On January 21, 2025, President Trump issued an Executive Order (“EO”) titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The EO, which was effective immediately, expressly revokes Executive Order 11246, a Civil Rights Era order with the stated intent to ensure nondiscrimination in federal contracting. President Trump’s EO also instructs federal executive departments and agencies to terminate certain Diversity, Equity, and Inclusion (“DEI”) related programs. The EO also warned private employers and institutes of higher education against implementing and maintaining illegal DEI programs. The EO does not wholistically define what the administration considers to be illegal DEI or DEIA (diversity, equity, inclusion, and accessibility) programs, but it makes clear that race and sex-based preferences fall in this category.
This alert focuses on the revocation of Executive Order 11246 and its impact. Our forthcoming “Part II” alert will address the EO’s instructions specific to DEI initiatives and the related impact.
Revocation of Executive Order 11246 – History of the Order
The EO explicitly (and immediately) revokes Executive Order 11246 - Equal Employment Opportunity; Nondiscrimination in Employment by Government Contractors and Subcontractors. In relevant part, Executive Order 11246 states as follows:
The contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex, sexual orientation, gender identity, or national origin. The contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, sexual orientation, gender identity, or national origin. Such action shall include, but not be limited to the following: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. The contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officer setting forth the provisions of this nondiscrimination clause.
Executive Order 11246, originally signed by President Johnson in 1965, was intended to ensure government contractors’ compliance with nondiscrimination requirements. It mandates that contractors not discriminate based on several protected classes, including race and sex.[1] It also requires contractors to take affirmative action to ensure nondiscrimination. The Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) enforced the requirements of Executive Order 11246. The implementing regulations to Executive Order 11246 outline specific steps covered contractors must take to promote nondiscrimination.
Generally speaking, those programs included preparing annual affirmative action plans, internal audits and reporting requirements, and evaluating compensation practices. More specifically, in preparing affirmative action plans, covered contractors were required to evaluate their current workforce and applicant flow in job groups against census data from the same groups to identify whether their workforce race and gender demographics were statistically significantly different than the workforce within their reasonable recruiting area. The goal of this information was to help covered contractors identify possible areas where their outreach efforts might be enhanced or expanded to attract qualified candidates and/or where barriers to employment might exist. While employers were still prohibited by Executive Order 11246 of making decisions based on race or gender, the new EO asserts that preferences were implemented and/or that the OFCCP was setting this expectation.
Many contractors who were previously obligated to comply with Executive Order 11246 may disagree with the statements in President Trump’s EO; however, they may still welcome the possibility of a decreased administrative burden of no longer preparing affirmative action plans. Importantly, contractors will still have to comply with other equal employment opportunity laws such as Title VII of the Civil Rights Act of 1964.
Revocation of Executive Order 11246 – What Happens Now?
- All Compliance Requirements and DOL/OFCCP Enforcement of 11246 Cease
In short, absent a successful challenge to the President’s authority to rescind Executive Order 11246, which appears unlikely, covered contractors are no longer obligated to comply with the requirements of that order. The EO permits federal contractors to continue to comply with the regulatory scheme in effect for 90 days after January 21, 2025. However, the EO also requires the OFCCP to “immediately cease” the following:
- Promoting “diversity;”
- Holding federal contractors and subcontractors responsible for taking “affirmative action;” and
- Allowing or encouraging federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.
To effectuate the EO, on January 24, 2025, the Acting Secretary of Labor Vincent N. Micone, III issued a memorandum directing that the OFCCP immediately cease all investigative and enforcement activity under Executive Order 11246 and its regulations. This includes all “pending cases, conciliation agreements, investigations, complaints, and any other enforcement-related or investigative activity.” The OFCCP had issued a new audit list (called a scheduling list) in November 2024, so this order provides relief to hundreds of entities that had been slated for OFCCP desk audits this cycle. It remains to be seen whether audits will proceed for those entities under related laws – Section 503 of the Rehabilitation Act, 29 U.S.C. 793 (“Section 503”) and the Vietnam Era Veterans’ Readjustment Assistance Act, 38 U.S.C. 4212 (“VEVRAA”).
