New Administration Outlook: What Employers Need To Know About This Week's DEI Executive Orders
Executive Orders Pertaining to DEI (the "Executive Orders")
- On January 20, the White House released an Executive Order Ending Radical And Wasteful Government DEI Programs And Preferencing. This order rescinded the Biden-era pro-DEI orders, including the mandate for federal agencies to create racial equity plans. The January 20 order requires all federal agencies to end any form of DEI programming and to shutter their DEI departments. This was followed on January 21 by a Memorandum from the Office of Personnel Management, ordering federal agencies to place all DEI staff on administrative leave by 5 p.m. January 22 and to create plans for reductions in force to eliminate their roles entirely. The memo also warned that DEI positions could not be renamed in order to disguise their function, and it requires agency employees who are aware of any such efforts to report them within ten days or face repercussions.
- Also on January 21, the Administration released an order titled Ending Illegal Discrimination And Restoring Merit-Based Opportunity. This order rescinded several executive orders regarding DEI, including, most notably, the 1965 Executive Order (Executive Order 11246) that required federal contractors to give equal opportunity in hiring and to submit affirmative action plans. Under the January 21 order, each federal contract will now require the contractor to "certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws."
- The January 21 order also announces an intention to eliminate DEI programs that constitute "illegal discrimination and preferences" in the private sector. The order directs the heads of agencies to "take all appropriate action" to advance the policies behind the order. It also instructs the Attorney General to, among other things, create a plan for "enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI." This includes identifying "the most egregious and discriminatory DEI practitioners" within designated areas of concern and selecting up to nine potential civil compliance investigations for each agency. The order specifically states that the targets of those investigations should be "publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars."
What Do Employers Need To Know?
The Executive Orders have given rise to confusion and concern for employers with DEI programs. While each organization must make its own decision on how to respond, here are some considerations:
- The Executive Orders impact how federal agencies operate and how they use their money, but they do not have the power to change civil rights law (e.g., Title VII), to make nondiscriminatory DEI programming illegal. If your organization has a DEI program, it should already be operating in compliance with Title VII, meaning it does not use race or any other protected class as a consideration in employment decisions. In other words, if your DEI program complied with the law last week, it still complies with the law this week. The governing standard has not changed.
- What has changed is the level of scrutiny employers can anticipate. This is similar to what occurred after the Students for Fair Admissions decision in 2023. That decision, which ended affirmative action in higher education admissions, did not change the legal standard that governs employment discrimination claims. Nevertheless, it triggered a wave of litigation and, to a lesser extent, agency action challenging DEI programs. Those lawsuits are continuing to work their way through the legal system, and courts are deciding them based on their individual merits. In each instance, the court must decide whether an individual plaintiff has experienced unlawful discrimination. DEI programs may be cited as evidence, but the existence of such programs is not sufficient, in and of itself, to establish that an individual was the victim of unlawful employment discrimination.
- With the issuance of the Executive Orders, employers can similarly anticipate significantly more scrutiny of their DEI programs, despite that the law pertaining to those programs has not changed. Employers with high-profile, robust DEI programs may well be subject to agency inquiries and investigations. It is important to remember, however, that being investigated does not mean an employer's DEI program is unlawful. Employers frequently face government investigation, including in the context of EEOC Charges, Department of Labor audits, and similar actions at the federal, state, and local level. As a result of the Executive Orders, agency inquiries into DEI programs may become as routine as those other government functions. But again, receiving an inquiry or being subject to investigation does not mean that a DEI program is unlawful or must be shut down.
- The above advice applies both to private entities and to federal contractors and grantees. The twist for federal contractors and grantees or other entities that receive federal funds, however, is that the Executive Order instructs agencies to avoid allowing federal funds to go to entities that have "unlawful" DEI programs. It remains to be seen how agencies will carry out this mandate, but there is risk that agencies will freeze funds based upon an allegation that the contractor or grantee has an impermissible DEI program. Even if the employer's DEI program is ultimately deemed lawful, such actions could have significant operational impacts. Such a withholding of funds would likely also trigger litigation, as the abilities of agencies to take such actions and the validity of the underlying order would both be subject to challenge. Regardless, some government contractors may opt to eliminate DEI programs in order to avoid this risk.
- It is important to note that eliminating DEI programs, while reducing the risk of government action, does create its own risks. Despite the rise in anti-DEI lawsuits and now enforcement actions, minority group employees continue to bring their own claims of discrimination, and EEOC reports show discrimination claims on the whole are on the rise. DEI programs exist in part to ward off such claims, including, for example, by identifying and eliminating bias in hiring and evaluation processes, training employees in cultural competence and avoiding harmful comments and behaviors, removing barriers for employees with disabilities, creating community so employees in minority groups are less isolated, and evaluating pay practices to eliminate discriminatory inequities. Additionally, this is an area that is being watched closely, and an employer's sudden retreat from DEI could prompt negative reactions from employee populations who are invested in these programs, which could itself increase the risk of litigation.
The flurry of activity this week, including the issuance of the Executive Orders, may leave employers wondering whether they must now abandon their DEI programs. Certainly, employers should carefully review their DEI programs to ensure that those programs are not discriminatory. Still, employers intending to maintain their DEI programs can take comfort in knowing that the Executive Orders do not alter the fundamental analysis that governs whether those programs are lawful.
The team at DWT is closely tracking the Executive Orders and other government actions that may impact DEI and will continue to keep you informed. We are also always here and available to talk through your specific concerns.