Executive Order: Ending DEI and Affirmative Action for Federal Contractors/Grant Recipients

On January 21, 2025, President Trump issued an Executive Order (EO) entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” revoking EOs from previous administrations that promoted diversity, equity and inclusion (DEI), affirmative action and equal opportunity programs.¹  Importantly, the EO revokes EO 11246 (Equal Employment Opportunity)²,  which mandated non-discrimination in employment by government contractors and subcontractors, imposed affirmative action requirements for most contractors, and was included in virtually all government contracts and many financial assistance agreements.

In addition, the EO promises guidance within the next 120 days to institutions of higher education regarding measures and practices necessary to comply with Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023).

Key Points

• The EO directs the head of each agency to include in every contract or grant award a term requiring the contractor or grant recipient to certify that they do not operate any programs promoting DEI that violate any applicable anti-discrimination laws and acknowledge that the certification is material for purposes of the government’s payment decision and therefore subject to the False Claims Act. See 31 U.S.C. 3729(b)(4).
• The EO revokes current EOs that address DEI and Affirmative Action, which will require the removal or modification of Federal Acquisition Regulation (FAR) 52.222-26, Equal Opportunity in existing federal contracts and the clause will be prohibited in new contracts.
• The EO directs federal contractors and subcontractors not to consider race, color, sex, sexual preference, religion, or national origin in ways that violate civil rights law in their employment, procurement, and contracting practices.
• The EO Directs the Director of the Office of Management and Budget (OMB) to remove all references to DEI programs in government contracts, grants, and acquisition processes.
• The EO directs the Attorney General to prepare a report for the White House, in consultation with federal agencies, within 120 days that (1) makes recommendations for enforcing federal civil rights laws and encouraging the private sector to end illegal discrimination and preferences, including DEI; (2) identifies key sectors of concern, the most egregious and discriminatory DEI practitioners and a plan to deter DEI programs or principles; (3) identifies 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; (4) identifies litigation that would be potentially appropriate for federal lawsuits, intervention or statements of interest; and (5) proposes potential regulatory action and sub-regulatory guidance.

What Does This Change Mean?

The changes detailed in the EO will require federal contractors and subcontractors to agree to new terms certifying that they do not have any DEI programs that are illegal under federal law. If the contractor is found to submit a request for payment while maintaining an “illegal DEI program” the company could be subject to False Claims Act liability. Which programs or activities fall within “DEI” is not defined in the EO. Even for employers who are not federal contractors or subcontractors, the EO is significant, as it signals the administration's position that many private-sector DEI preferences, mandates, policies, programs, and activities may be considered “illegal” under existing federal civil rights laws.

• Exceptions for Certain Categories. The EO provides an exception for federal and private-sector preferences for veterans and U.S. armed forces, and for the blind under the Randolph-Sheppard Act, 20 U.S.C. § 107 et seq.³  The EO clarifies that the EO does not prevent parties from engaging in First Amendment-protected free speech, or from teaching about the programs the EO deems unlawful.
• Statutory Obligations Remain: Despite changes to EO 11246, contractors must still comply with federal affirmative action, nondiscrimination, and reasonable accommodation requirements for disabled individuals and protected veterans.⁴  These obligations, under the Rehabilitation Act of 1973 and Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA), as well as nondiscrimination, non-harassment, and anti-retaliation obligations under Title VII, the Equal Pay Act, the Age Discrimination in Employment Act, and the Americans with Disabilities Act, are not subject to executive action.  Furthermore, all employers, including contractors, 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 submitting annual VETS-4212 reports to the Department of Labor.
• Affirmative Action Requirements That Have Been Repealed. The EO repeals EO 11246 of September 24, 1965 (Equal Employment Opportunity)⁵  which is currently implemented through FAR 52.222-6 and mandates non-discrimination in employment by government contractors and subcontractors, imposed affirmative action requirements for most contractors, and was included in virtually all contracts and financial assistance agreements for construction. Unlike many EOs, EO 11246 is codified in regulation.⁶  Federal contractors may continue operating the regulatory scheme currently in effect for 90 days from the date of the order without violating the EO.
• Changes to Regulations May Not Be Immediate. Existing contracts are not impacted until they are modified, or an entity executes a new contract with these requirements. Some of the programs revoked in the EO have been codified as regulations in the FAR and in separate Department of Labor regulations. Regulations in the FAR are added or amended through a Notice-and-Comment procedure that includes publication of the proposed rule in the Federal Register, an opportunity for public comments, publication of the Final Rule and requires a 30-day waiting period before the Final Rule takes effect. Although the Executive Branch has the power to direct federal agencies, and an EO may direct changes to regulations in the FAR, Agencies in implementing the EO will likely need to follow the Notice-and-Comment procedures. However, federal agencies have started issuing notices that they will not enforce the DEI and affirmative action provisions in current contracts. On January 22, 2025, the U.S. General Services Administration (GSA) released a notice of intent to not enforce existing contract clauses, provisions, terms, and conditions related to DEI. The GSA notice creates risk for companies from whistleblowers since it requests that anyone aware of a company disguising a DEI program should report it.⁷
• Risk to Private Sector and Universities of Targeting. The Report that the Attorney General must submit to the White House will include specific industry, non-profit and universities to target for investigations and possible litigation over alleged violations of the new policy against DEI and affirmative action. Since these terms are not well-defined, this creates risk for those targeted. This order aligns with arguments made by private groups and litigants in recent challenges to corporate DEI practices and signals that the administration may direct the U.S. Equal Employment Opportunity Commission (EEOC) and other agencies to aggressively pursue “reverse” discrimination and other claims tied to employer DEI initiatives. For instance, Andrea R. Lucas, the new Acting Chair of the EEOC, has announced plans to prioritize addressing DEI-related race and sex discrimination deemed unlawful under federal law, protecting workers from anti-American national origin discrimination, defending binary and biological definitions of sex (including women’s rights to single-sex spaces), combating religious discrimination and harassment (including antisemitism), and enforcing under-prioritized areas of civil rights law.⁸
• College and University Admissions. Within 120 days, the Attorney General and Secretary of Education are directed to issue guidance to state and local educational agencies and all institutions of higher education that receive grants or participate in Title IV assistance addressing compliance with Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023), which found that the consideration of race as a factor in the admissions process violated the 14^th Amendment.     

