Recent years have shown an increase in challenges to diversity, equity, and inclusion (DEI) programs in the courts across all types of organizations and industries. Holdings have typically been narrowly defined, but subject matter experts have anticipated that the legal logic arguably would apply to DEI programs in a much larger capacity. This thinking has led to increased scrutiny of related practices such as equal employment opportunity (EEO) and affirmative action plans (AAP).
The Trump Administration has accelerated this examination from speculation to action. On January 21, 2025, a new Executive Order (EO) titled “Ending Illegal Discrimination And Restoring Merit-Based Opportunity” was issued. This EO revokes a variety of federal DEI, AAP, and EEO related EOs and presidential memoranda. Most notably, EO 11246 which required that federal contractors and subcontractors comply with nondiscrimination and AAP obligations for women and minorities. There is still plenty of uncertainty in how this will impact the industry, but it is important for federal contractors to gain an understanding of the EO requirements, current agency guidance, and what they should be doing now to position themselves for compliance in the future.
Summary of the New Executive Order
While this EO creates significant impacts it does not have a sweeping effect on DEI, AAP, and EEO obligations. The EO does impact the following:
- EO 11246 nondiscrimination and AAP requirements for women and minorities are no longer operative.
- Agencies are to start including in every contract or grant award a term requiring agreement that companies are compliant in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code.
- Agencies are to start requiring an active certification from companies that they do not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.
- There are also various enforcement priorities for private and higher education institutions to be promoted which will be further reported on in the next few months.
The EO does not address a large collection of other requirements in this space such as:
- The Vietnam Era Veterans’ Readjustment Act of 1974 (VEVRAA) which requires nondiscrimination and AAPs for covered veterans.
- Section 503 of the Rehabilitation Act of 1973 (Section 503) which requires nondiscrimination and AAPs for covered individuals with disabilities.
- General federal nondiscrimination laws such as Title VII of the Civil Rights Act of 1964, the Equal Pay Act, and the Age Discrimination in Employment Act.
- Various state requirements on EEO, AAP, and DEI which are anticipated to increase in light of these changes.
Agency Guidance Following the EO
Agencies who have historically been responsible for enforcing these various requirements have come forward with limited guidance following the EO.
Office of Federal Contract Compliance Programs (OFCCP)
Date: 1/23/2025
Issued a bulletin in response to the new EO which states the OFCCP shall immediately cease:
- Promoting “diversity”.
- Holding Federal contractors and subcontractors responsible for taking “affirmative action”; and
- Allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.
It notes that federal contractors may continue to comply with their current programs for the next 90, that they will continue to enforce obligations for protected veterans and individuals with disabilities, and further guidance will be forthcoming.
Department of Labor (DOL)
Date: 1/24/2025
Issued an order restating the intent for all agencies to halt enforcement activity related to women and minorities under EO 11246. However, this order further notes that all reviews or investigations for veterans and individuals with disabilities are being held in abeyance pending further guidance.
Federal Contractor Best Practices to Action Now
In totality, federal contractor obligations to DEI, EEO, and AAP have not ended despite some statements from the administration that all DEI is unlawful discrimination. Rather, companies will need to rework their existing programs, policies, trainings, and various practices to bring them into compliance with this new regulatory framework. While this is likely to be a shifting target as we await further guidance, it seems clear that the government will begin looking for DEI programs the administration deems unlawful, employees may start raising challenges, and the potential for litigation and false claims has gone up.
We have already seen some agencies and federal contractors in the space taking action. The General Services Administration (GSA) issued a Policy Statement regarding their intent to suspend enforcement of contractual DEI terms in their existing agreements. It is anticipated that other agencies will follow this practice meaning we could have different applications of DEI requirements on an agency-by-agency basis until overarching guidance is provided. Federal contractors have responded in various ways as well. Several large federal contractors have already begun eliminating their DEI programs. Others, despite the risks, have leaned in and reinforced their commitment to DEI. While a majority are making changes to their established practices but will still have DEI programs in place.
Federal contractors should have a DEI, EEO, and AAP assessment completed and develop a strategy for ensuring their programs are conducted within the bounds of these new requirements. This assessment may include, but is not limited to, reviewing the following:
- Internal and external communications (including overall use of the terms DEI & EEO)
- Hiring, promotion, performance monitoring, termination, and other personnel management practices
- Code of ethics, employee handbooks, AAPs, and other policy reviews
- Review of training programs, verbiage used, and education initiatives
- Supplier diversity
- Mentorship, internship, and succession programs
- Retirement, leave, and other benefit programs
- Complaint, notice, and reporting systems
- Internal affinity groups, engagements, and philanthropy
BDO is well positioned to assist companies with maintaining a compliant DEI program as still mandated by various laws while monitoring and updating our clients with developments in this evolving space.