On January 21, 2025, President Trump advanced his pledge to “take action to abolish all discriminatory diversity, equity, and inclusion” (DEI) programs “throughout the government and the private sector” by issuing the executive order (EO) “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This EO—one of several EOs directed at eliminating DEI—marks a sharp shift in federal policy, revoking multiple DEI-related directives in federal contracting, hiring, and grant funding while also signaling increased federal scrutiny of private-sector DEI practices, programs, and activities.
While it remains to be seen how agencies will interpret and enforce the EO, as agency guidance is currently being developed in accordance with the EO’s directives, employers should carefully evaluate their hiring, promotion, and retention practices to ensure compliance with existing civil rights laws.
Key Takeaways from the Executive Order
The EO seeks to ensure that the federal government “enforce[s] our civil-rights laws” by eliminating DEI policies and practices that employ “illegal preferences and discrimination.” It identifies three primary areas for enforcement: (1) federal contractors, subcontractors, and grant recipients, (2) private employers, and (3) educational agencies and institutions of higher learning that receive federal funds. Federal contractors, subcontractors, and grant recipients, in particular, must scrutinize their own activities and programs to determine the impact of the EO upon their operations and plan to act accordingly. Federal contractors with race and sex-based affirmative action programs pursuant to prior executive orders must prepare to end those programs by April 21, 2025.
Federal Contractors, Subcontractors, and Grant Recipients
- The EO revokes multiple DEI-related EOs, including EO 11246 (Equal Employment Opportunity), a longstanding Johnson-era executive order issued in 1965 that not only prohibited federal contractors[1] and subcontractors from discriminating based on race, sex, and national origin, but also required them to implement “affirmative action” programs (AAPs) based on these characteristics. EO 11246 also created the Office of Federal Contract Compliance Programs (OFCCP) within the U.S. Department of Labor (DOL) to monitor compliance with EO 11246 and other federal contracting requirements.
- As a result of the EO, federal contractors are no longer required to implement sex- or race- based AAPs or comply with the Federal Acquisition Regulation (FAR) clauses that implemented EO 11246, or other withdrawn executive orders. Federal contractors must phase out compliance with EO 11246 by April 21, 2025 (90 days from the EO’s issuance).
- The OFCCP’s enforcement authority over EO 11246 has similarly been revoked, and was shortly followed by a “no action” order from Acting DOL Secretary Vincent Micone. That directive ordered all Department employees to cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246 and its regulations. The EO also more broadly orders the OFCCP to “immediately cease” promoting diversity. However, the EO provides that it “does not apply to lawful Federal or private-sector employment and contracting preferences for veterans of the U.S. armed forces.”
- In addition to revoking affirmative action requirements, the EO introduces a new compliance measure compelling agency heads to include terms in every contract or grant award obligating the recipient to certify: (1) that it does not operate any DEI-related program that violates federal anti-discrimination laws, and (2) that its certification of compliance with federal anti-discrimination laws is material to the government’s payment decisions. It is unclear whether agencies will implement this requirement immediately or wait for the FAR Council to establish a uniform certification process.
- The EO appears to expose noncompliant federal contractors to potential liability under the False Claims Act (FCA), including through civil enforcement actions initiated by private parties via the FCA’s qui tam provisions—effectively deputizing private citizens to enforce the EO. Claims under the FCA have potential for treble damages and other monetary penalties.
The Private Sector
- The EO calls for federal agencies, with assistance from the Attorney General, to eliminate “illegal DEI” in the private sector and requires them to provide, by May 21, 2025 (120 days from the EO’s issuance), reports identifying:
- Key industries of “concern” within each agency’s jurisdiction,
- The “most egregious” DEI practitioners in those industries,
- Up to nine potential compliance investigations into publicly traded corporations, large nonprofits, professional associations, and universities, and
- Enforcement strategies, including litigation and the issuance of regulatory guidance.
- These reports are expected to set the stage for future federal investigations and enforcement actions. In this vein, eleven state attorneys general have recently issued investigatory demands to a number of financial institutions that question the legality of their DEI programs and claim those programs violate legal, contractual, and fiduciary duties. Nineteen attorneys general also sent a letter to retailer Costco demanding that the company “repeal[] its DEI policies or explain why [it] has failed to do so.”
Educational Institutions
What Hasn’t Changed
Obligations established by statute, including anti-discrimination laws and/or laws that impose affirmative action related to people with disabilities and veterans—such as Title VII, the ADA, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRA)—cannot be revoked through executive action. As a result, these laws remain unaffected by the EO.
State anti-discrimination laws similarly continue to apply.
What This Means for Employers
The immediate impact of the EO is mixed. One thing is clear: race- or sex- based affirmative action programs for federal contractors must be dismantled. Beyond that, the order stops short of banning all DEI programs, instead targeting only those deemed “illegal.” Notably, courts have held that certain DEI efforts are not illegal—such as targeted recruitment, mentorship programs, and affinity groups—when designed to expand opportunity rather than impose preferences. Even so, employers should be aware that President Trump has made statements suggesting that all DEI is unlawful discrimination, signaling that federal agencies and attorneys general may use impact litigation to push the boundaries of existing law. The recent investigatory demands by Republican attorneys general similarly suggest a new, narrow view of the legality of DEI programs as a whole.
Notwithstanding this uncertainty, there are several key takeaways for employers. All employers should carefully review their policies and programs to identify what might amount to or be considered a DEI program. Employers should stay apprised of legal and regulatory developments that will help them consider whether such policies and programs align with existing anti-discrimination laws. Employers should also be prepared for heightened scrutiny from the administration. Federal contractors and grant recipients, in particular, should be cautious given the anticipated FCA implications of compliance. We anticipate that this area may shift quickly due to court challenges and evolving policy interpretations.
[1] Federal contractors include prime contractors and subcontractors that enter into an agreement with a federal agency or the federal government for the purchase, sale, or use of property or services. Any contractor with at least $10,000 in covered federal contracts (total) over a 12-month period was required to comply with EO 11246’s nondiscrimination provisions, and any contractor with 50 or more employees and at least one federal contract of $50,000 or more were additionally subject to its AAP requirements.
