Federal and State Contractors Assess the Impact of President Trump's Executive Order Ending Affirmative Action and DEI

On Jan. 21, President Trump signed the “Ending Illegal Discrimination And Restoring Merit-Based Opportunity” Executive Order (EO). This EO rescinds EO 11246, which mandated certain aspects of the affirmative active requirements. The EO also bars "illegal" DEI programs and promotes "colorblind equality" and merit-based opportunity. 

While there are still many unanswered questions about the EO — and legal challenges are expected — here is a summary of the impact of the EO on state and federal contractors.  

RESCISSION OF EO 11246 AND PROHIBITION ON "ILLEGAL" DEI PROGRAMS
Unlike many EOs, EO 11246 is codified in regulation (41 C.F.R. ch. 60) and it is currently implemented through FAR 52.222-6. The Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) has been responsible for enforcing EO 11246.

Trump’s new EO directs the OFCCP to immediately stop:

• Promoting “diversity.”
• Holding Federal contractors and subcontractors responsible for taking “affirmative action.” 
• Allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion or national origin.

The EO further provides, however, that contractors “may continue to comply with the regulatory scheme” for a period of 90 days, or until April 21, 2025.

Moving forward, executive agencies must require federal contractors “to agree that ... compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” and for federal contractors “to certify that [the contractor] does not operate any program promoting DEI that violates any applicable Federal anti-discrimination laws.” 

The EO does provide that the Attorney General and the Secretary of Education will issue guidance within 120 days.

The EO does not supersede federal law. This means that contractors must continue to comply with equal employment and nondiscrimination requirements that apply to all employers, including Title VII of the Civil Rights Act of 1964 (Title VII). That means government contractors cannot, for instance, discriminate against employees or applicants “because of such individual’s race, color, religion, sex, or national origin.”

The EO also does not end affirmative action requirements for covered federal contractors under two laws aimed at protecting veterans and individuals with disabilities: (1) the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA) and (2) Section 503 of the Rehabilitation Act. These programs are enforced by the OFCCP and require covered federal contractors to engage in affirmative action outreach efforts for protected veterans and individuals with disabilities, as well as creating affirmative action plans.

IMPACT ON FEDERAL CONTRACTORS
Federal contractors with existing contracts wonder whether the EO modifies the existing contract language. These contractors are in a difficult spot: complying with the EO would require them to ignore the contract requirement (such as the previously listed FAR clauses. Contractors should use the EO’s 90-day window to discuss the EO with a higher level contractor or federal agency, monitor developments, assess risks, and take any necessary actions.

For new federal contracts, federal contractors should be prepared “to certify that [the contractor] does not operate any program promoting DEI that violates any applicable Federal anti-discrimination laws.” As noted above, federal contractors must continue to comply with equal employment and nondiscrimination requirements.

It is unclear whether the EO will apply to non-federal contract operations. 

IMPACT ON STATE CONTRACTORS
Many states, such as California and Minnesota, have state affirmative action and DEI programs that the current administration may consider violative of the EO.

Federal contractors will need to review these state programs and ensure that the state programs are in compliance with “any applicable Federal anti-discrimination laws.” Unless there is a legal challenge to the EO, contractors may be forced to choose whether they wish to be federal contractors or state contractors. 

Grant Collins is a specialist in labor and employment law at Felhaber Larson. Reach him at gcollins@felhaber.com. We'll discuss how this may impact JATCs in the next issue..