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DEI/Affirmative Action Alert: Major Affirmative Action Law Revoked, and Private Sector DEI in the Cross-Hairs

on Thursday, 23 January 2025 in Labor & Employment Law Update: Sarah M. Huyck, Editor

On January 21, 2025, President Trump issued an Executive Order (“EO”) titled, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.”  While this EO is getting the most attention for rescinding a major affirmative action law (spoiler alert), it also initiates steps for federal agencies to crack down on “dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called ‘diversity, equity, and inclusion’ (“DEI”) or ‘diversity, equity, inclusion, and accessibility’ (“DEIA”) that can violate the civil-rights laws of this Nation.”

Federal Contractor Impact

As teased above, the new EO revokes EO 11246, which is the basis for federal contractor/subcontractor affirmative action plan obligations on the basis of race and gender.  Simply put, federal contractors will no longer have to comply with the race/gender affirmative action obligations, although they “may” continue to comply with the race/gender affirmative action obligations for 90 days from January 20, 2025.

As an alternative to the race/gender affirmative action requirements of EO 11246, the new EO requires contracting agencies to include a clause in all federal contracts/subcontracts requiring contractors to attest that they are complying with applicable anti-discrimination laws, and that they are not carrying out DEI initiatives that the Administration would consider to violate federal civil rights laws.  The non-discrimination clause will be considered a term “material to the government’s payment decisions,” meaning the government or others may be able to use the False Claims Act to enforce non-compliance anti-discrimination laws.  Contractors should expect to see language to this effect in new contracts, and in modifications to existing contracts, moving forward.

EO 11246 also established the Office of Federal Contract Programs (“OFCCP”) and provided it with the authority to enforce federal contractor affirmative action and non-discrimination obligations.  The new EO specifically prohibits the OFCCP from:

  • Promoting “diversity;”
  • Holding federal contractors/subcontractors responsible for taking “affirmative action;” 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 OFCCP, however, retains authority to enforce affirmative action obligations not connected with EO 11246, including obligations to take affirmative action with regard to individuals with disabilities under Section 503 of the Rehabilitation Act (“Section 503”), and protected veterans under the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”).  These laws were enacted by Congress and cannot be so easily rescinded.  Therefore, these laws are still in place, and as of now, contractors must continue to prepare Section 503 and VEVRAA affirmative action plans.  If you use Baird Holm to prepare your AAPs, we will be sending you an email in the coming weeks regarding any changes to the data needed to complete these plans.

Like all breaking news, there are a lot of open questions for federal contractors, including:

  • Will contractors still have to attest their Section 503/VEVRAA affirmative action compliance through the OFCCP’s Federal Contractor Portal in 2025?
  • What happens to pending OFCCP compliance reviews, complaint investigations, or other enforcement activities?
  • What happens to the OFCCP? The OFCCP still has a statutory mandate to enforce Section 503 and VEVRAA, but it is also possible the OFCCP could be merged with the Equal Employment Opportunity Commission (“EEOC”), as was originally proposed by the first Trump Administration.

Private Sector Impact

Aside from rescinding EO 11246, the new EO directs all federal agencies to “enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities” (emphasis added).  In other words, this directive does not focus solely on private sector organizations holding federal contracts/subcontracts.  It further requires each agency to submit a proposed strategic enforcement plan within 120 days containing recommendations for enforcing civil rights laws, and other measures to “encourage the private sector to end illegal discrimination and preferences, including DEI.”  The plan must identify (amongst other requirements):

  • Key “sectors of concern” within each agency’s jurisdiction;
  • The most “egregious and discriminatory” DEI practitioners in each sector of concern;
  • A plan of specific steps or measures to deter DEI programs or principles, regardless of whether characterized as “DEI,” that constitute illegal discrimination or preferences. As a part of this plan, the EO 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 million dollars or more;
    • State and local bar and medical associations; and
    • Institutions of higher education with endowments over $1 billion dollars;
  • Litigation that would be potentially appropriate for federal lawsuits, intervention, or statements of interest; and
  • Potential regulatory action and sub-regulatory guidance.

Clearly, the second Trump Administration will be taking a hardline stance on DEI issues.  Companies should promptly review any DEI programs with legal counsel to ensure compliance with applicable anti-discrimination laws to mitigate risk and hopefully stay out of agency cross-hairs.

Stay tuned for more information.

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