Trump Administration Rescinds Certain Equal Employment-Related Executive Orders and Prohibits “DEI”

On January 21, 2025, President Trump issued a sweeping executive order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (the EO), rescinding prior executive actions dating back to 1965 relating to equal employment opportunity and affirmative action based on race and sex in federal employment and government contracting activities.

The EO directs the Office of Federal Contract Compliance Programs (OFCCP) to cease promoting diversity, holding federal contractors responsible for taking “affirmative action,” and allowing or encouraging contractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin. It also instructs agency heads to take various actions and make recommendations focused on eliminating illegal discrimination and preferences in employment, including diversity, equity, and inclusion (DEI) programs, and reiterates that private employers, including government contractors, are prohibited from having “illegal” DEI programs or otherwise engaging in discrimination.

This Advisory discusses the EO and its implications, including compliance challenges government contractors will face. In sum, while the EO eliminates affirmative action based on race and sex and other compliance requirements for government contractors, it does not change existing prohibitions on discrimination in employment, including Title VII of the Civil Rights Act of 1964 (Title VII), and sends a clear message that unlawful discrimination (including unlawful DEI programs and policies) will be subject to increased scrutiny and enforcement. The EO does not affect existing requirements for government contractors relating to veterans and persons with disabilities.

The EO Revokes Executive Order 11246 and Executive Order 13672

Perhaps most significant for government contractors, including both prime contractors and subcontractors, the EO revokes Executive Order 11246, Equal Employment Opportunity, as amended by Executive Order 13672. As relevant to government contractors, those executive orders, among other things:

• Required government contractors to include a provision stating that contractors “will not discriminate against any employee or applicant for employment because of race, color, religion, sex, sexual orientation, gender identity, or national origin.”¹
• Required government contractors 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.”² Affirmative action “include[d] … employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship.”³
• Required government contractors to post equal employment notices “in conspicuous places.”⁴
• Required government contractors to state in job postings “that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, or national origin.”⁵
• Prohibited government contractors from retaliating against an employee or applicant for having “inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant.”⁶
• Provided that noncompliance could result in contracts being “cancelled, terminated, or suspended in whole or in part” and contractors being “declared ineligible for further Government contracts,” along with “other sanctions” and remedies.⁷
• Required government contractors to file compliance reports, including the Employment Information Report (EEO-1).⁸
• Directed the Department of Labor (DOL) and the Federal Acquisition Regulation (FAR) Council to issue regulations and contract clauses, respectively, implementing these requirements and granted DOL authority to enforce compliance, including by investigating alleged noncompliance and referring matters to the Equal Employment Opportunity Commission, the Department of Justice, and other appropriate federal agencies.

The FAR implemented these requirements through a series of contractual clauses, including FAR 52.222-23, Notice of Requirement for Affirmative Action to Ensure Equal Employment Opportunity for Construction; FAR 52.222-24, Preaward On-Site Equal Opportunity Compliance Evaluation; FAR 52.222-25, Affirmative Action Compliance; FAR 52.222-26, Equal Opportunity; and FAR 52.222-27, Affirmative Action Compliance Requirements for Construction.

The OFCCP has long had responsibility for implementing and monitoring compliance with many of these programs, but the EO has now rescinded that authority by instructing OFCCP to immediately stop promoting diversity, to stop holding federal contractors responsible for affirmative action compliance, and to stop allowing or encouraging federal contractors to engage in workforce balancing based on protected characteristics.

Significantly, the EO states that “[f]or 90 days from the date of this order, Federal contractors may continue to comply with the regulatory scheme in effect on January 20, 2025.”⁹ Given many open questions left by the EO (including how exactly it will be carried out), contractors may consider continuing to operate affirmative action and other programs until April 20, 2025, and to communicate with the OFCCP if they are in the middle of an audit or other compliance review.

The EO Prohibits Unlawful DEI Programs

In addition to dismantling certain compliance programs for government contractors, the EO reiterates existing law that prohibits “illegal private-sector DEI preferences, mandates, policies, programs, and activities” that establish preferences for persons of some races and genders over others in violation of Title VII and related requirements.¹⁰ The EO states:

the Attorney General, within 120 days of this order, in consultation with the heads of relevant agencies and in coordination with the Director of OMB, shall submit a report to the Assistant to the President for Domestic Policy containing 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.¹¹

The EO also targets the education sector, directing “the Attorney General and the Secretary of Education” to:

issue guidance to all State and local educational agencies that receive Federal funds, as well as all institutions of higher education that receive Federal grants or participate in the Federal student loan assistance program under Title IV of the Higher Education Act, 20 U.S.C. 1070 et seq., 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).¹²

Although the details of what constitutes a DEI program are largely undefined and could be defined in future regulations and guidance, the EO clearly suggests that the government will begin bringing enforcement actions against employers with DEI programs that the government believes establish preferences or affirmative action requirements in violation of Title VII. For instance, the EO directs the above-referenced report from the Attorney General (with assistance from the heads of all agencies) to identify:

