California DEI laws split along a clean line: public agencies, schools, and universities operate under a constitutional ban on preferential treatment, while private employers work under anti-discrimination statutes that permit voluntary diversity efforts but prohibit using protected characteristics to decide who gets hired, promoted, or fired. Layered on top are concrete compliance duties, pay data reporting, pay transparency in job postings, and harassment prevention training, that apply regardless of how a company frames its DEI philosophy. Federal policy changes in 2025 added a further constraint for companies holding federal contracts.
Why Public and Private Employers Follow Different Rules
Proposition 209, which California voters approved in 1996, applies only to the public sector. It added Section 31 to Article I of the California Constitution and bars state and local government from discriminating against or granting preferential treatment to any individual or group based on race, sex, color, ethnicity, or national origin in public employment, public education, or public contracting.1Justia Law. California Constitution Article I Section 31 “State” is read broadly: cities, counties, school districts, community college districts, the University of California, California State University, and special districts are all covered.
Private employers are not. Their primary framework is the Fair Employment and Housing Act, which prohibits discrimination but, unlike Proposition 209, leaves room for voluntary diversity programs within limits set by state and federal anti-discrimination law. The practical result is that the same DEI initiative, a demographic hiring target, for example, can be flatly unconstitutional at a city agency and merely risky at a private company down the street.
What Public Agencies and Universities Can and Can’t Do
Under Proposition 209, race-based quotas in government hiring, gender-based set-asides in contracting, and ethnicity-weighted admissions formulas at public universities are all unconstitutional. The bright line is the final decision: if a demographic characteristic tips the scale in who gets hired, admitted, or awarded a contract, the policy violates Section 31.
That still leaves meaningful room to act. The California Supreme Court has held that Section 31 does not prohibit all affirmative action programs or preclude government entities from taking a wide range of proactive steps to extend opportunities in employment, education, and contracting.2California State Senate. Proposition 209 and the Courts – A Legal History Targeted recruitment aimed at underrepresented communities is permissible as long as the hiring decision itself stays merit-based and demographic-neutral. Contracting offices can broaden their bidder pools using race-neutral criteria such as small business status or socioeconomic disadvantage. Mentorship, pipeline, and training programs are fine. Public universities cannot consider race, sex, or ethnicity in admissions, but they can use holistic review that weighs socioeconomic background, personal challenges, and achievement relative to opportunity.1Justia Law. California Constitution Article I Section 31
Two carve-outs matter. Subsection (e) of Section 31 preserves actions necessary to maintain eligibility for federal programs where losing eligibility would cost the state federal funds, which lets public entities comply with federal grant conditions that include diversity-related requirements.3Legislative Analyst’s Office. Proposition 209 – Prohibition Against Discrimination or Preferential Treatment by State and Other Public Entities The provision also preserves bona fide sex-based qualifications reasonably necessary to the operation of public employment, education, or contracting, and it does not invalidate court orders or consent decrees that were already in force when it took effect.1Justia Law. California Constitution Article I Section 31
In K-12 education, California law pushes in the opposite direction from admissions. Education Code Section 60040 requires school governing boards to adopt instructional materials that accurately portray the cultural and racial diversity of society, including the contributions of Native Americans, African Americans, Latino Americans, Asian Americans, Pacific Islanders, LGBTQ+ Americans, persons with disabilities, and members of other ethnic, cultural, and socioeconomic groups. Section 60044 prohibits adopting materials that reflect adversely on people based on race, ethnicity, gender, religion, disability, nationality, or sexual orientation.4California Legislative Information. California Education Code Division 4 Title 2 Part 33 Chapter 1 Article 3 Academic support programs are permissible so long as they remain open to all students without demographic preferences.
What Private Employers Can and Can’t Do
FEHA applies to employers with five or more employees and prohibits discrimination based on race, color, national origin, ancestry, religion, age (40 and over), disability, sex, gender identity, gender expression, sexual orientation, medical condition, genetic information, marital status, military or veteran status, and reproductive health decision-making.5California Civil Rights Department. Employment California’s CROWN Act expanded the definition of race to include traits historically associated with race, such as hair texture and protective hairstyles.
