In July, the DOJ launched up to date steering on what may represent “unlawful DEI” by authorities contractors below an govt order issued in January. Consequently, contractors should now transfer past compliance checklists and towards a strategic, principled and legally sound method to workforce administration, says Constangy associate Cara Crotty, who breaks down the most recent developments.
In January, President Donald Trump signed Govt Order 14173, “Ending Unlawful Discrimination and Restoring Benefit-Primarily based Alternative.” This motion rescinded Govt Order 11246, signed in 1965 to supply equal alternative for girls and minorities in hiring by authorities contractors. The sensible implications of this important shift are simply starting to unfold.
Contractors should now recalibrate their compliance practices, perceive their remaining authorized obligations and put together for a brand new period of federal scrutiny, one which targets DEI packages as potential sources of illegal discrimination.
Govt Order 14173: What it says and what it modifications
The brand new govt order directs all federal companies to terminate “unlawful preferences” in hiring and employment. Particularly, it requires:
- Removing of DEI mandates and references from federal laws, insurance policies and enforcement instruments.
- Rapid cessation of affirmative motion enforcement by the Workplace of Federal Contract Compliance Applications (OFCCP).
- Two new contract statements: contractors should (1) certify that they don’t keep illegal DEI packages and (2) acknowledge that compliance with antidiscrimination legal guidelines is materials to the federal government’s fee choices.
Critically, the chief order doesn’t outline “unlawful DEI,” creating uncertainty for contractors that need to proceed selling variety in hiring whereas nonetheless complying with the legislation.
Historic context
President Lyndon B. Johnson signed Govt Order 11246 in 1965 as a part of the federal authorities’s broader civil rights agenda. It required federal contractors to:
- Prohibit employment discrimination primarily based on race, colour, faith, intercourse or nationwide origin (with later amendments including sexual orientation and gender id).
- Develop and keep written affirmative motion packages (AAPs) to actively promote numerous workforces.
- Analyze workforce demographics, set placement objectives and undertake action-oriented packages the place underrepresentation existed.
Whereas the order explicitly prohibited quotas or hiring preferences primarily based on protected traits, critics claimed that its construction created de facto pressures to make use of the id classes in making hiring choices. Trump’s order displays these considerations and addresses these pressures.
What stays: Part 503 and VEVRAA
Importantly, Part 503 of the Rehabilitation Act and VEVRAA (Vietnam Period Veterans’ Readjustment Help Act) stay in full impact. These statutes, enacted by Congress, can’t be revoked by govt order and carry their very own affirmative motion mandates. Amongst different issues, contractors should:
- Preserve written AAPs for people with disabilities and guarded veterans.
- Conduct utilization analyses and set hiring benchmarks.
- Accumulate self-identification information.
- Present affordable lodging.
- Observe employment exercise (candidates, hires, promotions and terminations).
- Notify state employment companies of job openings.
The OFCCP at the moment retains enforcement authority below these statutes, whilst its function below EO 11246 was eradicated.
The present panorama
The brand new requirement that contractors affirm they aren’t engaged in illegal DEI creates authorized publicity below the False Claims Act, which prohibits making false certifications tied to federal funds. This could result in important financial legal responsibility if the federal government determines {that a} contractor’s DEI insurance policies are discriminatory, but the contractor licensed compliance with anti-discrimination legal guidelines.
In late July, the DOJ issued steering clarifying when DEI initiatives turn into discrimination below federal legislation. Whereas the DOJ presents the steering as nonbinding finest practices, it helps determine which DEI measures may set off enforcement actions or jeopardize federal funding.
The steering targets particular practices: granting preferences or benefits primarily based on protected traits, similar to race-specific scholarships or hiring packages; utilizing neutral-sounding standards that operate as proxies for protected traits; and segregating people primarily based on protected classifications. It additionally cautions in opposition to contemplating protected traits, whether or not explicitly or implicitly, in decision-making.
One other focus of the DOJ’s memo is coaching and teaching programs that stereotype, exclude or marginalize people primarily based on protected traits. Examples embody obligatory coaching that makes use of ideas like white privilege or poisonous masculinity in a means that assigns blame or stereotypes. In line with the DOJ, such coaching might violate federal antidiscrimination legislation if it creates a hostile surroundings.
Though the DOJ steering doesn’t prohibit variety efforts altogether, it emphasizes that these packages can not give choice or create disadvantages primarily based on race, intercourse or different protected traits.
Sensible steps
1. Conduct a DEI audit
Evaluate all DEI-related insurance policies, packages and public statements. Pay shut consideration to:
- Eligibility restrictions primarily based on race, gender or id (e.g., scholarships, mentorships, coaching packages).
- Incentive buildings tied to hiring or promotion of underrepresented teams.
