Real World Impact: On January 21, 2025, on his second day in office, President Trump issued an Executive Order entitled “Ending Illegal Discrimination And Restoring Merit-Based Opportunity” (the “Executive Order”). The Executive Order revokes, among other things, Executive Order 11246, and calls for the end of “illegal” and “immoral” “diversity, equity, inclusion, and accessibility (DEIA)” preferences and discrimination that “can violate the civil-rights laws of this Nation.”
Federal contractors have 90 days from the date of the Order during which they “may” continue complying with Executive Order 11246.
Background
Executive Order 11246, signed into law by Lyndon B. Johnson in 1965 to combat employment discrimination and thereafter amended multiple times, required federal contractors and subcontractors to “take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, sexual orientation, gender identity, or national origin.” EO 11246 was included in virtually all government contracts and many financial assistance agreements. The Office of Federal Contract Compliance Programs (OFCCP), a federal agency under the DOL, was charged with enforcing Executive Order 11246, along with the Vietnam Era Veterans’ Readjustment Act of 1974 (VEVRAA) and Section 503 of the Rehabilitation Act of 1972 (Section 503). In doing so, OFCCP conducted audits of neutrally selected contractors and subcontractors, as well as complaint investigations, to enforce these nondiscrimination requirements and ensure contractors and subcontractors were taking action to recruit diverse, qualified applicants.
Requirements of the Order “Ending Illegal Discrimination And Restoring Merit-Based Opportunity”
The Executive Order directs the OFCCP to “immediately cease” all of the following:
(A) Promoting “diversity”;
(B) Holding federal contractors and subcontractors responsible for taking “affirmative action”; and
(C) Allowing or encouraging federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.
Following on the heels of the Executive Order, Acting Secretary of Labor Vincent Micone issued a Secretary’s Order, effective immediately, ordering all DOL employees, including the OFCCP, Office of Administrative Law Judges, and the Administrative Review Board, to “immediately cease and desist all investigations and enforcement activity under the rescinded Executive Order 11246.” As a result, all pending cases, conciliation agreements, investigations, complaints, and any other enforcement-related or investigative activity was halted. Contractors and subcontractors with open reviews or investigations should be receiving notification by January 31, 2025, that the EO 11246 portion of the review or investigation has been closed, and the Section 503 and VEVRAA components of the review or investigation are being held in abeyance pending further guidance.
Statutory Obligations Remain in Place
Although the full impact of the new Executive Order remains to be seen, it is important to note that the OFCCP’s enforcement of VEVRAA and Section 503 is not impacted by the Executive Order. As Section 503 and VEVRAA are statutory, they remain in effect and must continue to be followed. Likewise, federal contractors and subcontractors must continue complying with nondiscrimination, antiharassment and antiretaliation obligations under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act and the Equal Pay Act.
Annual Federal Reporting Obligations Remain in Place
All employers, including contractors and subcontractors, with at least 100 employees must continue filing annual EEO-1 reports, and contractors with federal contracts or subcontracts valued at $150,000 or more must continue filing annual VETS-4212 reports.
New Certification Obligation
As previously mentioned, in addition to rescinding EO 11246, the Executive Order also speaks to ending “illegal” race- and sex-based preferences allegedly contained in DEIA programs that may violate civil rights laws. Specifically, it seeks to eliminate DEIA initiatives that preference a specific race or gender/ethnicity, and requires the heads of every government agency to include in contracts and grant awards a term requiring the contractual counterparty or grant recipient to (a) agree that its compliance “in all respects” with all applicable federal antidiscrimination laws “is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code"; and (b) “certify” that it does not “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” Based on these certifications, if a contractor is found to have submitted a request for payment while maintaining an “illegal” DEIA program, it could be subject to False Claims Act liability. It remains to be defined which types of programs or activities may be considered “illegal” DEIA under the Executive Order.
Implications for Private Employers
Although the Executive Order does not apply to private employers generally, it includes a provision titled “Encouraging the Private Sector to End Illegal DEI Discrimination and Preferences.” This provision directs the heads of all agencies, with the assistance of the Attorney General, to take action to advance in the private sector the policy of “individual initiative, excellence, and hard work.” To accomplish this, the Executive Order requires recommendations and a proposed strategic enforcement plan within 120 days for enforcing federal civil rights laws and encouraging the private sector to end illegal discrimination and preferences, including DEI, which should identify:
- key sectors of concern within each agency’s jurisdiction;
- “[t]he most egregious and discriminatory DEI practitioners in each sector of concern”;
- a specific plan to deter DEI programs or principles (whether or not they are officially called “DEI”) that constitute “illegal” discrimination or preferences;
- identification of up to 9 potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of $500 million or more, state and local bar and medical associations, and institutions of higher education with endowments of over $1 billion;
- identification of litigation that would be potentially appropriate for federal lawsuits, intervention or statements of interest; and
- proposals for potential regulatory action and sub-regulatory guidance.