If you are a federal contractor or subcontractor with a pending OFCCP audit, conciliation agreement, complaint, or enforcement-related action, consult with your Michael Best attorney to determine next steps.
- Replacement Compliance Requirements
The EO also gives contractors a preview of a new clause they might expect to see in their contracts to replace the standard EEO/AA flow down clause which previously incorporated the requirements of Executive Order 11246. The EO requires each agency head to include in every federal contract or grant award:
- 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 the False Claims Act.
- A term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws.
The Director of the Office of Management and Budget (OMB), with the assistance of the Attorney General as requested, will also be reviewing and revising as appropriate all government-wide processes, directives, and guidance to remove references to DEI and DEIA principles from all federal acquisition procedures and documents. They are also directed to terminate government mandates incorporating the concepts of “diversity,” “equity,” “equitable decision-making,” “equitable deployment of financial and technical assistance,” and “advancing equity.”
Status of Section 503 and VEVRAA Affirmative Action Requirements
The OFCCP also implements and oversees the requirements under Section 503 and VEVRAA. Section 503 prohibits covered contractors from discriminating against individuals with disabilities and requires affirmative action to recruit, hire, promote, and retain individuals with disabilities. These requirements include written affirmative action plans, self-identification processes, job-posting requirements, and reporting requirements. VEVRAA requires the same for protected veterans.
Both Section 503 and VEVRAA remain in effect as they are congressional acts, thus requiring action by Congress to amend and/or revoke. However, the future of the OFCCP remains unclear, as the enforcement of Section 503 and VEVRAA could conceivably be undertaken by another governmental agency. Moreover, it is unclear if OFCCP will continue to exist, or if its remaining areas of jurisdiction will be transferred to the EEOC or another agency. This option was floated during President Trump’s first presidency, but now seems less likely given that yesterday, January 30, 2025, he appointed Michael Schloss as the acting director of the OFCCP. Acting Director Schloss will oversee the OFCCP’s enforcement of Section 503 and VEVRAA.
More information about the OFCCP’s status should be available in the coming weeks and months. Currently, Acting Secretary of Labor Micone has ordered that “Section 503 and VEVRAA components” of compliance reviews or investigations “are being held in abeyance pending further guidance.”
EEO-1 and VETS-4212 Reporting
Covered contractors and also non-contractor private employers with 100 or more employees are required to file annual EEO-1 reports. This requirement continues to date. Similarly, contractors’ obligations to file annual VETS-4212 (those with contracts of $150,000 or more) are not impacted by the EO.
State and/or Local Requirements – Potential Conflicts
Many states and municipalities impose EEO and affirmative action requirements in connection with their own contracts, some of which are similar to Executive Order 11246 requirements and some which are arguably more aggressive. Prior to the issuance of the January 2025 EO, many contractors submitted their federal plan in lieu of preparing a separate affirmative action plan for states and municipalities. Contractors may now need to prepare separate state and/or local plans in lieu of one federal plan. Additionally, there is the potential for state and/or local obligations to conflict with the anticipated new guidance or requirements imposed with future and existing federal contracts. Finally, even if they do not conflict with new federal requirements, contractors will need to evaluate the lawfulness (at a minimum pursuant to the federal government’s position) of the requirements in their state or municipality contracts.
Miscellaneous Questions
Other than ceasing implementation of Executive Order 11246, contractors will have to evaluate many additional questions, including:
- Can/should we continue to gather race and gender self-identification information at the applicant stage?
- How do we address contracts that explicitly incorporate EO 11246 obligations with our vendors and/or clients?
- What flow-down clauses do we/should we use for now?
- Can we still do outreach to diversity organizations?
- Can we still have Employee Resource Groups?
- Can we still analyze our workforce demographic data?
- Will the revised obligations generate more competition for government contracts? How do we prepare for the new landscape?
Some of the answers to these questions may be provided by the administration in the coming weeks and months. For others, employers, with the help of legal counsel, will need to analyze existing statutes and caselaw to make their own determinations. We will continue to provide updates on the administration’s positions, including in our Part II update addressing the other DEI-focused aspects of the EO.
[1] Executive Order 11246 was amended by President Obama in 2014 to add sexual orientation and gender identity as protected classes (as reflected in the above text)