Executive Order 14173 on DEI: What It Means for Federal Contractors

Diversity, equity, and inclusion (DEI) initiatives have been a major focus for employers over the past decade, both in the private sector and public sector. Proponents of DEI programs say that a diverse workforce is essential for productivity and that such programs are necessary to recruit and retain talent from traditionally underrepresented communities. Detractors say that the programs are unnecessarily divisive and prioritize immutable characteristics over traditional indicators of merit. While we do not take a side in this debate, the Trump administration has, with the president issuing Executive Order 14173, prohibiting federal contractors from engaging in DEI-related employment policies and procedures. If you are a federal contractor grappling with the implications of EO 14173, a Richmond employment lawyer can advise you.   

Key Provisions of EO 14173

The official title of EO 14173 is “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The EO states that DEI policies violate Federal civil rights laws and may result in unlawful employment discrimination through “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements.” The key provisions of the EO are as follows: 

• Revokes a series of previous EOs regarding anti-discrimination and DEI initiatives within the federal government, including EO 12898 (1994), EO 13583 (2011), and EO 13672 (2014). 
• Revokes EO 11246 (1965), which required federal contractors to establish non-discriminatory practices in hiring and employment and take “affirmative action” to ensure that applicants were employed without regard to race, creed, color, or national origin. 
• Directs the Office of Federal Contract Compliance Programs to immediately cease (1) promoting diversity, (2) requiring federal contractors to take affirmative action, and (3) allowing federal contractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin
• Prohibits federal contractors from considering race, color, sex, sexual preference, religion, or national origin in ways that violate federal civil rights laws
• Requires every federal contractor to agree that it does not operate any DEI programs that violate federal anti-discrimination law 
• Directs agency heads to take all actions necessary to promote “individual initiative, excellence, and hard work” in the private sector 

Notably, the order does not apply to federal or private-sector employment or contracting preferences for veterans. It is also explicit that it does not prevent federal contractors or federally funded institutions from engaging in First Amendment-protected speech advocating for policies that would violate the order. For more information about the specifics of EO 14173, contact a Richmond employment lawyer. 

Who Does EO 14173 Apply To?

EO 14173 applies to any companies that do business with the federal government or receive grants from the federal government, including federal contractors and subcontractors. Within 120 days of the issuance of the order, the Attorney General and the Secretary of Education are directed to issue guidance to all state and local educational agencies that receive federal funds and institutions of higher education that receive federal grants or participate in the federal student loan program regarding measures for compliance. It is not yet clear how the order applies to federally funded projects. 

Implications of EO 14173 for Federal Contractors 

Perhaps the most important thing federal contractors should know about EO 14173 at the present moment is that, even in the absence of judicial injunctions (more on that below), they may continue to operate under their existing programs and procedures for 90 days. During that time, federal contractors should consider the following: 

Policy and Programming

Federal contractors should review and update their hiring, training, and employment contract policies, particularly policies related to DEI efforts. In enforcement actions, the Trump administration likely will pay particular attention to language that suggests federal contractors use affirmative action or race– or gender-based hiring preferences. When posting available positions, ensure that job descriptions are focused strictly on candidates’ qualifications rather than their immutable characteristics. Contact a Richmond employment lawyer to discuss strategies for amending your workplace policies and programming. 

Contractual Compliance Adjustments 

Existing federal contracts may need to be amended to reflect the administration’s stance on DEI initiatives. Federal contractors should thus work with their legal teams and outside counsel to review their existing contracts and ensure compliance with the new federal standards. The Trump administration has signaled that it is serious about eliminating DEI from federal contracting, so companies should expect compliance audits and oversight related to EO 14173.

Training and Internal Communications 

It is essential for federal contractors to ensure that their internal departments, particularly human resources departments, are aware of the changes and why they are occurring. As such, contractors should educate leadership on the removal of DEI programs and the potential consequences of failing to do so. Employees are likely to have questions and concerns about the new policy, so develop a communication plan designed to answer questions about what the changes mean for workplace culture. 

Legal Challenges to EO 14173

In February, the U.S. District Court for the District of Maryland issued a nationwide injunction prohibiting enforcement of certain provisions of EO 14173 based on First and Fifth Amendment grounds. The portions of EO 14173 that the court found unconstitutional were: 

• Section 3(b), which requires the head of each agency to include in every contract or grant award a term requiring the recipient to certify that it does not operate any DEI programs that violate federal anti-discrimination laws 
• Section 4, which requires the Attorney General to submit a report containing recommendations for enforcing federal civil rights law in the private sector, including a plan of specific steps or measures to deter DEI programs or principles in major corporations

The administration has appealed the injunction, and a protracted legal fight appears likely.  

Get the Answers You Need From a Richmond Employment Lawyer 

EO 14173 is a significant departure from established federal policy and represents a change in the federal contracting landscape. For more information about what it could mean for your business and how to comply with its provisions, please contact a Richmond employment lawyer at Pierce / Jewett by calling 804-502-2320 or using our online contact form.