- Language in advertising and marketing supplies or inside insurance policies that suggests quotas or mandates.
Be sure that packages don’t create a choice or benefit primarily based on protected traits until narrowly tailor-made and legally defensible.
2. Replace compliance language
Take away references to EO 11246 in:
- Equal alternative statements
- Affirmative motion plan paperwork
- Provider and subcontractor agreements
- Job postings and coverage manuals
Make clear that “affirmative motion” now refers solely to Part 503 and VEVRAA until state or native legal guidelines impose broader mandates.
3. Reevaluate use of the time period “DEI”
Whereas many corporations will select to proceed DEI work, take into account renaming initiatives to concentrate on office inclusion, fairness and alternative. Keep away from framing packages as solely benefiting specific demographics.
Nevertheless, relabeling alone is inadequate — substance issues. A facially impartial program that ends in race- or gender-based exclusion nonetheless carries authorized threat.
4. Proceed lawful analyses — strategically
Many compliance practices stay authorized and helpful:
- Gathering voluntary applicant and worker demographic information.
- Conducting hostile impression analyses.
- Evaluating workforce demographics to accessible labor market information.
- Performing pay fairness audits.
These ought to now be performed below authorized privilege wherever attainable to cut back discoverability in litigation.
5. Observe state and native legal guidelines
Contractors working with state or municipal governments should still be topic to affirmative motion or DEI mandates. As an example, states like California, Minnesota and New York have procurement insurance policies requiring numerous provider engagement and/or demographic reporting. Don’t assume the federal rollback applies universally.
A time to recalibrate
The rescission of EO 11246 marks a pivotal shift — however not the tip — of compliance for presidency contractors. Authorized obligations stay below Part 503, VEVRAA, Title VII and quite a few state legal guidelines. Public expectations for office equity and inclusion haven’t waned. And the reputational dangers of failing to navigate these modifications thoughtfully may be extreme.
Contractors should now transfer past compliance checklists and towards a strategic, principled and legally sound method to workforce administration. This requires:
- A renewed concentrate on nondiscrimination.
- A deeper understanding of what constitutes authorized and unlawful DEI.
- Proactive engagement with authorized counsel, procurement groups and govt management.
On this time of shifting ideologies and enforcement, employers who keep knowledgeable, adapt shortly, and make principled choices will likely be finest positioned to thrive, regardless of this unsure surroundings.
In July, the DOJ launched up to date steering on what may represent “unlawful DEI” by authorities contractors below an govt order issued in January. Consequently, contractors should now transfer past compliance checklists and towards a strategic, principled and legally sound method to workforce administration, says Constangy associate Cara Crotty, who breaks down the most recent developments.
In January, President Donald Trump signed Govt Order 14173, “Ending Unlawful Discrimination and Restoring Benefit-Primarily based Alternative.” This motion rescinded Govt Order 11246, signed in 1965 to supply equal alternative for girls and minorities in hiring by authorities contractors. The sensible implications of this important shift are simply starting to unfold.
Contractors should now recalibrate their compliance practices, perceive their remaining authorized obligations and put together for a brand new period of federal scrutiny, one which targets DEI packages as potential sources of illegal discrimination.
Govt Order 14173: What it says and what it modifications
The brand new govt order directs all federal companies to terminate “unlawful preferences” in hiring and employment. Particularly, it requires:
- Removing of DEI mandates and references from federal laws, insurance policies and enforcement instruments.
- Rapid cessation of affirmative motion enforcement by the Workplace of Federal Contract Compliance Applications (OFCCP).
- Two new contract statements: contractors should (1) certify that they don’t keep illegal DEI packages and (2) acknowledge that compliance with antidiscrimination legal guidelines is materials to the federal government’s fee choices.
Critically, the chief order doesn’t outline “unlawful DEI,” creating uncertainty for contractors that need to proceed selling variety in hiring whereas nonetheless complying with the legislation.
Historic context
President Lyndon B. Johnson signed Govt Order 11246 in 1965 as a part of the federal authorities’s broader civil rights agenda. It required federal contractors to:
- Prohibit employment discrimination primarily based on race, colour, faith, intercourse or nationwide origin (with later amendments including sexual orientation and gender id).
- Develop and keep written affirmative motion packages (AAPs) to actively promote numerous workforces.
- Analyze workforce demographics, set placement objectives and undertake action-oriented packages the place underrepresentation existed.
Whereas the order explicitly prohibited quotas or hiring preferences primarily based on protected traits, critics claimed that its construction created de facto pressures to make use of the id classes in making hiring choices. Trump’s order displays these considerations and addresses these pressures.
