Over the past 30 years, many countries have passed some form of regulation to promote diversity in the workplace. Although diversity management is a common imperative for multinational corporations, the evolution of legal and regulatory developments reveals a landscape filled with varied and multidimensional approaches. In the past several years, different regions of the world have experienced unique successes and challenges in achieving workplace diversity. While many law firms and Fortune 500 companies in the United States have embraced diversity initiatives as a whole, the European Union has pioneered efforts to achieve gender parity in corporate management, and countries in Asia have set progressive quotas to increase the representation of disabled employees. This chapter addresses some of these recent initiatives to promote corporate diversity in the multinational workplace as well as the particular challenges that corporations with a global presence may encounter in the administration of both internally and legally mandated diversity initiatives. These challenges include barriers to the collection and retention of employee diversity statistics imposed by international privacy regulation, the difficulties in adapting an integrated diversity initiative to regional demands, and the ever-present gaps between legislation and enforcement.
In a world populated by an increasing number of multinational corporations, diversity management has not only become an issue of strategic importance, but also a driver of economic and competitive success. Not only does an increasingly diverse workforce mean better access to resources and customers, greater legitimacy in heterogeneous societies and opportunities for learning and innovation, but corporations also perceive added value in distinguishing themselves from their homogenous competitors. In addition to being driven by business incentives, diversity initiatives sometimes are externally imposed in the form of equal employment opportunity, affirmative action and other initiatives aimed at eradicating prejudices and stereotypes that historically have limited the representation of disadvantaged groups. The proliferation of private and public diversity initiatives in recent years has been the result of these complementary forces.
iI Recent diversity initiatives
i Positive discrimination
While most countries have laws prohibiting discrimination against members of protected classes, some jurisdictions have gone a step further by enacting laws requiring ‘positive discrimination’ (i.e., the practice of giving an advantage to a certain group to increase diversity or combat prejudice). In the United Kingdom, for example, employers are legally required to implement ‘positive action’ in their recruitment processes under the Equality Act 2010. The Act allows employers to favour an applicant if the employer believes that the applicant experiences a ‘disadvantage connected to the [protected] characteristic’, and that positive discrimination will ‘enable or encourage persons who share the protected characteristic to overcome or minimise that disadvantage’. A similar regulation was signed into law in 2007 in South Africa. The European Union has also passed regulations that allow for participating Member States to take positive action to promote workplace equality.2 In 2015 and then again in 2017, members of the US Congress introduced a similar piece of legislation, also named the Equality Act, which would amend and expand the landmark Civil Rights Act of 1964 to embrace a more robust vision of equality, banning discrimination in various areas of people’s lives, including employment, public education, housing and credit, among others, on the basis of sex, sexual orientation and gender identity.
In India, there is a constitutional basis and ‘reservation’ programme in place to allocate a quota of public service positions for traditionally under-represented groups. These under-represented groups include certain castes and religious minorities. Similarly, Malaysia and Nigeria also have affirmative action programmes for public service employees in order to attain the desired balance of ethnicities. In contrast, however, outright ‘quota’ programmes have been rejected for the most part in the US by the Supreme Court, where the prevailing philosophy is for employers to make ‘blind’ determinations with respect to race, national origin, sex and other protected classes. As typically well-represented groups (e.g., white males) can claim ‘reverse’ discrimination under Title VII and other discrimination statutes, employers must carefully design diversity programmes to avoid legal claims by employees who claim to have been disfavoured or excluded by diversity initiative programmes.
