On January 21, 2025, President Donald Trump issued the Ending Illegal Discrimination and Restoring Merit-Based Opportunity Executive Order, which significantly alters federal contractor obligations related to affirmative action and diversity, equity, and inclusion (DEI) programs. This directive, now known as Executive Order 14173 (the new Order), rescinds the six-decade old Executive Order 11246, which previously required federal contractors to adopt affirmative action practices for hiring and promoting racial minorities and women. The new Executive Order 14173 also imposes prohibitions against workforce balancing and preferential hiring practices.
For federal contractors, these changes require a fresh consideration of how they handle certain diversity initiative and affirmative action plans in particular. Below, we outline the key changes introduced by Executive Order 14173 and practical steps for contractors to help ensure compliance while maintaining adherence to applicable federal laws.
Key Changes Under and Resulting from Executive Order 14173
- Revocation of Executive Order 11246
- The new Order rescinds Executive Order 11246, eliminating the requirement for federal contractors to adopt and implement affirmative action plans for racial minorities and women. The new Order permits contractors to continue compliance with their existing regulatory regime for a 90-day period. That grace period ends on April 21, 2025.
- The new Order, however, does not apply to lawful federal or private-sector employment preferences for veterans of the U.S. Armed Services.
- The new Order is silent on its impact, if any, on employment-related affirmative action plans for individuals with disabilities.
- Immediate Cessation of Regulatory Enforcement Efforts
- Soon after the issuance of Executive Order 14173, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced it would immediately stop enforcing affirmative action obligations related to race and sex.
- Prohibition of Workforce Balancing
- The Order explicitly bans “workforce balancing” practices, which involve adjusting hiring decisions to achieve demographic diversity targets. The Order also stresses that hiring, promotion, and other employment decisions must be strictly merit-based, prohibiting preferential treatment based on race, sex, or other protected characteristics. Federal contractors must ensure that employment decisions are not based on demographic considerations but on qualifications and merit alone.
- New Contractual Obligations Regarding DEI Programs
- Federal contractors will be required to certify that their DEI programs do not violate federal anti-discrimination laws. This contractual requirement is expected to prompt heightened scrutiny from both enforcement agencies and private litigants, raising questions about the permissible scope i.e., whether any existing programs could be interpreted as non-compliant.
- Revocation of Executive Order 13672
- The new Order also revokes Executive Order 13672, which mandated the inclusion of the phrases, “sexual orientation” and “gender identity” in non-discrimination clauses for federal contractors and subcontractors.
Practical Compliance Steps for Federal Contractors
In response to the Executive Order, federal contractors should consider taking the following steps to align with the new legal framework:
- Conduct a Comprehensive Policy Audit
- Review existing affirmative action and DEI-related policies to identify and remove provisions that conflict with the new Order. Unless mandated by applicable state laws, federal contractors should plan to terminate their affirmative action plans for racial minorities and women.
- For now, federal contractors should continue to maintain their affirmative action plans for qualifying veterans and individuals with disabilities as those programs are required under federal statutes.
- Revise Recruitment and Hiring Procedures
- Update job postings, selection criteria, and interview processes to ensure the language is consistent with all applicable laws. While the new Order requires the elimination of “gender identity” and “sexual orientation” in EEO statements and job postings, in deleting those phrases some contractors will need to ensure their revised versions comply with applicable state laws. As some may note, the Order’s direction to delete those phrases may be in conflict with federal case law that has held federal statutes prohibit discrimination on the basis of “gender identity” and “sexual orientation.” Resolution of those differing interpretations, however, will require further guidance from the Executive and Judicial Branches of government.
- Update Training Programs
- Modify or discontinue DEI training programs that could be interpreted as promoting racial or gender preferences.
- Develop training materials that focus on fostering a respectful and inclusive workplace without emphasizing demographic distinctions.
- Communicate Policy Changes Transparently
- Inform employees about revisions to affirmative action plans and DEI policies to prevent misunderstandings.
- Clearly articulate that these changes align with federal requirements while reaffirming the company’s commitment to a fair and inclusive workplace.
President Trump’s Ending Illegal Discrimination and Restoring Merit-Based Opportunity Executive Order marks a significant shift in federal contractor obligations, requiring the immediate cessation of race- and gender-based affirmative action programs. Federal contractors must act promptly to audit their policies, revise hiring practices, and ensure compliance with the new merit-based framework while balancing ongoing obligations under other federal, state, and local laws. Proactive compliance efforts now will help mitigate legal risks and help ensure a smooth transition under the new regulatory landscape.
