Could Diversity Hiring Efforts Endanger Your Company?
Sometimes trying to do the right thing backfires, ending in an expensive lawsuit. Here are some thoughts on how business owners can protect their companies and themselves.


Diversity, equity and inclusion, or DEI, is a term used to describe policies and programs that promote the representation and participation of different groups of individuals. This includes people of different ages, races and ethnicities, abilities and disabilities, genders, religions, cultures and sexual orientations.
The awareness of the necessity to not only hire more diverse candidates but to include, train and promote these individuals has come front and center and is more important now than ever. However, when businesses make a good-faith effort to hire diverse employees, they may unwittingly be opening themselves up to lawsuits. And on the other hand, businesses that don’t try to diversify their workforce could face lawsuits as well. It’s quite a dilemma.
Lowenstein Sandler LLP’s Julie Levinson Werner, a noted employment law attorney, says adopting quotas of a fixed percentage of individuals in certain roles by a certain date based on race, gender or other characteristics is legally risky. In fact, this very issue is at the heart of the upcoming Supreme Court case Students for Fair Admissions Inc. v. President & Fellows of Harvard College. While this case deals with the legality of race-based admissions in the scholastic context, one can foresee the result extending to the broader workplace environment.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Reminding us of the adage that “no good deed goes unpunished,” businesses that seek to create an inclusive workforce by advancing employees to meet certain quotas of diversity, rather than merit, could find themselves in legal jeopardy. And those businesses that do not incorporate DEI strategies could find themselves as defendants in a lawsuit that, if successful, could bankrupt the business and possibly the business owner personally.
So, What’s a Business Owner to Do?
This article is not intended to argue for one position or another. It is intended to bring the future into the present where the business owner “hopes for the best but plans for the worst” if moving away from merit-based hiring and promotion with a DEI focus to one singularly based on quotas. Yet, what if the business forsakes the DEI policies and programs that promote these new values, and uses merit-based criteria for promotion and advancement? It could find itself in harm’s way by the legal profession, who are gearing up to take on these cases even as this article is being written.
So how can a business hope for the best but plan for the worst? When carrying out the good intentions of diversity planning and hiring, businesses need an integrated business, estate planning and asset protection plan to protect them. This process involves retitling selected business and personal assets into legal structures that by their nature present significant legal hurdles to reaching such assets, absent a fraudulent transfer. In other words, it’s the process of keeping what you have worked for and earned out of harm's way.
There are many strategies to achieve integrated business, estate planning and asset protection: a HYCET Trust, domestic and foreign asset protection trusts, private retirement plans and IRA rescue plans, just to name a few.* In fact, sometimes a simple change in basic corporate structure can provide valuable protection, such as creating two classes of shares – voting and non-voting. Retain the non-voting shares and gift the voting shares to an irrevocable dynasty trust. If a lawsuit creditor can only reach your non-voting shares, he or she may be dissuaded from suing you in the first instance.
Cover Your Bases
Almost universally, an effective asset protection plan will consist not of one, but multiple strategies integrated into a holistic plan designed to achieve many benefits, including asset protection. That plan should serve several functions: protect your assets while you are alive, provide for the efficient transfer of your assets on your death, and mitigate to the maximum extent possible the amount of taxes owed. What that plan looks like, and which particular strategies are used, should always be tailored to the client.
Every client and business is unique , with its own circumstances. That is why it is crucial to work with an experienced asset protection attorney who can not only evaluate what steps you should take but also — perhaps more importantly — what steps not to take.
Be aware and take caution. These strategies should not be attempted if you have a foreseeable, expected or current lawsuit, or another legal claim. If so, these efforts could subject you to serious legal jeopardy and even violations of state and federal laws. Consult with a law firm that has extensive experience in this area of practice to determine if you are a candidate for integrated asset protection planning.
As the world continues to evolve and social and business paradigms are constantly in flux, successful business owners owe it to their business and themselves to promote strong inclusion and equity in their workforce while addressing the needs and merits of open positions.
Be prepared. Be proactive. Put an asset-protection plan in place today. Don’t let your DEI efforts cause your finances to DIE.
*Go to www.jmvlaw.com and view the library of videos describing many of these strategies.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jeffrey M. Verdon, Esq. is the lead asset protection and tax partner at the national full-service law firm of Falcon Rappaport & Berkman. With more than 30 years of experience in designing and implementing integrated estate planning and asset protection structures, Mr. Verdon serves affluent families and successful business owners in solving their most complex and vexing estate tax, income tax, and asset protection goals and objectives. Over the past four years, he has contributed 25 articles to the Kiplinger Building Wealth online platform.
-
Four Surprising Signs You’ll Never Retire (and How to Fix Them)
Gearing up to retire? If any of these four signs ring true, you may want to make some changes before you do.
-
Stocks Rise After Trump-Powell Fed Tour: Stock Market Today
Nvidia hit a new all-time high intraday, but another renowned semiconductor name and some less iconic stocks were bigger movers Friday.
-
How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study
Susan discovered several years after she filed for Social Security that she is eligible to receive benefits based on her ex-spouse's earnings record. This case study explains how her new benefits are calculated and what her steps are to claim some of the money she missed.
-
From Piggy Banks to Portfolios: A Financial Planner's Guide to Talking to Your Kids About Money at Every Age
From toddlers to young adults, all kids can benefit from open conversations with their parents about spending and saving. Here's what to talk about — and when.
-
I'm an Investment Pro: Here's How Alternatives Could Inject Stability and Growth Into Your Portfolio
Alternative investments can often avoid the impact of volatility, counterbalancing the ups and downs of stocks and bonds during times of market stress.
-
A Financial Planner's Guide to Unlocking the Power of a 529 Plan
529 plans are still the gold standard for saving for college, especially for affluent families, though they are most effective when combined with other financial tools for a comprehensive strategy.
-
An Investment Strategist Takes a Practical Look at Alternative Investments
Alternatives can play an important role in a portfolio by offering different exposures and goals, but investors should carefully consider their complexity, costs, taxes and liquidity. Here's an alts primer.
-
Ready to Retire? Your Five-Year Business Exit Strategy
If you're a business owner looking to sell and retire, it can take years to complete the process. Use this five-year timeline to prepare and stay on track.
-
A Financial Planner's Prescription for the Headache of Multiple Retirement Accounts
Having a bunch of retirement accounts can cause unnecessary complications. Consolidation can make it easier to manage your savings and potentially improve investment outcomes.
-
Overpaying for Financial Advice? A Financial Planner's Guide to Fees
Take five minutes to review how much you're paying for financial advice. If you're overpaying, you could be better off with an adviser who charges a flat fee.