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February 12, 2025
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On the first day of President Trump’s second administration, he signed the Ending Racial and Wasteful Government DEI Programs and Preferencing Executive Order. This order provides direction to eliminate any and all Diversity, Equity, and Inclusion (“DEI”) programs throughout the federal government specifically, including “Chief Diversity Officers,” “Equity Action Plans,” “environmental justice” offices, equity-related grants/contracts, as well as DEI/DEIA performance requirements.

Then, on January 21, 2025, President Trump signed an executive order targeting the elimination of DEI/DEIA programs for federal contractors and private entities. The summary below focuses exclusively on this order, Ending Illegal Discrimination and Restoring Merit-Based Opportunity (“DEI Executive Order”), as it pertains to government contractors and private entities.

I. In General

The DEI Executive Order revokes Executive Order 11246, signed by President Johnson in 1965, which required certain federal contractors to take affirmative action to avoid discrimination in employment practices (such as tracking and evaluating employment statistics and data).

The DEI Executive Order directs federal agencies enforcing existing anti-discrimination laws to terminate “illegal DEI and DEIA policies.” While the DEI Executive Order does not specifically define what “illegal” means, it does clearly target the elimination of such discrimination and preferences in employment decisions, including intentional workforce balancing based on race, color, sex, sexual preference, religion, or national origin.

II. Impact on Federal Agencies and Potential Impact on Those Receiving Funding

Under Trump’s initial Executive Order, federal agencies are required to compile and submit a full list of all contracts tied to DEIA initiatives as of November 5, 2024, including a list of all contract descriptions or personnel position descriptions that were changed since November 5, 2024 to obscure their connection to DEIA programs. This list must include all DEI-related positions, expenses, contractors, and grant recipients involved in DEI, as well as all federal contractors that have provided DEI training or materials to department employees.

It is likely that the government agencies will be instructed to eliminate these contracts, if possible.

III. Impact on Government Contractors

Federal contractors and subcontractors will no longer have an obligation to create an affirmative action plan or take affirmative action in employment decisions. Moreover, the DEI Executive Order requires that the Office of Federal Contract Compliance Programs (“OFCCP”) stop “promoting diversity” and “allowing or encouraging federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” The DEI Executive Order does not eliminate the OFCCP or remove any contractor non-discrimination obligations.

Requirements for Certification and Potential False Claims Act (FCA) Exposure

The major impact for federal contractors will come upon renewal or amendment. However, all federal contractors should act now to plan for this significant change.  Specifically, all new federal contracts, amendments, or renewals will include new requirements and certifications.

First, the contract will need to agree that “compliance in all respects with all applicable Federal anti-discrimination laws are material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code,” i.e., the FCA.

In addition, every contractor and grant recipient will be required to “certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”  This is significant, as a failure to comply could serve as the basis for an FCA claim.

If the Department of Justice views the certification as false, it could become a basis for an allegation under the FCA.  Federal contractors should act quickly, with the assistance of counsel, to consider these new requirements. An attorney-client privileged review of policies and procedures will be critical.

Rehabilitation Act and Vietnam Veterans

Federal contractors and subcontractors are still required to comply with Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), which require federal contractors to engage in affirmative action outreach efforts and create affirmative action plans for individuals with disabilities and certain protected veterans.

Timing

Federal contractors and subcontractors may continue to comply with the prior rules for 90 days from January 21, 2025.

IV. Impact on the Private Sector

The DEI Executive Order does not specifically direct immediate action on the part of private sector employers. However, we certainly recommend that private employers act.  The DEI Executive Order outlines a plan for federal agencies to eliminate or limit certain DEI/DEIA programs in the private sector. The DEI Executive Order directs the Attorney General and other agency heads to create and submit a report on private-sector DEI programs within 120 days containing recommendations and other appropriate measures to encourage the private sector to end illegal discrimination and preference. Within this report, the Attorney General must include a proposed strategic enforcement plan identifying:

• Key sectors of concern within each agency’s jurisdiction
• The most effective DEI practitioners in each sector of concern
• A plan of specific steps or measures to deter DEI programs or principles that constitute illegal discrimination or preferences
• Other strategies to encourage the private sector to end illegal DEI discrimination and preferences and comply with all Federal civil-rights law
• Litigation that would be potentially appropriate for Federal lawsuits, intervention, or statements of interest
• Potential regulatory action and sub-regulatory guidance

The DEI Executive Order also requires each agency to identify up to nine potential civil compliance investigations of:

• Publicly traded corporations
• Large non-profit corporations or associations
• Foundations with assets of $500 billion or more
• State and local bar and medical associations
• Institutions of higher education with endowments over $1 billion.

On February 5, 2025, the Attorney General issued a memorandum that tasked the Department of Justice’s Civil Rights Division with investigating, eliminating, and penalizing illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions receiving federal funds. However, this memorandum explicitly states that there is no prohibition on educational, cultural, or historical observances – such as Black History Month or similar events – that celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.

While this effort may not impact a significant number of private entities, it does show that the Trump administration is willing to invest resources into challenging large private entities.  It is also a warning to all private entities to review DEI and other programs to ensure lawful compliance.

Other Considerations

Within 120 days, the Attorney General and Secretary of Education shall jointly issue guidance to all state and local educational agencies receiving federal funding and to institutions of higher education that received federal grants or participate in the federal student loan assistance program regarding their need to comply with Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023).

What Should Employers Do?

Federal contractors and non-contractors alike should thoroughly review their DEI programs, recruitment initiatives, Employee Resource Groups, and other similar programs.  We highly recommend that such reviews be conducted with the assistance of counsel to ensure that the work product is protected by the attorney-client privilege.  Employers will need to assess the guidance provided, the potential reach of the various federal agencies, and their own risk tolerances when determining what action steps will be taken following such review.

Finally, employers should review their job postings to ensure there is no reference to diversity and/or equity in any job application, solicitation, or posting. Reverse discrimination claims are real, and employers are much more likely to face those claims from an unsuccessful applicant than face a challenge from the government during this transitional period.

© 2025 McNees Wallace & Nurick LLC
McNees Employer Client Alert is presented with the understanding that the publisher does not render specific legal, accounting or other professional service to the reader. Due to the rapidly changing nature of the law, information contained in this publication may become outdated. Anyone using this material must always research original sources of authority and update this information to ensure accuracy and applicability to specific legal matters. In no event will the authors, the reviewers or the publisher be liable for any damage, whether direct, indirect or consequential, claimed to result from the use of this material.