Private employers can voluntarily pursue diversity goals, set internal targets, and run affinity groups or mentorship programs. What they cannot do is let those efforts cross into employment decisions that disadvantage someone because of a protected characteristic. A DEI initiative that results in an employee being denied a promotion or terminated based on race or sex violates FEHA the same way traditional discrimination does. The exposure is substantial: FEHA remedies include back pay, front pay, compensatory damages for emotional distress, punitive damages, and attorney’s fees, with no statutory cap on compensatory or punitive damages.
Federal Title VII adds a second constraint. In March 2025, the EEOC and Department of Justice jointly warned that DEI initiatives, policies, and programs “may be unlawful if they involve an employer or other covered entity taking an employment action motivated—in whole or in part—by an employee’s or applicant’s race, sex, or another protected characteristic.”6U.S. Equal Employment Opportunity Commission. EEOC and Justice Department Warn Against Unlawful DEI-Related Discrimination EEOC guidance has long recognized that voluntary affirmative action plans can be lawful if they are designed to break down patterns of segregation, operate as a reasoned program rather than isolated acts, remain in effect only as long as necessary, and avoid unnecessary restrictions on opportunities for the broader workforce.7U.S. Equal Employment Opportunity Commission. CM-607 Affirmative Action California employers now need to satisfy both FEHA and Title VII, and the federal enforcement posture has made that balance more demanding than it was a few years ago.
Pay Data Reporting and Pay Transparency
Government Code Section 12999 requires private employers with 100 or more employees to submit annual pay data reports to the California Civil Rights Department. The 100-employee threshold is counted nationwide, so a company based elsewhere with only a handful of California workers can still be covered. Employers that use 100 or more workers through labor contractors must file a separate report covering those workers.8California Civil Rights Department. California Pay Data Reporting Reporting year 2025 data is due by May 13, 2026.
Penalties for failing to file are set in statute. A court can impose a civil monetary penalty of up to $100 per employee for a first failure to file and up to $200 per employee for subsequent violations, plus the state can recover its costs of seeking a compliance order.9California Civil Rights Department. 2025 California Pay Data Reporting Handbook
SB 1162 also requires employers with 15 or more employees to include the pay scale, the salary or hourly wage range the employer reasonably expects to pay, in every job posting. If a company uses a third party to post openings, it must provide the pay scale to that third party, which must include it in the listing.10California Legislative Information. Senate Bill 1162 Violations carry penalties from $100 to $10,000, with the Labor Commissioner weighing the totality of the circumstances including prior violations. For a first offense, no penalty is assessed if the employer shows it has updated all current postings to include the pay scale.
Required Training
Every California employer with five or more employees must provide sexual harassment prevention training every two years: at least two hours for supervisors and at least one hour for nonsupervisory employees. New nonsupervisory hires must be trained within six months of hire; new supervisors within six months of taking on supervisory duties. Seasonal or temporary employees hired for less than six months must be trained within 30 calendar days or 100 hours worked, whichever comes first.11California Civil Rights Department. Sexual Harassment Prevention Training – Information for Employers The curriculum must cover federal and state anti-harassment law, prevention and correction, available remedies, practical examples, harassment based on gender identity, gender expression, and sexual orientation, and prevention of abusive conduct.12California Legislative Information. California Government Code Section 12950.1 Skipping the training does not trigger a standalone penalty, but it strips the employer of a key defense if a harassment claim is filed.