Further complicating matters for US federal contractors, the Office of Federal Contract Compliance Programs (OFCCP) has set forth regulations for contractors to benchmark, inquire and take positive action to ensure appropriate representation of veterans and individuals with disabilities. In 2015, the OFCCP extended protections against workplace discrimination by prohibiting discrimination based on sexual orientation and gender identity by federal contractors and subcontractors. In 2016, the OFCCP revised its Sex Discrimination Guidelines for the first time in more than four decades. The final rule outlined sex-based discriminatory practices that contractors must identify and eliminate, and clarified how contractors must take affirmative action to ensure that hiring and employment practices do not adversely affect employees on the basis of sex. For employers in the US interacting with the finance sector, Section 342 of the Dodd-Frank Act establishes an office at every relevant federal agency to monitor and ensure the fair inclusion of minorities and women for every company and vendor governed by the Act.
ii Gender quotas on corporate boards
Legally mandated gender quotas on corporate boards are one effective form of positive discrimination that has taken hold in Europe. These metrics serve as a regimented means of removing inequities in the corporate board room and promoting women’s economic interests. Before the first gender quota came into effect in 2003, the problem of female under-representation was strikingly apparent. While the proportion of women in the workforce was continually increasing in most jurisdictions, this growth did not translate into increased representation on corporate boards.
Norway was the first nation to enact a legally mandated gender quota in 2003. Before the quota, women represented a meagre 6.8 per cent of board directors in Norway. In response, the Norwegian parliament approved a rule requiring corporate boards to consist of 40 per cent women by 2008. The quota applies to all publicly owned corporations and public limited liability companies in the private sector. Affected corporations had until 1 January 2006 to voluntarily comply with the quota rule, after which time compliance became mandatory. The result was full compliance with the mandate by 2009, and in 2010 the percentage of female directors had increased to 40.3 per cent. The gender quota law has had and continues to have an undeniably positive impact as evidenced by Norway’s No. 2 ranking in World Economic Forum’s 2017 ‘Global Gender Gap Report’.
In the years since Norway enacted its groundbreaking gender quota, many other countries have followed suit. Belgium, France, Iceland, Italy, the Netherlands and Spain have all passed laws establishing quotas for women on corporate boards. Also, in 2015, Germany passed legislation requiring major companies to allocate 30 per cent of seats on non-executive boards to women, although this gender quota has not been as successful as its European counterparts. Specifically, non-complying companies in France and Norway, for example, face fines and other sanctions. Under the German law, however, a company that fails to fill the requisite number of board seats with women must only keep the seats empty until they are filled by female candidates. In addition, a voluntary effort known as the ‘30 per cent club’ has helped to substantially increase women’s representation on corporate boards. In Australia, the Council of Superannuation Investors and Australian Institute of Company Directors each launched initiatives to achieve 30 per cent female representation on Australian Security Exchange 200 boards by the end of 2017 and 2018, respectively. A number of other countries also have laws that require that gender be taken into account in appointing board members and that companies report on the gender balance of their boards. And in November 2013, the European parliament voted in favour of legislation proposed in 2012 that would set an objective, by 2020, of 40 per cent women among non-executive directors of companies listed on stock exchanges. Further in 2017, the European Commission announced its plans to advocate for a similar gender quota. Legally mandated gender quotas are also starting to appear outside Europe as well. In 2011, for example, Malaysia’s Ministry of Women, Family and Community Development succeeded in passing an amendment to the 2004 regulation requiring 30 per cent female directors on boards in the public sector. Similarly, Brazil has a 40 per cent target, by 2022, for female representation on the board of state-controlled enterprises; India’s Companies Act, 2013, requires prescribed classes of companies to have at least one female board member; Israel and the United Arab Emirates require all companies and government agencies to have at least one woman on the board; and in 2014 Japan’s Prime Minister Shinzo Abe announced the goal of increasing the percentage of women in executive positions at Japanese companies to 30 per cent by 2020, and on 1 April 2016 a new law in Japan that promotes women’s career activities took effect that requires private and public sector Japanese companies with over 300 employees to disclose gender diversity targets.
iii Pay equity regulation
Equal pay for men and women has also become a hotly discussed topic around the globe. In the area of pay disparity, gender creates the widest gaps of any protected characteristic.