• “The most egregious and discriminatory DEI practitioners in each area of concern.”
• “A plan of specific steps or measures to deter DEI programs or principles that constitute illegal discrimination or preferences.”
• “[U]p to nine potential civil compliance investigations of publicly traded corporations, 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.”
• “Other strategies to encourage the private sector to end illegal DEI discrimination and preferences.”
• “Litigation that would be potentially appropriate for Federal lawsuits, intervention, or statements of interest.”¹³

New Contract and Grant Provisions

To implement these requirements for government contractors, the EO requires agencies to “include in every contract or grant award” certain terms regarding employment actions. Specifically, federal contracts must require the contractor or grant recipient to (1) certify that it does not have DEI programs that violate antidiscrimination laws; and (2) acknowledge that compliance with antidiscrimination law is “material to the government’s payment decisions” for the purpose of the False Claims Act (FCA).¹⁴ Notably, it is not clear whether these new contractual provisions will be inserted only in new contracts and grants going forward or will be added to all existing contracts and grants.

What the EO Does Not Do

Understanding what the EO does not do is as important as understanding what it does do. The EO leaves intact various equal employment opportunity requirements:

Compliance With Title VII. Like all executive orders, the EO cannot supersede statutes, and it does not purport to do so.¹⁵ That means government contractors must continue to comply with equal employment and nondiscrimination requirements that apply to all employers in the United States, including Title VII. That means government contractors cannot, for instance, discriminate against employees or applicants “because of such individual’s race, color, religion, sex, or national origin.”¹⁶ Although Title VII does not reference gender identity or sexual orientation, the Supreme Court recently held in Bostock v. Clayton County, Georgia that Title VII prohibits discrimination in employment on the basis of gender identity or sexual orientation.¹⁷ We note that another recent executive order by President Trump purports to limit the scope of Bostock, at least with respect to gender identity.

Veterans. The EO expressly states that it does not affect equal employment requirements relating to protections for veterans.¹⁸ Indeed, discrimination against veterans is prohibited, and affirmative action for veterans is required, by the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA).¹⁹ Thus, government contractors should not expect any changes from the EO to affect FAR and FAR supplement contract clauses relating to veterans, including FAR 52.222-35, Equal Opportunity for Veterans; FAR 52.222-37, Employment Reports on Veterans; and FAR 52.222-38, Compliance with Veterans’ Employment Reporting Requirements.

Persons With Disabilities. The EO does not affect equal employment requirements and protections for persons with disabilities. Similar to requirements relating to veterans, many protections for persons with disabilities are established by statute, including the Americans with Disabilities Act,²⁰ Section 503 of the Rehabilitation Act,²¹ and the Randolph-Sheppard Act.²² Thus, government contractors should not expect the EO to affect FAR and FAR supplement contract clauses relating to persons with disabilities, including FAR 52.222-36, Equal Opportunity for Workers with Disabilities, which mandates similar reporting and affirmative action obligations as VEVRAA and will presumably continue to be enforced by the OFCCP.

Implications and Next Steps for Government Contractors

Existing Contracts. One of the most significant questions the EO presents is how government contractors should handle existing contracts. At first glance, the answer may seem obvious: eliminate all affirmative action and other preferential programs based on race and sex within 90 days of the EO. It is well established, however, that new executive actions and regulations do not automatically modify existing government contracts. This places government contractors at a crossroads of potentially needing to decide whether to ignore contract requirements or follow the EO. Contractors need to carefully consider the risks of taking a particular path and may consider using the EO’s 90-day window to monitor developments, assess risks, and take any necessary actions.

New Contracts. There is a tension between the certification for new contracts and grants and the 90-day grace period. Contractors that compete for new contracts and grants containing the certification discussed above while continuing to operate programs the EO prohibits during the 90-day grace period should consider qualifying the certification and/or disclosing the programs, as appropriate.

FCA Risks. The specter of FCA liability arises whenever a government contractor is required to certify compliance with a requirement. The EO is no different, and perhaps comes with higher risk. Not only does the EO require the compliance certifications detailed above, but it also specifies that compliance is material and references the FCA.

Programs Not Tied to Government Contracts. In certain instances, the government extends compliance obligations beyond the particular products or services contractors provide the government. FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, provides an example of requirements that affect operations not directly tied to a government contract. Here, the EO’s restrictions are not limited to government contracts. As detailed above, the EO prohibits DEI programs that violate federal nondiscrimination laws, including Title VII. A question unique to government contractors is whether implementing such a DEI program could raise compliance concerns, including FCA liability risks, under government contracts even if the DEI program does not affect a government contract (e.g., where a company applies a DEI program for personnel not supporting government contracts). Given the breadth of the certification detailed above, operating an illegal DEI program unrelated to government contracts could potentially lead to FCA liability.

Takeaways

• Identify all affirmative action, DEI programs, and other policies to assess whether those programs violate the EO or existing law, including the extent to which those policies improperly require consideration of “race, color, sex, sexual preference, religion, or national origin” or otherwise run afoul of antidiscrimination laws.
• Address any noncompliant policies, including withdrawing or revising those policies to comply with the EO and existing law, while considering the risks of noncompliance with the provisions in existing contracts.
• Engage with the OFCCP regarding the impact of the EO on any active or anticipated compliance reviews.
• Engage with contracting officers about existing contracts and compliance obligations under those contracts.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.