President Trump Takes Aim at Affirmative Action and DEI Via Executive Order

Federal Contractors and Subcontractors

Trump’s action revoked Executive Order 11246 (“EO” 11246), which, since 1965, has mandated that most federal government contractors and subcontractors: (i) comply with employment non-discrimination requirements, and (ii) implement affirmative action programs. Trump’s order further directed that the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) — the agency that had been responsible for enforcing EO 11246 — immediately cease: (i) “[p]romoting ‘diversity’”; (ii) “[h]olding Federal contractors and subcontractors responsible for taking ‘affirmative action’”; and (iii) “[a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.”

The Executive Order also requires the head of each agency to include, in each contract or grant award, (i) a requirement that the contractor or recipient “agree that its compliance . . . with . . . Federal anti-discrimination laws is material to the government’s payment decisions,” and (ii) it “does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” The Executive Order highlights the new administration’s focus on DEI initiatives that may be perceived to violate Title VII and other anti-discrimination laws by giving preferences in terms or conditions of employment based on protected characteristics. While the Executive Order did not address statutory requirements that still apply to federal government contractors and subcontractors (including those in the Vietnam Era Veterans Readjustment Assistance Act or the Rehabilitation Act), it appears to eliminate the affirmative action program requirements that had been part of many federal contractors’ and subcontractors’ policies.

Private Sector

The Executive Order has potentially significant implications beyond government contractors as well, as it directs federal agencies, such as the Equal Employment Opportunity Commission (EEOC), to use heightened scrutiny of DEI initiatives. A particularly notable aspect of the Executive Order is the directive for each federal agency to identify up to nine private entities (“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”) for potential civil compliance investigations. The Executive Order indicates that federal lawsuits would be potentially appropriate and potential regulatory action could be taken against such private actors that pursue illegal and/or inappropriate DEI initiatives.

This provision introduces a new layer of enforcement risk, as agencies are now tasked with actively seeking out and reporting companies that fail to comply with merit-based criteria and apply DEI programs in a manner that agencies determine to provide unlawful preferences. This could lead to a significant increase in the number of investigations and enforcement actions against private entities, creating a more challenging environment for businesses with DEI programs — particularly higher-profile companies, in addition to those that contract with the federal government.

Companies should be vigilant in reviewing and potentially re-evaluating their DEI initiatives to mitigate risks of being targeted by these agency investigations or future enforcement actions. The Executive Order’s directive to federal agencies to proactively identify non-compliant entities underscores the importance of ensuring that DEI programs are both effective and legally sound. Businesses must balance the pursuit of diversity and inclusion aspirations — which they may have identified as a critical aspect of addressing the needs and expectations of their various stakeholder groups (shareholders, employees, customers, etc.) with the legal requirements of merit-based practices, potentially leading to a reconsideration of DEI goals and methodologies, or their presentation.

The Executive Order’s anticipated impact on corporate America underscores the need for legal and compliance teams to proactively and regularly evaluate their employment practices and compliance regimes.

Please reach out to your Vinson & Elkins team to discuss the potential impacts of the Executive Order on your business and how you should be preparing for these developments.