What stays: Part 503 and VEVRAA
Importantly, Part 503 of the Rehabilitation Act and VEVRAA (Vietnam Period Veterans’ Readjustment Help Act) stay in full impact. These statutes, enacted by Congress, can’t be revoked by govt order and carry their very own affirmative motion mandates. Amongst different issues, contractors should:
- Preserve written AAPs for people with disabilities and guarded veterans.
- Conduct utilization analyses and set hiring benchmarks.
- Accumulate self-identification information.
- Present affordable lodging.
- Observe employment exercise (candidates, hires, promotions and terminations).
- Notify state employment companies of job openings.
The OFCCP at the moment retains enforcement authority below these statutes, whilst its function below EO 11246 was eradicated.
The present panorama
The brand new requirement that contractors affirm they aren’t engaged in illegal DEI creates authorized publicity below the False Claims Act, which prohibits making false certifications tied to federal funds. This could result in important financial legal responsibility if the federal government determines {that a} contractor’s DEI insurance policies are discriminatory, but the contractor licensed compliance with anti-discrimination legal guidelines.
In late July, the DOJ issued steering clarifying when DEI initiatives turn into discrimination below federal legislation. Whereas the DOJ presents the steering as nonbinding finest practices, it helps determine which DEI measures may set off enforcement actions or jeopardize federal funding.
The steering targets particular practices: granting preferences or benefits primarily based on protected traits, similar to race-specific scholarships or hiring packages; utilizing neutral-sounding standards that operate as proxies for protected traits; and segregating people primarily based on protected classifications. It additionally cautions in opposition to contemplating protected traits, whether or not explicitly or implicitly, in decision-making.
One other focus of the DOJ’s memo is coaching and teaching programs that stereotype, exclude or marginalize people primarily based on protected traits. Examples embody obligatory coaching that makes use of ideas like white privilege or poisonous masculinity in a means that assigns blame or stereotypes. In line with the DOJ, such coaching might violate federal antidiscrimination legislation if it creates a hostile surroundings.
Though the DOJ steering doesn’t prohibit variety efforts altogether, it emphasizes that these packages can not give choice or create disadvantages primarily based on race, intercourse or different protected traits.
Sensible steps
1. Conduct a DEI audit
Evaluate all DEI-related insurance policies, packages and public statements. Pay shut consideration to:
- Eligibility restrictions primarily based on race, gender or id (e.g., scholarships, mentorships, coaching packages).
- Incentive buildings tied to hiring or promotion of underrepresented teams.
- Language in advertising and marketing supplies or inside insurance policies that suggests quotas or mandates.
Be sure that packages don’t create a choice or benefit primarily based on protected traits until narrowly tailor-made and legally defensible.
2. Replace compliance language
Take away references to EO 11246 in:
- Equal alternative statements
- Affirmative motion plan paperwork
- Provider and subcontractor agreements
- Job postings and coverage manuals
Make clear that “affirmative motion” now refers solely to Part 503 and VEVRAA until state or native legal guidelines impose broader mandates.
3. Reevaluate use of the time period “DEI”
Whereas many corporations will select to proceed DEI work, take into account renaming initiatives to concentrate on office inclusion, fairness and alternative. Keep away from framing packages as solely benefiting specific demographics.
Nevertheless, relabeling alone is inadequate — substance issues. A facially impartial program that ends in race- or gender-based exclusion nonetheless carries authorized threat.
4. Proceed lawful analyses — strategically
Many compliance practices stay authorized and helpful:
- Gathering voluntary applicant and worker demographic information.
- Conducting hostile impression analyses.
- Evaluating workforce demographics to accessible labor market information.
- Performing pay fairness audits.
These ought to now be performed below authorized privilege wherever attainable to cut back discoverability in litigation.
5. Observe state and native legal guidelines
Contractors working with state or municipal governments should still be topic to affirmative motion or DEI mandates. As an example, states like California, Minnesota and New York have procurement insurance policies requiring numerous provider engagement and/or demographic reporting. Don’t assume the federal rollback applies universally.
A time to recalibrate
The rescission of EO 11246 marks a pivotal shift — however not the tip — of compliance for presidency contractors. Authorized obligations stay below Part 503, VEVRAA, Title VII and quite a few state legal guidelines. Public expectations for office equity and inclusion haven’t waned. And the reputational dangers of failing to navigate these modifications thoughtfully may be extreme.
Contractors should now transfer past compliance checklists and towards a strategic, principled and legally sound method to workforce administration. This requires:
- A renewed concentrate on nondiscrimination.
- A deeper understanding of what constitutes authorized and unlawful DEI.
- Proactive engagement with authorized counsel, procurement groups and govt management.
On this time of shifting ideologies and enforcement, employers who keep knowledgeable, adapt shortly, and make principled choices will likely be finest positioned to thrive, regardless of this unsure surroundings.
