Trump Targets OFCCP, DEI in Executive Order

Late on the night of January 21, 2025, President Trump signed the “Ending Illegal Discrimination And Restoring Merit-Based Opportunity” Executive Order (the “EO”). This EO, like a number of the executive orders issued on his first day in office, took aim at Diversity, Equity, and Inclusion (“DEI”) programs by, among other things, broadly directing executive agencies and departments to terminate all “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements;” curtailing the Office of Federal Contract Compliance Programs’ (OFCCP) operational authority and directing agencies to scrutinize the DEI practices of private sector employers. Additionally, this language raises questions about the future and status of certain programs, preferences, and set-aside procurements administered by the U.S. Small Business Administration, U.S. Department of Transportation, and other agencies. 

The first portion of the EO rescinds Executive Order 11246 (1965), which established the OFCCP and provided the OFCCP its operational authority to ensure the compliance with anti-discrimination laws by federal contractors. The EO specifically orders the OFCCP to immediately cease promoting “diversity”, enforcement of "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." It states that federal contractors “may – not “must” –  continue complying with the existing regulatory scheme for ninety (90) days after January 21, 2025. The impact of the EO on pending compliance reviews, complaint investigations, or other enforcement activities is as yet unknown. 

Significantly for federal contractors, the EO directs agencies to include in all contract or grant awards a provision requiring contractors to certify that they do not operate any programs promoting DEI “that violate any applicable Federal anti-discrimination laws” and that compliance with applicable federal anti-discrimination laws is material for payment; non-compliance falls under 31 U.S.C. 3729(b)(4), "False Claims." Federal contractors should expect to see contractual language implementing this directive in new procurements and modifications to existing contracts.

The second portion of the EO focuses on DEI programs in the private sector. Specifically, the EO directs agency heads to submit reports within one hundred and twenty (120) days identifying:

• Key sectors within each agency's jurisdiction;
• Private sector companies with the most "egregious and discriminatory" DEI programs;
• A plan to deter DEI programs “that constitute illegal discrimination or preferences.” As part of the plan, agencies are directed to identify up to 9 potential investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets over $500M, state and local bar and medical associations, and universities with endowments over $1B;
• Litigation that would be potentially appropriate for Federal lawsuits, intervention, or statements of interest; and
• Potential regulatory action and sub-regulatory guidance.

Significantly, the EO is directed at DEI programs and practices that violate federal anti-discrimination laws—not all DEI efforts. The lawfulness of DEI programs and practices within the private sector is still determined by the applicable statutes, e.g., Title VII of the Civil Rights Act, and the case law interpreting the statutes. That said, given the increased scrutiny that is expected to flow from this EO, federal contractors and non-federal contractors alike should review their DEI policies and practices for compliance with existing law and consult with counsel as needed.