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Employers should take note of an Executive Order related to diversity, equity, and inclusion (DEI) made by President Biden on his first day in office. While the order applies only to departments and agencies of the Federal Government, it’s likely to have a far-reaching impact on private-sector employers as well.
For context, Executive Order 13985 states that “the Federal Government should pursue a comprehensive approach to advancing equity for all, including people of color and others who have been historically underserved, marginalized, and adversely affected by persistent poverty and inequality.” Berkshire Associates summarizes that “the Executive Order lays out a comprehensive and systematic approach to advancing equity throughout the Federal Government.”
So, what about private-sector employers?
The first organizations likely to be affected by the Executive Order would naturally be government contractors. According to the National Law Review, “employers, especially those with government contracts, should continue to monitor developments regarding these Executive Orders and consult with legal counsel to ensure compliance with the laws.”
Law firm Morgan Lewis agrees: “It will be important for businesses and nonprofit organizations interacting with the federal government to adjust to changes in the way the federal government operates and to take affirmative advantage of these changes, rather than wait for them to be imposed on the system.” However, they continue with a statement that all private-sector employers, not just government contractors, would be wise to heed: “Considering how private sector operations can further the underlying principles of the president’s collective actions … may be of distinct advantage in creating new opportunities and avoiding risk.”
Similarly, Forbes writes, “this executive action is important because it sends an important message about where the government and the private sector are headed … racial equity will be a significant driver of [President Biden’s] agenda and the public conversation over the next four years.” And as stated by law firm Littler, “it is clear that President Biden will not be shy about using the executive power of the presidency to pursue and advance his policy initiatives.” That pressure won’t just be coming from within the White House; as noted by the Washington Post, after news broke of the Executive Order, “civil rights groups made it clear they will press for more-sweeping change in the months ahead.”
Next steps to consider
As we’ve written previously, private-sector employers in the U.S. would be wise to recognize the importance of establishing ongoing, monthly monitoring of DEI metrics, including race, ethnicity, and gender pay gaps (pay equity).
In carrot-and-stick terms, the “stick” is that pay equity class-action lawsuits abound and will no doubt increase. The “carrot,” as noted by McKinsey, is that boosting DEI is simply good business: “Organizations with top-quartile diversity in their leadership teams are 36 percent more likely to outperform their peers in earnings before interest and taxes.” And as a writer on Lexology notes, “prioritizing diversity and inclusion can drive change … employers should provide an understanding of diversity as an organizational goal and business plan. It goes hand in hand with a company’s anti-harassment and anti-retaliation policies.”
PolicyLink adds that “a growing number of companies known for their hard-nosed approach to business, such as Gap Inc., PayPal, and Cigna, have found new sources of growth and profit by driving equitable outcomes for employees, customers, and communities of color.” They go on to posit that a rising tide propelled by greater focus on DEI could indeed lift all boats: “The U.S. GDP could be 14 percent or $2 trillion higher, if the wage disparity between white employees and employees of color was eliminated.”
To help ensure their success in an ever-changing landscape of DEI-related laws and initiatives, employers should enlist an external technology partner to monitor pay equity on a monthly basis. To learn more about achieving pay equity, download our white paper What is Pay Equity? If your organization needs help bolstering its DEI efforts, we invite you to explore our DEI platform, PayParity.
To find out more about how organizations can bolster their diversity and inclusion efforts with the help of an expert partner, check out our pay equity analytics serivce.