Introduction

Since President Trump’s second inauguration on January 20, the new administration has torn up the rulebook on diversity, equity, and inclusion (“DEI”) initiatives and affirmative action programs, including key regulations dating back to 1965 governing affirmative action for private corporations that deal with the federal government (federal contractors). Keep reading to understand the background and details of these key changes and their potential impact on your organization.

What attitude shift is behind the Executive Order on DEI?

The White House has asserted in the Executive Order that “critical and influential institutions of American society, including the Federal Government, major corporations, financial institutions, the medical industry, large commercial airlines, law enforcement agencies, and institutions of higher education have adopted and actively use dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called “diversity, equity, and inclusion” (DEI) or “diversity, equity, inclusion, and accessibility” (DEIA)”.

See the full text of the Executive Order here: Ending Illegal Discrimination And Restoring Merit-Based Opportunity – The White House

Surveys show that DEI was still favored by 52% of US workers in 2024, (albeit decreasing from 56% in 2023).¹ However, Trump’s reform follows growing disapproval of DEI in recent years as a concept linked by commentators to reverse discrimination (see e.g.: Forbes – Do DEI Initiatives Lead To Reverse Discrimination?). Prior to Trump’s victory, while many organizations held tightly to their DEI programs, some industry leaders had already sought to roll back their DEI efforts and tailor their policies more cautiously in the wake of criticism and evolving public attitudes.

The lightning campaign now underway within the federal government to dismantle DEI-related initiatives has sent shock waves through the public and private sector alike. While the public sector is clearly the primary target of the reforms, management and HR departments in private corporations with DEI policies and affirmative action programs are naturally wondering how much of this paradigm shift impacts their own HR processes.

Beyond the federal government itself, what organizations do these changes impact?

The answer mainly initially hinges on whether or not your corporation deals or plans to deal with the federal government, although the ripple effect of the reform is even broader.

The total value of federal contracts awarded by the federal government in the fiscal year of 2023 was an eye-watering $759 billion² (on par with the entire GDP of Belgium). Around 400,000 businesses are actively registered to perform contracts with the federal government and, while the number of businesses that have active contracts is around 100,000.

The chances are, if you are a corporation of a significant size, that you either list the federal government among your customers or would like to in the future. Every business registered or looking to register to bid for federal contracts should be familiar with the new changes to avoid being caught out.

Note that the Executive Order also extends to:

• Subcontractors; and
• Organizations receiving federal grants.

Furthermore, even organizations with no relationship to the federal government are likely to feel an effect, both since normative industry practice is changing and since future initiatives targeting the private sector are envisaged: the same Executive Order has directed the Attorney General to submit a report by May 21 with recommendations to “encourage the private sector to end illegal discrimination and preferences, including DEI.”

Is Trump dismantling foundational equality legislation, such as Title VII of the Civil Rights Act?

No. Key equal opportunities legislation remains firmly in place, such as:

• Title VII of the Civil Rights Act of 1964
• Equal Pay Act of 1963
• Age Discrimination in Employment Act (ADEA) of 1967
• Americans with Disabilities Act (ADA) of 1990
• Uniformed Services Employment and Reemployment Rights Act (USERRA) of 1994
• Genetic Information Nondiscrimination Act (GINA) of 2008, plus state laws.

Not only would the approval of Congress would be required to amend or repeal primary legislation (rather than a simple Executive Order), but the White House also alleges that the aim of the President’s ongoing reforms is in fact to better enforce civil rights legislation in the manner originally envisaged, by excluding DEI programs deemed to unfairly prefer certain races, ethnicities, genders, and other characteristics.

The Executive Order explains: “Longstanding Federal civil-rights laws protect individual Americans from discrimination based on race, color, religion, sex, or national origin.  These civil-rights protections serve as a bedrock supporting equality of opportunity for all Americans.  As President, I have a solemn duty to ensure that these laws are enforced for the benefit of all Americans.”