In the US, the issue has become a linchpin of congressional debate in the last few years. In January 2009, President Obama signed into law the Lilly Ledbetter Fair Pay Act to supplement existing pay equity legislation. The Act effectively extends the time in which an individual can bring an equal pay discrimination claim. In 2014, President Obama signed a Presidential Memorandum that required federal contractors to submit data on employees’ compensation by race and gender to help ensure fair pay. In addition, in 2016, the US Equal Employment Opportunity Commission announced new EEO-1 pay equity reporting requirements to assess allegations of pay discrimination and to provide equal pay for equal work by increasing transparency. Notably, however, some of these actions have been rolled back by the Trump administration. For example, in 2017, President Trump signed an executive order that revoked the ‘Fair Pay and Safe Workplaces’ rule that was enacted by President Obama’s executive order in 2014. Additionally, the Trump administration effectively froze the aforementioned 2016 equal pay data collection rule. In several US jurisdictions, including California, Connecticut, Delaware, Illinois, Maryland, Massachusetts, Nebraska, North Dakota, New York, Oregon, Puerto Rico and Utah, governors have signed measures into law aimed at narrowing the gender wage gap and closing loopholes that employers use to defend unfair wage practices.
Other countries also continue to confront pay disparity issues. Although foundational treaties in the EU guarantee equal pay for work of equal value for all citizens, the gap between men and women’s hourly gross earnings throughout the entire EU remains at approximately 16 per cent, and several Member States have adopted remedial measures in recent years. The French parliament introduced legislation in 2006 that required firms to develop a framework to eliminate pay disparity by 2010, and in the United Kingdom, the Equality Act 2010 obligates a corporation with over 250 employees to disclose pay information with the intent to expose gender discrepancies. In 2014, the European Commission published a recommendation focusing on pay transparency that proposed measures for Member States to facilitate wage transparency in companies, such as improving the conditions for employees to obtain information on pay or establishing pay reporting and gender-neutral job classification systems from companies, among others. In 2017, Germany’s Pay Transparency Act came into effect, which grants employees in companies with more than 200 workers access to information about how their wages compare to their colleagues’ and provides for mandatory pay equity reporting for companies who employ 500 or more employees. The issue of pay equity has garnered attention outside the EU as well. In the Philippines, for example, the Senate approved a bill in 2012 that would protect women from discriminatory compensation policies in all areas, including wages, salary and employment benefits.
iv Sexual and moral harassment policies
A recent uptick in sexual and moral harassment legislation also evidences an increased focus on diversity awareness and sensitivity in the workplace. Developments in India have focused on gender and gender programmes, with India’s Supreme Court recognising the legal rights and status of transgender individuals as a ‘third’ gender and the Indian parliament’s enactment of a wide-reaching sexual harassment law. The sexual harassment law mandates workplace committees and a range of penalties to protect women from unwelcome sexual advances, comments and conduct in the workplace. This law is unique in that it also covers third parties in the workplace, including clients, customers and daily wage workers. Similarly, other Asian nations such as Bangladesh, Nepal and Pakistan recognise a legal third gender for intersex and transgender individuals. Among EU nations, both France and Germany recognise gender identity beyond woman and man and, in Denmark, citizens may self-determine their legal gender without any medical approval.
In the EU, some Member States have recently addressed the problem of workplace harassment by placing an affirmative duty upon employers to prevent and redress this behaviour. These Member States have implemented specific anti-discrimination and sexual harassment legislation. In Germany, the General Act on Equal Treatment, enacted in 2006, places a duty upon employers to protect employees from not only discrimination from superiors and co-workers, but from third parties, such as customers, as well. The Croatian Labour Act similarly requires that employers protect their workers from the harmful, unwanted conduct of superiors, colleagues and third parties. And sexual harassment appeared as prohibited conduct in Turkish legislation for the first time in 2003. Additionally, the EU has issued a directive on sexual harassment (Directive 2002/73/EC), which implemented the principle of equal treatment for men and women concerning access to employment, vocational training and promotion as well as working conditions.