Healthcare employers face additional obligations. Under AB 1407, nurses licensed in California must complete one hour of implicit bias training through a board-approved provider within the first two years of licensure, and nursing school graduates must complete one hour as a graduation requirement. Hospitals providing perinatal care must implement evidence-based implicit bias programs for all healthcare providers involved in that care.13California Legislative Information. AB 1407 – Nurses – Implicit Bias Courses
Board Diversity Mandates Are No Longer Enforceable
California twice tried to mandate demographic diversity on corporate boards, and both laws were struck down. SB 826, enacted in 2018, required publicly traded companies headquartered in California to have minimum numbers of women on their boards. AB 979, enacted in 2020, extended similar requirements to directors from underrepresented communities, defined to include individuals who self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, Alaska Native, gay, lesbian, bisexual, or transgender.14California Legislative Information. AB 979 In 2022, Los Angeles Superior Court judges struck down both laws as violations of the California Constitution’s equal protection clause. The penalties that would have applied under AB 979, which reached $100,000 for a first violation and $300,000 for subsequent violations, are no longer enforceable. Companies can still pursue board diversity voluntarily, but there is no state-imposed minimum.
Federal Contractors Face an Added Layer
In January 2025, President Trump signed Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The order revoked EO 11246, which since 1965 had required federal contractors to take affirmative action to ensure equal employment opportunity. EO 14173 instead requires federal contractors to certify that they do not operate any DEI programs that violate applicable federal anti-discrimination laws, and that certification is deemed material for purposes of the False Claims Act.6U.S. Equal Employment Opportunity Commission. EEOC and Justice Department Warn Against Unlawful DEI-Related Discrimination A false certification could expose a contractor to treble damages and per-claim penalties.
For California employers holding federal contracts, this creates genuine tension. California law encourages pay equity reporting, harassment prevention training, and voluntary diversity work. Federal policy now treats certain DEI programs as potential evidence of discrimination. Enforcement is still developing, but one thing is clear: programs that grant preferences based on protected characteristics in hiring or promotion face heightened risk under both state and federal law, while programs focused on broadening applicant pools, removing bias from evaluation processes, and ensuring equal access to mentorship sit on much safer ground under both frameworks.
Employees Who Refuse or Report Are Protected
Labor Code Section 1102.5 prohibits employers from retaliating against workers who disclose information they reasonably believe reveals a violation of state or federal law, whether the disclosure goes to a government agency, a supervisor, or anyone with authority to investigate or correct the problem. The statute also protects employees who refuse to participate in conduct that would violate the law.15California Legislative Information. California Labor Code Section 1102.5
The protections are broad. An employee need not prove an actual violation; the standard is reasonable cause to believe the conduct was illegal. Internal complaints to supervisors, HR, or compliance officers count as protected activity. Employees whose job duties include reporting misconduct are still protected. Retaliation covers more than termination: demotion, pay cuts, denial of promotion, negative performance reviews, reassignment, and constructive discharge all qualify.
If an employee shows that protected activity was a contributing factor in an adverse action, the burden shifts to the employer to prove by clear and convincing evidence that it would have taken the same action regardless. Employers found to have retaliated face a civil penalty of up to $10,000 per employee for each violation.15California Legislative Information. California Labor Code Section 1102.5 A poorly designed DEI program creates immediate liability here: an employee asked to participate in something that appears to violate anti-discrimination law has a legally protected right to refuse and report.
The Line Between Permissible DEI and Prohibited Preferences
Across both sectors, California law draws the same fundamental distinction. Programs that expand opportunity, remove barriers, and ensure fair processes are permissible. Programs that use protected characteristics to determine outcomes are not. For public entities, that line is constitutional and absolute under Proposition 209. For private employers, it flows from FEHA and Title VII, with some flexibility for voluntary programs that meet the criteria in federal case law and EEOC guidance.
Permissible efforts include recruiting from a wider range of communities, reviewing job qualifications for unnecessary barriers, offering mentorship and professional development open to all employees, analyzing pay equity data, and training staff on bias and harassment prevention. Prohibited conduct includes setting quotas based on demographic characteristics, using race or gender as a factor in hiring or promotion decisions, limiting access to programs or benefits by demographic group, and retaliating against employees who raise concerns about any of these practices. The safest programs focus on process rather than outcomes: making sure the system is fair, not engineering a particular demographic result.