Adapting to New Risks and Enforcement Priorities

Contractors and grant recipients should start preparing in advance of new provisions being incorporated into existing agreements or new contracts or grants. Private-sector entities should also take note, as the EO raises questions about the broader impact on their DEI and employment practices.

• Review and Audit Current DEI Programs:Conduct a comprehensive review of existing DEI initiatives to identify and remove practices that may violate the EO or federal civil rights laws.
• Monitor for Whistleblower Risks:Establish clear compliance protocols and provide employee training to mitigate whistleblower claims, as agencies like the GSA are encouraging reports of disguised DEI programs.
• Prepare for Actions from Program Beneficiaries:Be prepared to manage potential legal or reputational challenges from employees, students, or other stakeholders affected by the elimination of DEI programs.
• Strengthen Compliance Documentation:Maintain detailed records of policy reviews, program changes, and training efforts to demonstrate compliance and reduce risks during investigations.
• Anticipate Government Action and Potential Expansion: The EO directs federal agencies to target specific sectors, including publicly traded corporations, large nonprofits, and institutions of higher education, for enforcement. The scope of enforcement could expand beyond federal contractors to purely private-sector companies, potentially reshaping DEI and employment practices across all industries. Businesses must monitor developments and prepare for sweeping enforcement efforts.
• Risks of Shareholder Lawsuits: Companies face lawsuits from shareholders for both removing DEI policies—citing financial or reputational harm—and retaining them, risking non-compliance with the EO. Strong governance, communication, and documentation are essential.

^{1 Exec. Order Ending Illegal Discrimination and Restoring Merit-Based Opportunity, (Jan. 21, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/ending-illegal-discrimination-and-restoring-merit-based-opportunity/.}

^{2 Exec. Order 11246, 3 C.F.R. § 339 (1964–1965), https://archives.federalregister.gov/issue_slice/1965/9/28/12315-12325.pdf.}

^{3 20 U.S.C. §§ 107(a)–(f) (1974).}

^{4 The EO directs the Office of Federal Contract Compliance Programs (OFCCP)—the agency responsible for ensuring federal contractors comply with affirmative action and nondiscrimination requirements—to cease promoting diversity and enforcing workforce balancing. However, the EO does not address the impact on ongoing OFCCP audits. While its future is uncertain, the OFCCP retains its statutory mandate to enforce disability and veteran affirmative action requirements under Sections 503 and VEVRAA, unless Congress acts.}

^{5 Exec. Order 11246, 3 C.F.R. § 339 (1964–1965), https://archives.federalregister.gov/issue_slice/1965/9/28/12315-12325.pdf.}

^{6 41 C.F.R. Chapter 60.}

^{7 Policy Statement Regarding Intent to Suspend Enforcement of Contractual DEI Terms in Existing Agreements, U.S. General Services Administration, (Jan. 22, 2025).}

^{8 Press Release, President Appoints Andrea R. Lucas EEOC Acting Chair (Jan. 21, 2025), available at https://content.govdelivery.com/accounts/USEEOC/bulletins/3cded12.}