Also interesting is the recent passage of sexual harassment legislation in several countries that have not historically focused on these issues. China, for example, passed progressive legislation that gives victims of sexual harassment a cause of action under Chinese law. In 2005, China’s national legislature amended the Law on the Protection of Women’s Rights and Interests to explicitly prohibit workplace harassment, but, at the time, the law did not impose obligations on employers to prevent harassment in the workplace. In 2012, however, the Special Provisions on Occupational Protection for Female Employees took effect and gave victims of harassment a mechanism to redress their claims under Chinese tort law. Under these regulations, unless an employer establishes a corporate anti-harassment policy, it may be liable for negligently or intentionally failing to stop harassment that it knew or should have known could occur. Similarly, in Bangladesh, the initiative to protect equal rights of women and non-discrimination has gained momentum and has successfully mobilised women to uphold their rights. The Bangladeshi government has adopted policies, legislations and strategies to empower its women. However, weak enforcement of these laws remains common.
Progress also is apparent, although not as far-reaching, with respect to anti-discrimination initiatives for lesbian, gay, bisexual and transgender (LGBT) employees in the global workplace. In Europe, the EU’s Charter of Fundamental Rights was the first international instrument to explicitly include the term ‘sexual orientation’, and Article 13 of the European Commission Treaty prohibits discrimination based on sexual orientation. Also, Article 19 of the Treaty on the Functioning of the European Union provides that the EU will ‘combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation’. Member States vary in their application of this anti-discrimination law. The Equality Act in the United Kingdom makes it direct discrimination to treat LGBT employees unfavourably on the grounds of their sexual orientation. The anti-discrimination provision applies to all areas of employment, including terms of contracts, pay, promotions, transfers, training and dismissal. Similarly, in Germany, the 2006 General Act on Equal Treatment defines sexual orientation to encompass discrimination against transsexual and intersexual as well as lesbian, gay and bisexual employees. These policies stand in stark contrast to the laws of several countries where homosexuality and homosexual acts are legally prohibited. Countries such as Algeria, Libya, Nigeria, Singapore and Somalia permit employers to discriminate based on sexual orientation and some even punish homosexual acts with protracted periods of imprisonment.
Indicative of this dichotomy is India. As noted above, India’s Supreme Court recognised transgender people as constituting a legal third gender in April 2014, grounding its decision on rights guaranteed by the nation’s Constitution as well as international law, and determining that gender identity and sexual orientation are fundamental to the rights to self-determination, dignity and freedom. In December 2013, however, a two-person bench of the Supreme Court put a colonial-era portion of the Penal Code (Section 377), which described homosexual acts as ‘against the order of nature’ and punishable by up to life in prison, back into law after a 2009 ruling by the High Court of Delhi struck down Section 377 as unconstitutional. Although the Supreme Court ruled that only the parliament can make changes to the law that bans consensual same-sex sexual activity, a curative petition to re-examine the Supreme Court’s decision is still pending.
Stop-and-go progress on LGBT rights is a common theme around the world. In the US, the Supreme Court has paved the way for gay marriage. Additionally, several US jurisdictions have outlawed discrimination based on sexual orientation and, in 2015, the Equal Employment Opportunity Commission concluded that Title VII of the Civil Rights Act of 1964 prohibits sexual orientation or gender identity discrimination in employment because it is a form of sex discrimination. Also in 2015, New York State Governor Andrew Cuomo announced that he would take executive action to protect transgender people from discrimination in housing and employment, among other areas. Governor Cuomo noted that this action was long overdue, explaining that ‘The law left out the T’ because transgender people had been left out of previous anti-discrimination laws protecting gay and bisexual men and women. Despite this progress, including the help of the Affordable Care Act, significant barriers to provide equality to transgender individuals remain as they continue to face discrimination, harassment and barriers to access in the healthcare system, in addition to in society generally. For example, in 2016 and 2017, several states, including Arkansas, Mississippi and North Carolina, introduced or enacted anti-LGBT legislation. More recently in 2017, the Department of Justice announced that Title VII of the Civil Rights Act of 1964 does not prevent workplace discrimination based on gender identity. As mentioned above, however, the Equal Employment Opportunity Commission still considers discrimination based on gender identity as unlawful. In addition, many employers still struggle with policy decisions over health insurance coverage of transgender employees, including, for example, whether to cover sex-change surgeries. As this issue continues to make headlines, there will likely be many more legal developments on LGBT protections in the coming years.
