DEI and Small Businesses
What Is DEI?
DEI (short for “diversity, equity and inclusion”) has no universal definition. It is a flexible socio-economic policy that emerged in 2020 during covid-19 lockdowns and a period of unrest following the public murder of George Floyd, an unarmed Black man, by police.
Based on the definitions of the three words that make up the acronym, at its core, DEI seeks the fair consideration of people from different backgrounds in all areas of public life. In that regard, DEI represents the evolution of civil rights in America.
The most well-known example of DEI is the NFL’s “Rooney Rule” which has been in place since 2003, years before DEI acquired its name. The Rooney Rule encourages NFL team owners to interview at least one person of color for open head coaching positions before hiring whomever the owner decides is the best fit for the role and for the team. (Like nearly all policies emerging from civil rights concerns, the Rooney Rule has expanded to include women as an underrepresented minority.)
What Isn’t DEI?
Like the Rooney Rule, DEI does not dictate who is hired. It is not a set aside or preference. It is not a quota program or affirmative action. But businesses decide whether they need DEI by looking at the makeup of their workforce. If everyone is the same, they ask themselves whether their search efforts are broad enough and whether they could better serve all of their customers (or reach additional customers) if they employed or contracted with people from underrepresented groups.
Why Do We Need DEI?
Examples from your own life may reveal why we still need DEI in 2025. If you have been employed in corporate America, perhaps a boss or the HR department asked whether you could refer someone for open positions. The employer may even have offered you a bonus if someone you referred was hired. Naturally, if you were to participate in such an Employee Referral Program, you’d want to refer someone you knew well enough to feel confident that they would reflect favorably on you—someone you knew from school, your neighborhood, or your social activities—in other words, someone like yourself.
The hiring manager receives many applications—sometimes too many to vet closely. Thus, to better utilize their time, HR gives more attention to referrals from insiders. After all, referred candidates already have been vetted to some degree.
Outsiders can have difficulty breaking through in a system that doesn’t have easy entry points for candidates who aren’t connected and who lack similarities with the insiders making referrals or hiring decisions. A DEI program can provide visibility to people from underrepresented groups. Therefore, DEI is an additional means of identifying qualified candidates, not a tool to fill jobs with unqualified minorities.
How Does DEI Impact Small Businesses?
Case in point, DBE programs (i.e., contracting programs for disadvantaged business entities) are an example of how DEI programs produce a diverse, inclusive talent pool without favoring one race over another. While DBE programs began in 1983 as a small federal set aside by the Department of Transportation for minority construction and transportation firms, in 1987 women were added to the list of groups deemed to be disadvantaged. In time, DBE programs expanded even more to include small businesses led by anyone, including white men. (Quiet as it was kept, white men were benefitting from DBE programs before those programs were expanded to include small business enterprises (SBEs). They did so by partnering with women (often their wives) and becoming certified as women owned businesses.)
Once SBEs were included in DBE programs, that meant anyone could benefit from the programs on their own, without partnering with women or minorities. Thus, DBEs became inclusive. Today, DBE programs allow small businesses to compete with or partner with larger, better-financed businesses. Without DBE programs, the tax dollars spent by government procurers would not flow to all qualified taxpayers. They’d instead be gobbled up solely by the behemoth contractors like Booz Allen and Boeing.
Why Does Trump Hate DEI?
If this is what DEI is, why does the President hate it so much? Why does the Trump Administration say DEI is illegal? Why does he want businesses to pay damages to white people for including minorities in their hiring and contracting pools?
No one outside the White House can answer that question because the White House will not define DEI. Their Executive Orders don’t define DEI. They won’t say what is illegal about it. Even as they lose in federal courts, they won’t point to any specific DEI program, policy or activity by any business or organization that violates anti-discrimination laws.
Therefore, it isn’t possible to pinpoint their motives. But we can evaluate their results so far. The anti-DEI campaign has been highly successful. Much of the American public believes DEI to be an unlawful set aside to benefit blacks while harming whites. Think about that for a moment. The mere consideration of minorities in a talent pool is now widely believed to be reverse discrimination against white men. Under pressure from the Administration, many law firms and corporations have ended their DEI programs without any analysis, let alone a determination, that the programs were, in fact, illegal.
Do Courts Consider DEI Illegal?
A few steely-spined firms have gone to court over penalties imposed by the Administration due to their DEI programs (among other vendettas the President’s has expressed in his Executive Orders against them). The courts have ruled that the DEI programs are fine and it’s the Executive Orders that are illegal.
However, even when a firm wins a court challenge, the Trump Administration does not change its unlawful pronouncement claiming that DEI programs are illegal. Instead, the Administration issues more Executive Orders against additional firms and uses the same illegal language that the court just struck down.
The result of the Administration’s doubling down on its unlawful attacks on DEI is terror. Businesses are terrified of becoming the Administration’s next target. There are probably corporate leaders filling prescriptions for anxiety medications as you read this.
Clientis Is An Authority on DBE Contracting
Nonprofits are feeling the heat too. Weeks before the Administration set its sights on Harvard University’s tax-exempt status, Clientis’s Head of Solution Development (who also is an administrative lawyer) gave an interview to New York Amsterdam newspaper regarding the legal rights of nonprofits with inclusive missions or programs. Clientis was selected to opine because of our Government and Corporate Contracting in the Trump Era training program which teaches 15 contracting skills DBEs need in the Trump Era.
The story that ran is a “man on the street” piece where various nonprofits explain how they are managing the uncertainty around their public and private funding and their tax-exempt status during the second Trump Administration. It is a worthy read.
Two of our quotes were included in the story, but our course creator said so much more. It isn’t that DEI is illegal. It’s that the Administration is intent on ending it no matter what. Many of the law firms that ordinarily would provide free legal services to parties under government attack have instead entered into legal agreements to end DEI practices and provide free services to clients approved by the Trump Administration.
How to Fight Attacks on DEI
So, we explained how parties litigating against the government can get competent legal representation by bringing their cases under the Administrative Procedure Act (APA). If a company or organization wins a case under the APA, the court may force the government to pay your attorneys’ fees. Using this statute (or other statutes with fee recovery provisions) allows both nonprofits and for-profits to attract competent lawyers and enforce your rights.
Trickle Down Effect on Small Businesses
More than the budgets of Harvard and similar large institutions are at stake. Most small businesses do not contract directly with the federal government. Rather, they contract with universities, private corporations, and state and local governments. Those contracts often are funded with federal dollars. If these prime contractors believe or worry that DBE programs are illegal DEI, they may end your contracts and/or stop partnering with you. Therefore, in time, the Trump Administration’s attacks on DEI may trickle down to you.
Thus, small businesses regardless of who owns them, should care about DEI. If you own or work for a small business that has private corporate contracts, nonprofit contracts, or state and local government contracts, you are likely a part of the DEI pool. DEI programs and policies are putting food on your table and keeping your lights on—whether you knew it or not.
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