This means that employers are still very much open to damaging lawsuits, including class action lawsuits, under equal opportunity legislation. In fact, in line with recent trends, more litigation can now be expected under equal opportunities legislation on a “reverse-discrimination” theory, on the basis that DEI programs favouring underrepresented classes unfairly exclude individuals from overrepresented classes.

Additionally, obligations specific to federal contractors under VEVRAA and Section 503 of the Rehabilitation Act (for veterans and individuals with disabilities), remain intact.

So, what regulations have been scrapped?

The key set of regulations for federal contractors, subcontractors, and grant recipients that has been scrapped under the new Executive Order is the Executive Order 11246 of September 24, 1965, which was introduced in the wake of the Civil Rights Act of 1964 (which itself remains in force).

The old Executive Order required contractors with 50+ employees and more than $50k+ in federal contracts to maintain written affirmative action plans (AAPs), along with related compliance requirements.

AAPs included:

• Workforce analysis to identify underrepresentation of minorities and women;
• Goals and timetables for addressing underrepresentation; and
• Specific action-oriented programs to promote equal opportunities.

AAPs are now no longer mandated and retaining them may instead open employers to significant liability, especially where they contain what are deemed to be unlawful DEI programs under the new Executive Order.

How does the new Executive Order restrict DEI programs? What new risks are created?

Federal contractors and grant recipients must now certify compliance with all applicable anti-discrimination laws and affirm they do not operate DEI programs that violate these laws. Compliance is deemed "material" to government payment decisions, exposing non-compliance to potential False Claims Act (FCA) liability. Under the FCA, liability arises when a contractor knowingly submits a false claim for payment or falsely certifies compliance with material terms of a contract. Even if no explicit misrepresentation is made, submitting an invoice implies compliance with all material contract terms, including the new certification requirements.

FCA penalties include devastating treble damages (i.e. three times the false claim) and fines; the Executive Order is also expected to incentivize whistleblowers to report noncompliance.

Furthermore, if new EEOC guidelines are introduced following the Executive Order (which is likely now that the acting Chair is pro-Trump), organizations will lose the valuable protections provided by Section 713(b)(1) of Title VII, which protected employers implementing affirmative action programs in good faith based on EEOC guidance.

In general, organizations are increasingly vulnerable to disparate treatment and disparate impact claims for retaining DEI and/or affirmative action programs that could be construed as discriminatory.

How are big corporations responding?

Businesses are scrambling to reshape and rebrand their employment practices and procedures in response to the reforms. Household name companies now scaling back DEI efforts include:

1. Meta discontinued several DEI initiatives, including programs related to recruitment, training, and supplier diversity. The company cited the evolving legal and policy landscape as the primary reason for the changes.
2. Walmart ended its five-year commitment to its Racial Equity Center and stopped considering race and gender in supplier contracts. It also ceased participation in external diversity surveys and phased out the use of “DEI” in internal documents.
3. Boeing dismantled its global DEI department, redirecting staff to focus on talent acquisition and employee experience within its HR division.
4. Google scrapped its diversity hiring targets and is reviewing its remaining DEI policies to align with federal requirements for contractors.
5. McDonald’s revised its DEI strategy by eliminating certain leadership diversity goals and rebranding its diversity team.
6. Lowe’s consolidated employee resource groups into a single organization, ceased participating in external events like Pride parades, and stopped engaging in external diversity surveys.
7. Ford shifted its employee resource groups to focus on general mentorship and networking while halting participation in external diversity surveys.
8. John Deere ended support for cultural awareness events like Pride parades and removed socially motivated messages from corporate materials.

Stay tuned for Part II of this blog post, “Should We Scrap Our DEI Efforts Following Trump’s Executive Order?”

¹ US workers' views of DEI grow slightly more negative | Pew Research Center
² A Snapshot of Government-Wide Contracting for FY 2023 (interactive dashboard) | U.S. GAO