iiI Challenges facing multinational corporations
It is clear that with such varied legislation across the globe, multinational employers must keep abreast of a panoply of regulations, laws and international policies. On top of this challenge, global corporations also may face a unique set of difficulties in implementing and administering internal diversity initiatives. These challenges include adapting an integrated diversity policy to a specific locale, gathering statistical data to measure the success of diversity programmes and understanding the complexities of the source of law and enforcement in each region.
i Global integration versus local responsiveness
In order for a global diversity policy to be successful, it must be tweaked to accommodate the culture and social context of each region and continually monitored and adjusted. Studies have shown that policies created in one country and exported to another often lack the cultural legitimacy to be effective in other management situations. Differing attitudes towards corporate diversity and distribution of power among groups are common examples of the cultural differences that make wholesale exportation of a diversity management programme difficult. For example, an overt emphasis on employee heterogeneity is uncommon in France, where it is illegal to register employees as members of an ethnic group. In China, gender stereotypes from thousands of years of feudal despotism still linger in a modernised, industrial society. As a result, lax diversity policies often result in tokenism rather than substantive change. Finally, differences in protected categories may cause difficulties in translating anti-discrimination policies aimed at remedying historical disadvantages. In Hong Kong, for instance, local ordinances prohibit discrimination on the grounds of gender, pregnancy, marital status, disability, race and family status. However, although the Labour Department has in place guidelines and codes of practice to prevent age and sexual orientation discrimination in the workplace, Hong Kong does not offer protection on the bases of age, religion or sexual orientation. Moreover, in India, caste is a protected category. International corporations should be aware of these differences throughout the implementation of an integrated diversity strategy.
ii Tracking progress
In order to gauge the success of corporate diversity policies, employers must also be able to gather statistics on employees and measure progress. However, the collection of sensitive data is difficult in light of regulations aimed at protecting data privacy. In the EU, employers collecting identifying information regarding employees must disclose the purpose of these statistics before storing and transferring the data. Employers must obtain consent from employees when seeking to use the information for purposes other than those communicated or when transferring the information to a third party for a different purpose. Indeed, the enhanced protections offered to employees under the General Data Protection Regulation, which takes effect in May 2018, further emphasises the need for multinational employers to appropriately ensure employee data protection. Moreover, individual Member States often have their own data privacy laws that further complicate data collection and reporting. The French Data Protection Act, for example, largely prohibits employers from collecting and processing ‘sensitive data’, including information relating to racial or ethnic origins, political, philosophic or religious opinions, trade union affiliation, health or sexual identity. The Act also limits the length of time that employers may store employees’ personal data. These regulations make it extremely difficult, if not impossible, for employers to track the progress of their diversity programmes.
Statutes similar to the EU model have recently come into effect in India, Malaysia, Mexico, South Africa, South Korea and the Philippines, among other jurisdictions. In India, the 2011 Information Technology Rules not only distinguishes ‘personal information’ from ‘sensitive personal information’, but also requires corporate entities that collect, process and store personal data, including sensitive personal information, to comply with certain procedures. In Malaysia, the Personal Data Protection Act 2010 imposes strict limitations on the transfer of personal data outside the country, with limited exceptions similar to those embedded within the Safe Harbor Principles. The 2010 Law on the Protection of Personal Data Held by Private Parties and the related 2011 Personal Data Regulations, 2013 Privacy Notice Guidelines and 2014 Parameters for Self-Regulation enacted in Mexico are more lax in that they allow cross-border transfer of data within a corporation as long as Mexican employees are given rights of access and objection (for a valid reason), and the corporation meets certain security requirements. In 2016, the Turkish parliament enacted the Law on Protection of Personal Data, which distinguishes the transfer of personal data to third parties in Turkey from the transfer of personal data to third countries. As a greater number of countries, including Brazil and Serbia, consider, introduce and enact detailed data protection and privacy laws, multinational corporations must continue to be sensitive to regional legislation and maintain strict compliance with local laws.
