Key Takeaways:
- The executive orders represent a significant change in federal policy on diversity, equity, and inclusion initiatives and will have broad impacts across many industries.
- Companies and nonprofits have continuing obligations to comply with federal and state anti-discrimination and civil rights laws.
- Companies and nonprofits should review their federal contracts and grants; review their DEI policies and practices; understand the potential risks under the executive orders; maintain thorough documentation; prepare to communicate with stakeholders; and consult legal counsel to navigate this complex legal landscape.
On his first two days in office, President Trump issued a handful of executive orders aimed at eliminating diversity, equity, and inclusion (DEI) programs and policies within the federal government and encouraged the private sector to follow suit. Two of the executive orders that have gotten a lot of attention are "Ending Radical and Wasteful Government DEI Programs and Preferencing," dated January 20, 2025, and "Ending Illegal Discrimination and Restoring Merit-Based Opportunity," dated January 21, 2025. Both executive orders mark a significant shift in federal policy by arguing that DEI policies and practices undermine "traditional American values of hard work, excellence, and individual achievement" and emphasizing "merit-based" policies and practices for hiring and other opportunities. In this alert, we summarize the key provisions of these executive orders, its implications for businesses, and highlight a list of key takeaways that clients may find helpful.
Key Provisions:
There are several key provisions to these executive orders. At a
high level, these executive orders:
1. Require Agencies to Identify Federal Contractors and
Grantees Who Received DEI Funding: The January 20, 2025
order requires every agency, department, or commission head, in
consultation with the Attorney General and the Directors of the
Office of Management & Budget and Office of Personnel
Management, to create a list of all federal contractors who have
provided DEI training or DEI training materials and federal
grantees who have received federal funding "to provide or
advance DEI and environmental justice programs, services, or
activities since January 20, 2021."
2. Eliminate DEI in Federal Grants and Contracts:
The January 20, 2025 order directs each agency, department, or
commission head, in consultation with the Attorney General and the
Directors of the Office of Management & Budget and Office of
Personnel Management to end all equity-related plans, actions,
initiatives, programs, grants, and contracts. The January 21, 2025
order goes further and requires the head of each agency to include
terms in every contract or grant awards that require the
contractual counterparty to (1) affirm that it is complying with
applicable federal anti-discrimination laws and (2) certify that it
does not operate any programs promoting DEI that violate applicable
federal anti-discrimination laws. Under the order, the former of
the two new affirmations and certifications is considered a
"material" term according to the False Claims Act, 31
U.S.C. § 3729 et seq., which could subject recipients of
federal funding to additional civil and criminal liability and
increased scrutiny
3. Revoke Previous Executive Orders: The January
21, 2025 order revokes several decades-old executive orders that
established DEI initiatives, including:
- Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations)
- Executive Order 13583 (Establishing a Coordinated Government-wide Initiative to Promote Diversity and Inclusion in the Federal Workforce)
- Executive Order 13672 (Further Amendments to Executive Order 11478, Equal Employment Opportunity in the Federal Government, and Executive Order 11246, Equal Employment Opportunity)
- The Presidential Memorandum of October 5, 2016 (Promoting Diversity and Inclusion in the National Security Workforce)
4. Change the Federal Contracting and Subcontracting
Process: The January 21, 2025 order attempts to streamline
the federal contracting process to "enhance speed and
efficiency [and] reduce costs." The order requires federal
contracts to comply with existing federal civil rights laws and,
beginning April 21, 2025, revokes Executive Order 11246 (Equal
Employment Opportunity), which has been in place for nearly 60
years. Finally, the order directs the Office of Federal Contract
Compliance Programs within the Department of Labor to immediately
stop promoting diversity, "holding Federal contractors and
subcontractors responsible for taking 'affirmative
action,'" and stop allowing federal contractors and
subcontractors to engage in "workforce balancing based on
race, color, sex, sexual preference, religion, or national
origin."
5. Encourage the Abandonment of DEI in the Private
Sector: The January 21, 2025 order encourages the private
sector to end their own DEI policies and programs. It further
directs federal agencies, in conjunction with the Attorney General,
to take appropriate action to advance "the policy of
individual initiative, excellence, and hard work" in key
private sectors. Under this mandate, appropriate action includes
identifying "the most egregious and discriminatory DEI
practitioners in each sector of concern" as well as
identifying up to nine civil compliance investigations into DEI
policies and programs of publicly traded corporations, large
non-profit organizations, foundations with significant assets,
state and local bar and medical associations, and institutions of
higher education with substantial endowments.
Next Steps:
1. Assess Your Federal Contracts and Grants:
The executive orders may affect your eligibility and compliance
requirements for federal contracts and grants. We can expect
additional guidance from awarding agencies and the DOJ regarding
their interpretations of these executive orders and what federal
contractors and grant recipients can and cannot do. However, there
are existing federal civil rights and anti-discrimination laws and
regulations that do currently govern your contract and grants.
These executive orders may conflict with those law and regulations.
You should review your federal contracts and grants to determine if
they contain any terms or conditions related to DEI that may
conflict with the laws and regulation and/or the executive orders
and consult with legal counsel to the extent such terms or
conditions exist.
You should also carefully scrutinize future contracts or grants,
which will require you to affirm that you are complying with
federal civil rights laws and certify that you do not operate any
DEI programs that violate any applicable federal civil rights laws.
You should consult with legal counsel before signing any such
contracts or grants.
2. Review DEI Policies and Understand Your Risk:
Companies and nonprofits, particularly those in key sectors
identified by the agencies and the Attorney General, should be
prepared for increased scrutiny and potential civil compliance
investigations. As with federal contracts and grants, companies and
nonprofits must comply with federal, as well as state, civil rights
and antidiscrimination laws and regulations. These laws and
regulations may override any conflicting executive orders.
Companies and nonprofits should review their existing DEI policies
and practices to ensure that they are consistent with their current
antidiscrimination and civil rights legal framework. Companies and
nonprofits should also consult with legal counsel to understand any
potential risks associated with increased scrutiny or before making
changes to their DEI policies and programs.
3. Maintain Thorough Documentation: Keep detailed
records of all employment practices and decisions. This
documentation should include:
- Records of hiring and recruitment processes
- Performance evaluations and promotion decisions
- Training materials and attendance records
- Any changes made to DEI policies and practices
4. Communicate with Your Stakeholders: The
executive orders, and your organization's response to them, may
generate questions, concerns, or reactions from your stakeholders,
such as employees, customers, or shareholders. You should be
prepared to communicate with your stakeholders about the impact of
the executive orders on your organization and your commitment to
equal opportunity, nondiscrimination, and excellence. You also may
consider providing training and resources to your staff and leaders
on how to handle any issues or challenges that may arise because of
the executive orders.
Given the complexity and potential legal implications of these
executive orders, businesses should seek legal guidance to navigate
compliance and avoid potential legal challenges.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
