevitable in the coming period. Abandoning entirely DEI initiatives that also form part of a Respect@Work programme would give rise to material compliance risk in this area. Moreover, Queensland has recently amended its state anti-discrimination Act to introduce a new (enforceable^[13]) positive duty to eliminate discrimination on the basis of all protected attributes, not only gender. For employers with national operations including Queensland, this new expanded duty will also need to be complied with.

Third, following the Respect@Work report, safety regulators in Australia have taken a keen interest in efforts by Australian employers to eliminate sex-based harms in the workplace. The evidence is clear that more diverse and inclusive workplaces are also safer workplaces.^[14] Abolishing DEI initiatives that also mitigate psychosocial safety risks therefore creates another avenue of compliance risk, noting that safety regulators (unlike the Australian Human Rights Commission) have powers of criminal prosecution.

Finally, the federal Workplace Gender Equality Act 2012 (Cth) requires employers with 100 or more employees to prepare and lodge annual reports containing information in relation to employee and governing body composition and pay, as well as its workplace policies and practices, which must be made public to employees and other stakeholders. Large employers with more than 500 employees must also have in place a policy or strategy that is responsive to six Gender Equality Indicators, including the gender composition of its workforce, equal remuneration, flexible work, and support for caring or family responsibilities. WGEA has various powers of enforcement, with a range of sanctions at its disposal.  It is also an offence to provide false information to WGEA.

Caught between regulatory regimes: What about Australian businesses with US parents or related entities?

Among the raft of executive orders President Trump signed on day one of his current term was one ‘ending illegal discrimination’ which revoked a prior executive order requiring equal opportunity and non-discrimination in government contracting.

President Trump’s new executive order directs the Office of Federal Contract Compliance Programs to cease holding contractors responsible for taking ‘affirmative action,’ requiring federal contractors to certify that they do not ‘operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws,’ and instructs the Attorney General to submit recommendations for how to ‘encourage the private sector to end illegal discrimination and preferences,’ such as through ‘civil compliance investigations’ and litigation. This executive order has raised concerns for general counsel and executive leaders of private sector businesses in the US.

The urgent question for Australian businesses with related entities in the US is: Can this directly or indirectly impact them, and if so, how?

David Glasgow considers that the executive order directed to private industry was intended to make organisational leaders concerned about the legal viability of their DEI initiatives whether they are labelled DEI or not. While the order does not make any DEI programs unlawful that were lawful beforehand, it does increase the risk that companies could be investigated or sued by the federal government. By requiring contractors to certify that they do not operate any unlawful forms of DEI without defining what is and is not lawful, the order is also likely to sow confusion.

Whether it may legally impact Australian businesses with related US entities will depend on more complex practical and organisational considerations concerning DEI strategies and initiatives, stakeholder concerns and implications for programmes already in train or planned for 2025 and beyond. This is a matter for targeted legal advice.

In all cases, it is important that organisations reflect on their strategic direction, and ensure that their policies and processes for managing compliance risk are aligned.

Part one conclusion

The DEI debate gives rise to a range of difficult legal questions, as well as fundamental issues concerning corporate culture, mission, values, access to top talent, productivity and workforce engagement.

In part one of this two-part series, we have outlined the key context to this debate and provided insights into why it is that Australia may be less likely to follow the US path.

In part two, we provide practical guidance to employers about what to do when faced with resistance to DEI and related Respect@Work initiatives, and how to navigate the difficult terrain ahead.