iii ‘Unconscious’ bias training
An increasingly popular trend related to diversity and inclusion initiatives is the recognition of, and mitigation against, ‘unconscious’ or ‘subconscious’ bias in decision-making through awareness training. For example, unconscious assumptions can often overlap with common stereotypes: ‘women are more emotional than men’, ‘assertive women are too ambitious’, ‘persons with disabilities cannot perform as well’, and ‘older people are out of touch with technology’. Though unconscious biases may not necessarily lead to biased decisions in the workplace, they may predict discriminatory non-verbal, subtle behaviours, such as sitting further away from someone, cutting interviews short, evaluating someone more poorly or disciplining someone more frequently. These types of behaviours can lead to negative consequences, such as poor morale, bad publicity, loss of time and productivity as well as erosion or loss of client relationships.
Significantly, employment courts in the United Kingdom have long accepted that discrimination can be a result of subconscious and unintentional bias. For instance, the Equality and Human Rights Commission has written, as part of non-binding guidance, that: ‘Employers may have prejudices that they do not even admit to themselves or may act out of good intentions – or simply be unaware that they are treating the worker differently because of a protected characteristic.’ As plaintiffs’ bars around the world will likely proffer this variety of ‘evidence’ to prove indirect discrimination, companies are increasingly taking a closer look at how to eliminate less overt bias in the workplace. For example, employers can encourage employees to make thoughtful, deliberate decisions in the workplace, and can use objective frameworks, such as checklists at key decision points, to encourage less biased outcomes. While hiring and promoting employees, employers can agree beforehand to basic merit criteria, militating against any biased tendencies that may influence decision-making. Employers can also conduct regular audits of key decisions, including hiring and promotion, to ascertain whether any patterns exist that could evidence unconscious bias in any particular parts of the business, and to ensure that diverse groups of people are represented on the panel of reviewers. Companies should, however, weigh the potential downside should a record be created that may prove damaging in the event of litigation.
Both for strategic reasons and in response to recent legal developments throughout the world, highly successful multinational corporations are focused on promoting diversity in the workplace and implementing robust diversity management programmes. These corporations are grappling with a complex set of legal issues that are relatively new in many regions of the world and remain untested in the global marketplace. As developments continue to unfold in the legal landscape, corporations will have to monitor and adjust their diversity programmes to remain compliant. Corporations in the United States can serve as a model for many business entities that are just beginning to promote diversity. Owing to a highly diverse population and a history of racial, ethnic, gender and LGBT inequality, the United States has been very proactive in working towards workplace equality, although this progress is not without setbacks. Europe is quickly catching up with legislation to address the increasingly diverse population resulting from the free movement of workers throughout the European Union. As corporations become more diverse at all levels, these global initiatives not only will become more important for success in the marketplace but also will become more complex. Companies wishing to stay competitive will rely on their human resources professionals and legal advisers to aid them in navigating the wide range of regulations that affect this area.
1 Erika C Collins is a partner at Proskauer Rose LLP. The author extends special thanks to Michelle Gyves, Peter Wilson and Mindy Yang for their contributions to this chapter.
2 See, e.g., Racial Equality Directive 2000/43, 2000 OJ (L 180) 22 (EC); Employment Equality Directive 2007/78, 2007 OJ (L 303) 16 (EC).