President Trump Issues Executive Order on Diversity Efforts by Government Contractors and Private Employers

On January 21, 2025, President Donald Trump issued an Executive Order, titled Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The Executive Order rescinds affirmative action requirements in government contracting that have been in place since 1965, and instructs federal agencies to take an aggressive stance toward “illegal” diversity, equity, and inclusion” (DEI) programs and policies of government contractors and private employees. The Executive Order was issued one day after President Trump issued an Executive Order requiring all federal agencies to terminate their own “illegal” DEI programs and eliminate all Chief Diversity Officers and other DEI positions.

Summary of Executive Order

Section 2 of the Executive Order requires “all executive departments and agencies . . . to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements.” Federal agencies—including the Justice Department, Department of Labor, and the Equal Employment Opportunity Commission (EEOC)—are ordered “to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.”
Section 3 of the Executive Order addresses, in part, the Office of Federal Contract Compliance Programs (OFCCP) which, since 1965, has enforced affirmative action requirements in government contracts under Executive Order 11246 (now rescinded). The OFCCP is now required to 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. Federal contractors may continue practices under EO 11246 for 90 days.

All federal agencies are ordered to include in their contracts a requirement that the contractor agree “its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of the [False Claims Act]” and that the contractor represent and warrant that they do not “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”

Section 4 of the Executive Order is entitled “Encouraging the Private Sector to End Illegal DEI Discrimination and Preferences.” Within 120 days of the Executive Order (i.e., May 21, 2025), the Attorney General, in consultation with the heads of relevant agencies and in coordination with the Director of OMB, is required to submit a report to the President’s Domestic Policy Advisor containing a proposed strategic enforcement plan. As a part of this plan, each agency is required to identify “the most egregious and discriminatory DEI practitioners” within their agency’s jurisdiction. The agency must also identify:

up to nine potential civil compliance investigations of publicly traded corporations or other private employers;
potential federal lawsuits; and
potential regulatory action and sub-regulatory guidance.

Section 5 of the Executive Order directs the Attorney General and Secretary of Education to issue joint guidance to educational institutions and educational agencies “regarding the measures and practices required to comply with Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023).”

Notably, the Executive Order affirms that federal agencies and private employers can continue to provide preferences for veterans of the US armed forces or disabled individuals.

Takeaways

Government contractors and private employers should carefully review their diversity programs, and consult with employment counsel to ensure compliance with anti-discrimination laws.

Corporate DEI programs remain permissible, so long as they comply with any applicable federal, state, and local anti-discrimination laws.

While the Executive Order does not define “illegal” DEI, generally speaking, the federal anti-discrimination laws prohibit the use of race, gender, or other protected characteristics in hiring, promotion, firing, and other personnel decisions.

Government contractors should prepare for the increased prospect of litigation under the False Claims Act claiming that the contractor made false certifications to the government regarding “discriminatory” DEI practices.

State and local employers, including public universities, should prepare for potential federal investigations of and challenges to their DEI policies and hiring and personnel practices.

Despite the scrutiny of DEI programs and policies at the federal level, all employers remain subject to applicable state and local law including, for example, California’s and Illinois’ diversity reporting laws.