Trump Administration Issues Executive Order Targeting DEI in the Private Sector

On January 21, 2025, President Donald J. Trump issued an executive order targeting diversity, equity and inclusion (DEI) programs and related measures that seek to address social inequality.  Entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” the order contains a number of concrete actions targeting the private sector, including ending affirmative action regulations for federal contracts and directing government agencies to:

• Remove any remaining government DEI-related programs, and
• Identify prominent businesses and other organizations for enforcement actions targeting private DEI-related programs and practices.

Key Aspects of the Order

Private Sector Focus

In addition to revoking a wide swath of executive orders relating to diversity, inclusion, and equal employment opportunity going back to 1965, the order contains a number of measures aimed at “[e]ncouraging the Private Sector to End Illegal DEI Discrimination and Preferences,” including broadly directing all agency heads to “take all appropriate action with respect to the operations of their agencies to advance in the private sector the policy of individual initiative, excellence, and hard work identified in . . . this order.” [Id., § 4(a).]

In addition, the Attorney General and other administration officials are directed to issue, within 120 days of the order, i.e., May 21, 2025, a report to the President “containing recommendations for enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” [Id., § 4(b).]

Specifically, the report must include:

• “key sectors of concern” for each agency; 
• “[t]he most egregious and discriminatory DEI practitioners in each sector of concern”; and 
• “A plan of specific steps or measures to deter DEI programs or principles (whether specifically denominated ‘DEI’ or otherwise) that constitute illegal discrimination or preferences,” including “up to nine potential civil compliance investigations of 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.”[Id., § 4(b)(i)-(iii).]
• Other strategies to encourage the private sector to end illegal DEI discrimination and preferences and comply with all Federal civil-rights laws;
• Litigation that would be potentially appropriate for Federal lawsuits, intervention, or statements of interest; and
• Potential regulatory action and sub-regulatory guidance. 

The order has a potentially significant impact on federal contractors as well.

Specifically, the order directs the Department of Labor’s Office of Federal Contract Compliance Programs to immediately cease “[p]romoting ‘diversity’”, “[h]olding Federal contractors and subcontractors responsible for taking ‘affirmative action’”, and “[a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” [Id., § 3(b)(ii)(A)-(C).]

All federal agencies are directed to include terms in every contract or grant award:  

• Providing that compliance with Federal anti-discrimination law is material to payment decisions for purposes of federal regulations, and 
• Requiring certification that each federal contractor does “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” [Id., § 3(b)(iv)(A)-(B).]

Finally, the Director of the Office of Management and Budget is directed to “[t]erminate all ‘diversity,’ ‘equity,’ ‘equitable decision-making,’ ‘equitable deployment of financial and technical assistance,’ ‘advancing equity,’ and the like mandates, requirements, programs, or activities . . . .” [Id., § 3(c)(i)-(iii).] All federal employees in DEI-related positions have been placed on indefinite paid leave. [Trump Orders All Federal Diversity, Equity And Inclusion Employees Placed On Paid Leave Starting Wednesday]

Key Takeaways

Larger companies should begin to plan in anticipation of the Attorney General’s report to be issued by May 21, 2025.  Based on the Executive Order, the Trump administration intends to file, and intervene in, impact litigation against select private-sector targets. By targeting private employers, and seeking to extend the Supreme Court’s landmark ruling in Students for Fair Admissions v. Harvard, the Executive Order may also further embolden plaintiffs’ counsel and conservative advocacy groups to file similar impact litigation in the future and seek to put other pressure on companies to back away from DEI initiatives. As part of their planning, companies should assess their risk profile and carefully review their programmatic DEI initiatives and communications.

While the order strongly suggests a view that many, if not all, DEI programs are likely unlawful, that is still a hotly contested issue.  The Supreme Court’s 2023 decision in Students for Fair Admissions only addressed the education context and only specifically construed the requirements of the Equal Protection Clause of the Fourteenth Amendment, not the requirements of various civil rights statutes, which have been construed to embody a different standard in many cases over the past decades.  Even then, Students for Fair Admissions did not go so far as to rule out diversity as a compelling interest.  As a result, the legal landscape governing DEI programs in the private sector remains unsettled.

Against this backdrop, employers should carefully evaluate any programs and benefits that are available only to certain demographic groups, or that could be characterized as imposing quotas or mandated numerical targets, which have long been declared impermissible under existing law.

In addition, federal contractors must cease compliance with the OFCCP’s existing affirmative action requirements by April 20, 2025, and should begin planning for that.  Federal contractors will also need to pay particular attention to the new certification requirement, which could be asserted as a basis for liability under the False Claims Act, as well as to support a breach of contract claim.  

As we move into 2025, companies will need to closely follow developments in this area. The Executive Order is likely just the first salvo by the new Administration to combat DEI programs.

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