US President Donald Trump has signed an executive order that rescinds several prior executive orders that sought to promote diversity and inclusion in federal contracting, the federal workforce, and federal programs related to environmental justice. Most notably, President Trump revoked Executive Order 11246, a Johnson-era executive order that prohibited federal contractors from discriminating on the basis of race, sex, and national origin in employment and required them to engage in “affirmative action.”
Executive Order 11246 also created the US Department of Labor’s Office of Federal Contractor Compliance Programs (OFCCP) to monitor compliance with the order. The regulations issued by OFCCP ultimately resulted in the requirements for federal contractor affirmative action plans and provided the basis for OFCCP audits, investigations, and enforcement actions. The executive order also calls for federal agencies to take actions to encourage private employers to end “illegal DEI programs” and use the full panoply of federal anti-discrimination laws to address DEI practices in the private sector.
The executive order broadly calls for the federal government to terminate what the order describes as all “discriminatory and illegal preferences, mandates, policies, programs, regulations, enforcement actions, and requirements.” Pursuant to that stated policy, the executive order directs the Office of Management and Budget and the US Department of Justice to conduct a review of all governmentwide processes, directives, and guidance on federal acquisition, contracting, grants, and financial assistance and revise them to conform with the principles of the order.
It also rescinds Executive Order 11246 and orders the OFCCP to “immediately cease” (1) promoting diversity, (2) holding federal contractors responsible for fulfilling the “affirmative action” obligations imposed by Executive Order 11246, and (3) allowing or encouraging federal contractors to engage in “workforce balancing” based on race, color, sex, sexual preference, religion, or national origin. The Secretary of the Department of Labor issued a notice on January 24, 2025 directing OFCCP employees to cease and desist all investigative and enforcement activity under Executive Order 11246 and the regulations promulgated under it. Accordingly, any current OFCCP investigations or audits tied to Executive Order 11246 will be suspended.
Federal agencies must now ensure that all federal contracts and grant awards include terms (1) requiring the contracting party or grant recipient to agree that compliance with federal anti-discrimination laws is material to the government’s payment decisions for purposes of the False Claims Act and (2) certifying that the contracting party or grant recipient does not operate any programs promoting DEI that violate federal anti-discrimination laws.
This means that while federal contractors may maintain DEI programs, they must certify that such programs do not run afoul of federal law. Given uncertainty over whether a particular court would hold that a particular DEI program violates federal anti-discrimination laws, the order’s certification requirement could subject contractors to False Claims Act risk and private lawsuits by whistleblowers.
Finally, the order directs the United States Attorney General and the Secretary of Education to jointly issue guidance to recipients of federal funds, including student loan assistance, on compliance with the US Supreme Court’s 2023 holding in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, which held that college affirmative action programs violate the Equal Protection Clause and Title VI.
The order also mandates that federal agencies enforce existing federal discrimination laws to address “illegal private-sector DEI preferences, mandates, policies, programs, and activities” and requires several agencies to provide recommendations within 120 days of the order on how to use federal civil rights laws to encourage the private sector to end illegal discrimination and preferences, which it defines to include DEI.
The reports setting forth the agencies’ recommendations must identify (1) “[k]ey sectors of concern,” (2) specific entities that the agencies consider “[t]he most egregious and discriminatory DEI practitioners in each sector of concern,” (3) measures to deter illegal DEI programs, including “up to nine potential civil compliance investigations of” publicly traded corporations, large nonprofit corporations or associations, foundations, or educational institutions, and (4) proposed litigation, regulatory action, and other strategies aimed to “end illegal DEI discrimination and preferences.” These reports will likely lay the groundwork for investigations and enforcement actions by the federal government.
Although the executive order focuses primarily on DEI programs in the employment and education contexts, the scope of the order is much greater. By directing agencies to identify ways to target illegal DEI policies that violate any federal civil rights laws (not just those specifically governing employment and education) the order encourages federal agencies to pursue investigations and enforcement actions against any practices that take race, gender, ethnicity, or other protected characteristics into account. This includes, for example, federal laws prohibiting discrimination in lending, healthcare, housing, transportation, and public accommodations.
Despite the fact that the executive order revokes the OFCCP’s key role of monitoring compliance with EO 11246, it does not eliminate the OFCCP entirely, as OFCCP maintains its authority to enforce federal contractors’ affirmative action obligations under Section 503 of the Rehabilitation Act (Section 503) and the Vietnam Era Veterans’ Readjustment Act (VEVRA). These obligations will continue for the foreseeable future because they are established by statute and cannot be revoked solely through executive action.
The immediate effect of the executive order is unclear. There are competing considerations outlined in the order and it is not yet known how the order will be implemented by federal government agencies.
Notwithstanding this uncertainty, there are several points that contractors should consider:
Agency implementation of this executive order may vary and clarifications from the federal government are expected, so federal contractors and grant recipients should take care to work closely with their federal customers and consult legal counsel as necessary.
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