CLIENT ALERTS

Employers Look to Plot a Course in the Wake of Presidential Executive Order on DEI

January 29, 2025

In December 2023, we wrote about challenges for employers in the wake of the Supreme Court’s June 2023 decision in the Harvard University affirmative action case, and a series of well-publicized private lawsuits attacking corporate diversity programs. [Employers Look to Plot a Course in the Wake of Supreme Court’s Affirmative Action Decision – Prince Lobel Tye LLP]. We advised that despite the attacks on private sector diversity, equity and inclusion (DEI) efforts, the law had not fundamentally changed for employers because existing anti-discrimination laws already forbade employers from “discriminating” against or for individuals on account of race, color, sex, religion, and national origin and other protected characteristics. We concluded then that, “Employers should not be scared off by these [attacks]. DEI initiatives in employment, if constructed appropriately, should survive legal challenges.”

On his first full day in office, President Trump issued a sweeping executive order (Order) titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The Order addresses three (3) major areas: a) DEI initiatives by federal agencies; b) federally mandated affirmative action programs for government contractors; and c) DEI programs initiated by private employers. The Order instructs federal agencies to end a series of specific DEI programs created under executive orders issued by prior administrations, and generally instructs federal agencies “to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements.”

Of particular note for private sector employers, the Order a) revokes President Lyndon Johnson’s Executive Order 11246, requiring federal contractors to have affirmative action programs; and b) broadly declares private employer DEI efforts to be suspect (and to be targets for investigation/enforcement) because, in the President’s view, they do not reward “individual initiative, excellence, and hard work.”

The underlying premise of the Order is that these programs and initiatives have frequently been operated in an illegal manner to favor candidates, employees and businesses who possess/represent certain racial, ethnic, gender or other protected characteristics at the expense of “merit, aptitude, hard work, and determination.” In short, the Executive Order is grounded on the notion that DEI programs, whether operated by the federal government or in the private sector, frequently result in illegal preferences/reverse discrimination — what the Order refers to as a “pernicious identity-based spoils system.”

Once again, we report that nothing in the Executive Order changes the fundamentals of federal or state anti-discrimination law. However, it cannot be denied that the Executive Order poses a new and serious challenge to private sector DEI initiatives. Indeed, the Order instructs federal agencies to be on the lookout for “illegal” private sector DEI efforts. And, for federal government contractors, the Executive Order mandates significant concrete changes to current practices. Below, we discuss the practical implications of the Executive Order for federal contractors and other private sector employers, and outline opportunities to continue to value diversity, equity and inclusion.

Practical Implications for Federal Contractors

The Order instructs the Office of Federal Contract Compliance Programs (OFCCP) to “immediately cease”:

  • Promoting “diversity”
  • Holding Federal contractors and subcontractors responsible for taking “affirmative action”
  • Allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin

Going forward, federal contractors will be required to certify that they do not operate any illegal DEI programs.

For federal contractors, the most significant immediate change is that the Order eliminates affirmative action plan obligations regarding race and gender and enforcement activity by the OFCCP regarding race or gender affirmative action plans. For 90 days, federal contractors “may continue to comply with the regulatory scheme in effect on January 20, 2025.”

One important caveat to the termination of affirmative action obligations is that the Order does not impact affirmative action obligations with respect to veterans under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) or persons with disabilities under Section 503 of the Rehabilitation Act of 1973. These obligations remain in effect.

Practical Implications for Private Sector Employers Generally

The Order instructs the Attorney General to submit recommendations for “enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” The Attorney General’s report (due in 120 days) is supposed to propose an enforcement plan identifying:

  • “The most egregious and discriminatory DEI practitioners”
  • “A plan of specific steps or measures to deter DEI programs or principles (whether specifically denominated “DEI” or otherwise) that constitute illegal discrimination or preferences”

Each agency is also instructed to identify targets for investigation and litigation, with a focus on “large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.”

In sum, while anti-discrimination law may not have changed, the focus of the federal government’s enforcement efforts has, with the stroke of a pen, shifted dramatically. Further, it should be anticipated that there will be greatly increased whistleblowing activity on these issues. Employers who get caught in these crosswinds, even if eventually vindicated in court, face significant exposure in terms of cost and time and energy to respond to allegations of “illegal DEI” efforts.

The Path Forward   

As we remarked in December 2023, many employers recognize that “their overall success is tied to the strength and diversity of their workforce.” We believe these business values can still be promoted in the workplace, though it is undeniable that the risks of being targeted for alleged “illegal DEI” practices have increased. For these reasons, we strongly recommend that employers take a close look at their current policies, practices and communications around diversity and anti-discrimination to make sure they cannot be construed (or misconstrued) to create quotas, which are illegal, or to suggest that hiring/promotions decisions are based on anything other than qualifications.

We will continue to report on important developments in the Trump administration’s efforts to curtail or end private sector DEI efforts.

For questions about how your business may be impacted by these recent developments or assistance with reviewing your current policies, please reach out to Daniel S. Tarlow or other members of Prince Lobel’s Employment Law Practice Group.

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