On January 21, 2025, President Trump issued a widely expected executive order (EO), Ending Illegal Discrimination and Restoring Merit-Based Opportunity, targeting affirmative action and diversity, equity, and inclusion (DEI) initiatives in the federal government. The EO revokes multiple labor-related executive orders promoting affirmative action and other DEI policies, including EO 11246, Equal Employment Opportunity (September 24, 1965), which has long required government contractors to adhere to equal employment and affirmative action requirements.
The EO creates new compliance obligations for all government contractors and grant recipients and will lead to new Federal Acquisition Regulation (FAR) rules, eliminating such things as mandatory affirmative action plans and adding a new mandatory contract certification. Any contractor or grant recipient that currently maintains a DEI program should especially take note, as the EO directly links the maintenance of future DEI programs to False Claims Act (FCA) liability. Key provisions of the new EO include:
- Prohibition on federal contractors and subcontractors from considering “race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws” in their employment practices. The rule is not limited to employment under a contract or grant, but will be applied across the board. Among other things, this provision would apply the Supreme Court’s recent decisions in the Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, and Students for Fair Admissions Inc. v. University of North Carolina et al. cases, where the Court held that race-based affirmative action programs violate Title VI of the Civil Rights Act of 1964
- A requirement that every contract or grant award include a “term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code.” A contractor or grant recipient must also affirmatively “certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” This means that, when implemented, any government contractor or grant recipient who continues to engage in prohibited discrimination or maintains certain affirmative action programs or DEI policies—contrary to the new contract terms and affirmative certifications—will risk liability under the FCA by virtue of submitting invoices to the government for payment. This risk is especially high because of the FCA’s qui tam relator provisions, which incentivize employees to bring FCA suits on behalf of the government.
- Preventing the Office of Federal Contract Compliance Programs (OFCCP) from enforcing contractor affirmative action requirements under existing FAR/contract requirements. This includes “[a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” We expect this will result in the recission or amendment of certain labor regulations, such as FAR 52.222-25, Affirmative Action Compliance, and 4 C.F.R. § 60-1 and 60-2.
The EO states that contractors may continue to comply with the existing “regulatory scheme” for 90 days, or until April 21, 2025. This suggests that the Office of Management and Budget (OMB) and the FAR Council will issue guidance to procuring agencies in the coming weeks or months, to include reconciling the EO directives with existing FAR clauses. While the ban on OFCCP enforcement is immediate, the EO does not change the terms and conditions of any existing contract or grant. Contractors should seek legal guidance before taking action.
We anticipate considerable uncertainty in the months ahead. As occurred with the COVID vaccine mandate several years ago, legal action that challenges the EO and/or implementing regulations may delay implementation. In addition, regulatory guidance will be needed for contractors to determine what constitutes impermissible DEI promotion and to answer other questions when preparing revised employment practices.