Is DEI Illegal Now: Part I – How Can Employers Compete For Talent Without Violating Title VII?

Conflicting signals from federal agencies have prompted some employers to scale back or suspend DEI-related initiatives out of fear that such programs may be considered "illegal." However, overcorrecting in this direction creates its own set of risks, especially under Title VII, which continues to prohibit discrimination based on race, sex, disability, national origin, age, and other protected characteristics. Meanwhile, the EEOC continues to pursue settlements and litigation involving traditional discrimination theories, confirming that Title VII enforcement remains active.

The business reality also has not changed: companies must attract, develop, and retain the most qualified talent to remain competitive, and doing so requires merit-based, inclusive systems, not demographic quotas or reactive retrenchment. The most defensible strategy for 2026 is not to dismantle compliance or abandon inclusion efforts, but to modernize them so that hiring, promotion, and compensation decisions remain neutral, job-related, and performance centric.

Following public statements describing certain forms of corporate DEI efforts as potentially "unlawful" under Title VII, some employers, particularly federal contractors, have paused or scaled back DEI initiatives out of caution. While caution is understandable, reactionary dismantling is neither required by law nor supportive of business competitiveness. Talent markets remain tight, demographic shifts continue, and legal obligations under Title VII are unchanged. The key question for employers in 2026 is how to navigate anti-DEI rhetoric without exposing themselves to traditional discrimination liability or undermining their ability to recruit and retain top talent.

The Two-Front Risk Employers Face

Employers must recognize that they now face two distinct types of risk:

Risk 1: Claims of "reverse discrimination" associated with improper DEI implementation
These risks arise when hiring, promotion, compensation, or development opportunities are tied—explicitly or implicitly, to protected characteristics, such as race or sex. Such practices may draw scrutiny under Title VII, as highlighted by EEOC leadership in media interviews and agency statements. [Reuters/Steptoe LLP, Jan. 14, 2026]¹

Risk 2: Traditional Title VII discrimination and harassment claims
This includes:

• Race discrimination and harassment
• Sex discrimination and harassment
• Retaliation
• Pay disparities
• Failure to hire or promote
• Hostile work environment

Recent EEOC enforcement actions demonstrate that Risk 2 remains active and financially significant. For example, Boart Longyear paid $177,500 to resolve a race harassment case, [EEOC Press Release]² and Glunt Industries agreed to a $2 million consent decree for systemic sex discrimination in hiring. [EEOC Press Release]³

Employers who dismantle compliance-oriented DEI programs may inadvertently increase exposure to Risk 2 by removing structures that prevent discrimination, support retention, and ensure a safe working environment.

The Cost of Overcorrection

Some employers have responded to anti-DEI messaging by:

• Eliminating workforce demographic tracking
• Canceling harassment and inclusion training
• Disbanding ERGs
• Avoiding recruitment outreach to underrepresented groups
• Stopping pay equity audits
• Avoiding the term "DEI" altogether

While these actions may appear to reduce legal exposure, they increase other risks:

• Without demographic tracking, employers cannot detect patterns that may later support disparate impact claims, along with failing to file for the EEO-1 reports.
• Without training, employers lose affirmative defense mechanisms recognized by courts
• Without pay equity audits, pay discrimination can go undetected and become costly

Additionally, talent competitiveness suffers when qualified individuals encounter artificial barriers, lack development pathways, or perceive the organization as unwelcoming.

What Employers Should NOT Do

To remain compliant and competitive, employers should avoid:

• Tying employment opportunities to protected characteristics
• Implementing demographic quotas or scorecards
• Using DEI as a basis for hiring or promotion decisions
• Eliminating compliance programs without legal review
• Restricting tracking or analytics out of fear
• Ignoring pay equity and compensation governance

Each of these responses either violates Title VII outright or creates blind spots that increase liability.

What Employers SHOULD Do Instead

A defensible 2026 strategy blends legal compliance with talent competitiveness:

1. Reframe DEI as "Merit-Based Opportunity" and "Barrier Removal"
   This approach focuses on:
   • Skills-based hiring
   • Job-related selection criteria
   • Removing non-essential barriers (e.g., degree inflation)
   • Broadening applicant access

These actions expand qualified talent pools without resorting to preferences.

2. Ensure Programs Are Voluntary and Open to All
   Mentorship programs, leadership development, ERGs, and training should not exclude any employee based on a protected classification. This preserves both morale and legal defensibility.
3. Continue Anti-Harassment and Anti-Discrimination Training

Training remains essential for:

• Title VII compliance
• Retention
• Culture
• Productivity

Courts frequently consider employer training when evaluating liability.

4. Conduct Pay Equity and Compensation Governance Under Privilege
   Pay equity is both a compliance and retention issue. Employers with equitable compensation systems are more competitive and less likely to lose talent.
5. Use Workforce Analytics Responsibly
   Analytics are not prohibited by Title VII. They help employers identify:

• Skills gaps
• Promotion patterns
• Unintended barriers
• Turnover risks

Analytics only become problematic if used to assign opportunities based on protected traits.

The Bigger Picture

Employers should view anti-DEI rhetoric through a practical and legal lens rather than a political one. Title VII has always prohibited employment decisions based on protected characteristics, and that remains true regardless of which direction discrimination flows. At the same time, business competitiveness requires accessing the broadest pool of qualified talent. Employers who modernize compliance, rather than dismantle it, will be best positioned to navigate both regulatory scrutiny and the demands of high-performance labor markets.

Footnotes

1 Reuters interview with EEOC Chair Andrea Lucas, summarized via Steptoe LLP analysis, Jan. 14, 2026.

2 EEOC Press Release, Boart Longyear settlement (race harassment), 2025.

3 EEOC Press Release, Glunt Industries consent decree (sex discrimination), 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.