US tech company HP has threatened to withhold up to 10% of costs invoiced by law firms if they do not meet minimum diversity requirements.

In a letter sent to law firm partners last week, Kim Rivera, chief legal officer and general counsel, said HP has implemented a ‘diversity holdback’ mandate. 

Explaining the initiative, Rivera said HP’s vision ‘is to create technology that makes the world a better place for everyone, everywhere. To achieve that vision, business leaders must represent diversity of our customers and stakeholders’.

With women representing more than 55% of HP’s workforce in the legal function, Rivera said HP have invested in driving diversity at all levels, ‘and I expect no less from our outside law firm partners. I believe we can all do better’.

HP can withhold up to 10% of all amounts invoiced by law firms that do not meet or exceed HP’s 'minimal' diverse staffing requirements.

The programme will apply to US-based firms with 10 or more attorneys. Firms must have at least one ‘diverse firm relationship partner’, regularly engaged with HP on billing and staffing issues, or at least one woman and one racially or ethnically diverse attorney, each performing or managing at least 10% of the billable hours worked on HP matters.

The policy applies to race or ethnicity, gender, LGBT (lesbian, gay, bisexual and transgender) status, and disability status.

A female, racially or ethnically diverse attorney who performs or manages at least 10% of the billable hours would meet the requirement.

‘As the name suggests, the staffing is a minimum and more diverse composition of HP teams than required by the diversity handbook provision will be viewed favourably,’ HP says.

The provision will not come into effect until the second year of HP’s engagement with a firm. ‘So, even for those firms that do not immediately meet minimal diverse staffing, there will be ample time to work toward achieving the metric,’ HP says.

However, HP says many firms already have teams that meet minimum requirements, so the holdback provision ‘will likely never apply’.

HP was founded in 1939 by Bill Hewlett and Dave Packard, who began part-time work the previous year in a rented garage with $538 in working capital, consisting of cash and a used drill press. In 1973 it became was the first company in the US to institute flexitime and in 1999 the first Fortune 20 company to appoint a woman as chief executive. The current chief executive is also a woman. 

In the letter, Rivera told partners that HP has made diversity an ‘explicit business goal’, highlighting that the company has the most diverse board of directors in the technology industry, and is one of the top technology companies in relation to women and underrepresented minorities in executive positions.

Rivera added: ‘I am counting on your courage and vision to support both the letter and spirit of the “diversity holdback” provision. We hope it will serve as a meaningful tool to improve diversity in our organisations and on our working teams.’