Consultant Diversity Labs Forced to Shut Down After DEI Investigation by FTC

An investigation by the Federal Trade Commission into diversity, equity and inclusion at a consultancy for law firms and legal departments has forced the company to shut down.

The FTC said Diversity Lab LLC used “discriminatory DEI employment practices” in creating what it called the Mansfield Certification, which was meant to focus on “opening the door wider by expanding and considering a broader pool of qualified talent for all leadership roles and activities,” according to Diversity Labs.

The FTC found the Mansfield Certification was based on law firms’ “adherence to common DEI hiring standards, including quotas based on race, gender, and other demographic characteristics.” Through the program, law firms confirmed they considered candidate pools made up of at least 30% individuals with particular characteristics, FTC said.

“Hiring on the basis of protected characteristics rather than on merit is as immoral and un-American as it gets,” said FTC Chairman Andrew N. Ferguson, in a statement. “Colluding with your competitors to set race-based quotas for hiring is not only immoral, but it also may violate the antitrust laws. The FTC will not tolerate agreements rigging the labor markets.”

Ferguson said the FTC at the start of the year sent dozens of “warning letters” to law firms that participated in the Diversity Lab program. This created financial pressure that put Diversity Lab on the verge on bankruptcy, according to an open letter by its founder, Caren Ulrich Stacy, published in The American Lawyer.

On what is left of its website, Diversity Lab said it closed “not because we violated any laws, but because we ran out of options and funds to defend ourselves against the FTC’s false accusations.” It also faced scrutiny from the Department of Justice and Equal Employment Opportunity Commission.

Diversity Lab said 600 law firms and legal departments were providing data that showed the Mansfield Certification “expanded access to opportunity and increased transparency for everyone, leading to more inclusive workforces and stronger businesses.”