For a more detailed discussion of the potential impact of the president’s recent Executive Orders on private employers’ DEI programs and initiatives, please see our January 27, 2025 Alert, Will the Elimination of Efforts in the Federal Sector to "Build a Workforce That Reflects the Diversity of America" Impact the Private Sector?
Next Steps for Employers
- Continue preparing VEVRAA and Section 503 Affirmative Action Plans and abide by state and local affirmative action statutory or contractual requirements.
The Executive Order does not revoke VEVRAA or Section 503 obligations and does not impact state and local affirmative action requirements. Therefore, contractors and subcontractors should continue to prepare annual VEVRAA and Section 503 AAPs. Contractors should also consider whether they want to continue analyzing personnel activity data annually (hires/promotions/terminations) in the context of confirming compliance with antidiscrimination laws, or in relation to any obligations that may exist outside of EO 11246. Without the restrictions of analyzing data by job groups, as was required under EO 11246, contractors have flexibility to review their data in groupings that make the most sense based on how they make employment-related decisions. Also, contractors should continue engaging in their privileged pay analysis practices to support compliance with existing federal law and state pay transparency and pay reporting requirements.
- Audit DEIA initiatives and programs to confirm legal compliance.
It appears from the Executive Order that there is a presumption that affirmative action efforts and DEIA programs are necessarily the equivalent of illegal quotas or preferences. This is not, however, the case. Indeed, it has always been unlawful under Title VII to have race-, gender- or ethnicity-based preferences in employment.
DEIA efforts generally exist to make available opportunities for historically underrepresented groups to be considered for opportunities – based on their individual initiative, excellence and hard work – with the best qualified candidate being selected for the position or promotion, without regard to the individual’s race, gender or ethnicity.
With this in mind, DEIA programs that focus on equity in opportunity (not outcome), mentorship and leadership development programs that do not involve preferential treatment remain legally permissible. Programs that are race and gender neutral also continue to be legally permissible, such as scholarships or mentoring programs supporting individuals with disabilities, first generation college graduates, or internships for disadvantaged college students, or professional development opportunities for veterans.
On the other hand, DEIA programs that create explicit race-, gender- or ethnicity-based preferences, targeted diversity scholarship or internship programs that focus on a specific race, gender or ethnicity, and other programs that either prioritize or exclude specific demographic groups will likely face scrutiny. In addition, employers should not financially incentivize managers or other members of leadership to meet diversity goals, as EEOC has publicly stated that such incentives can be evidence of discriminatory intent.
Employers with DEIA programs should take stock of their programs, initiatives and trainings and conduct a privileged review to confirm they are in compliance with the Executive Order and legal precedent. In the end, all employers should remember that they should always hire and promote the most qualified candidate and treat employees and candidates as individuals with their own unique strengths, weaknesses and life experiences. Removing barriers to inclusion remains a legally compliant way to promote DEIA.
- Remain vigilant in keeping up to date with new legal and executive order developments.
Right now, it is unclear when and how EO 11246 requirements will be removed from existing federal contracts, and when related FAR clauses may be rescinded. It is also unclear at this time what federal contracting and grant clauses might say in the future regarding discouraging “illegal” DEI programs and how they will be enforced, not to mention what specifically might be deemed “illegal” DEI. We anticipate additional guidance as OFCCP’s mission is defined by the current Administration, and as the agencies and Attorney General create the aforementioned strategic enforcement plan, and the new certification requirement is fleshed out.
As this is a developing topic, and compliance obligations are rapidly evolving, we will issue additional legal alerts on these topics as more information and guidance is received.
If you have any questions regarding the Executive Order or what your next steps should be, please contact the authors of this Alert, Nancy Holt, Affirmative Action Compliance Group Partner, at nholt@fordharrison.com, and Erica Johnson, attorney in our Memphis office and member of FordHarrison’s Affirmative Action/OFCCP Compliance practice group at ejohnson@fordharrison.com. Of course, you can also contact the FordHarrison attorney with whom you usually work or any member of the Affirmative Action/OFCCP Compliance practice group.