New Texas opinion flags popular DEI hiring and training tactics as legal risks
Texas’ attorney general has sharply questioned corporate-style DEI, warning HR that common hiring and training practices may clash with anti-discrimination and even securities laws.
On January 19, 2026, Texas Attorney General Ken Paxton issued Opinion No. KP-0505, a lengthy formal opinion on “Diversity, Equity, and Inclusion” in Texas. The opinion sets out his office’s position that many race- and sex-conscious policies in both the public and private sectors raise serious constitutional and statutory concerns.
The opinion devotes considerable space to state and local government programs. Paxton concludes that Texas’s “historically underutilized business” (HUB) framework, which defines eligibility partly by race, ethnicity and sex and ties agencies to utilization “goals” and “good faith efforts,” is presumptively discriminatory and fails strict scrutiny under the U.S. Equal Protection Clause and the Texas Equal Rights Amendment. He reaches similar conclusions about the state’s Disadvantaged Business Enterprise (DBE) programs and other statutes that give preferences to minority- and women-owned businesses in public contracting and bonding, or that instruct officials to consider race and sex in appointments to boards and commissions.
Those public-sector findings set the stage for the portions of the opinion aimed at private employers. Paxton describes how diversity initiatives have evolved into a “multi-billion dollar industry” and then examines how specific corporate practices might interact with federal and state law.
For hiring and promotion, the opinion points to demographic hiring targets, diversity mandates for boards, and pipelines such as internships and fellowships that are open only to certain demographic groups or where race or sex is treated as a plus factor. It says that when employers give formal weight to race or sex in these decisions, they risk disparate-treatment liability under Title VII and the Texas Commission on Human Rights Act, and race-based liability under Section 1981 when contracts or jobs are allocated differently by race.
The opinion also highlights DEI-linked compensation. It notes the use of DEI metrics in executive and management incentive plans and suggests that tying bonuses or performance reviews to representation goals can support an inference that race or sex was a motivating factor in employment decisions. It cites case law in which “balanced workforce” goals and diversity-linked evaluation systems were treated as evidence of intentional discrimination.
Paxton then turns to internal programs such as employee resource groups, mentoring and training. He states that programs, opportunities or benefits limited to particular racial or gender groups can be challenged as discrimination in the “terms, conditions, or privileges” of employment. The opinion also discusses diversity training that uses broad stereotypes or themes of inherent bias and collective guilt, and notes federal decisions where courts scrutinised similar trainings in hostile work environment claims.
Supplier diversity is another area the opinion connects to legal risk. It describes corporate efforts to steer spending to minority- or women-owned suppliers and notes that, where access to contracts turns on race, Section 1981’s guarantee of equal rights to make and enforce contracts may be implicated.
A distinctive section addresses securities and fiduciary law. Paxton explains that federal and Texas securities regimes require full and fair disclosure of material risks, and argues that DEI initiatives that expose a company to discrimination claims or boycotts could be material to investors. He also invokes the Investment Advisers Act of 1940 and Texas authorities to emphasise that investment advisers owe duties of care and loyalty, must disclose conflicts, and should not favor non-financial DEI objectives over client interests without appropriate disclosure.
The opinion does not itself invalidate statutes, rewrite regulations or impose penalties. Courts would ultimately decide whether the specific state programs it critiques are unconstitutional, and whether any particular DEI policy at a private employer violates Title VII, the TCHRA, Section 1981 or securities law. But the document makes clear that the attorney general’s office views many explicit race- and sex-conscious measures with suspicion.
For HR leaders, especially at organisations that operate in Texas or deal with Texas public entities, the signal is straightforward. Policies that rely on race or sex as eligibility criteria, selection factors, or numeric targets in hiring, promotion, pay, training, internal programs or supplier selection are more likely to attract legal challenge under the framework laid out in this opinion. Inclusion efforts grounded in equal treatment, job-related criteria and race-neutral methods sit on firmer ground within the approach the attorney general describes.
