Federal contractor DEI initiatives singled out in latest Trump executive order

President Donald Trump on Thursday signed an executive order targeting diversity, equity and inclusion programs at companies that are federal contractors.

While contractors are already subject to anti-DEI directives that the president enacted at the start of his second term, Trump wrote that this new order is necessary because “some entities continue to engage in DEI activities and often attempt to conceal their efforts to do so.”

Under the directive, agencies must ensure that contracts and subcontracts, within 30 days, include a clause that states the contractor:

• Will not engage in DEI activities.
• Agrees to provide information and reports to assess compliance. 
• Acknowledges that noncompliance with the order could lead to the termination or suspension of the contract and the company being barred from future government contracts. 

The order defines “racially discriminatory DEI activities” as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation or allocation or deployment of an entity’s resources.”

While noting that racial discrimination in employment has been illegal for decades, Julia Judish, a special counsel at Pillsbury law firm, said that the inclusion of “recruitment” in the definition is an “about face” for federal contractors. 

Government contractors had been required to implement affirmative action programs, but on the second day of his second term, Trump repealed an executive order from the 1960s that mandated such a requirement. Consequently, the Office of Federal Contract Compliance, a Labor Department agency that enforced the directive, was significantly downsized. 

“It’s the flip of what had been required of government contractors over decades,” Judish said. 

She also predicted that the new order will create uncertainty for contractors. 

“Does this mean that, if a government contractor participates in a career fair at a historically Black college or university, is that viewed as a racially discriminatory allocation or deployment of their resources in support of recruitment that is more likely to reach potential applicants based on race or ethnicity?” she said. “So there’s a lot of questions.” 

The new directive also requires the Office of Management and Budget, in coordination with the Justice Department, assistant to the president for Domestic Policy and Equal Employment Opportunity Commission, to “identify economic sectors that pose a particular risk of entities engaging in racially discriminatory DEI activities based on current or past conduct and issue additional guidance to contracting agencies regarding best practices to ensure compliance with this order within such sectors.”

Additionally, the order authorizes the Justice Department to sue contractors and subcontractors that violate these requirements and mandates changes to the Federal Acquisition Regulation in order to ensure the rules correspond with the new directive. 

The second Trump administration has prioritized cutting employees and programs that officials determine perform work related to DEI. 

For instance, the Interior Department this month reminded employees that they should report any suspected DEI activities and that doing so is considered to be a protected whistleblower activity.