During his first week in office, President Trump revoked an executive order that required larger federal contractors to create and implement affirmative action plans intended to increase the participation of women and minorities in those companies. The order, which had been in place since 1965, was enforced by the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP). That agency conducted audits of contractors' affirmative action plans, and initiated enforcement action against contractors that failed to comply with affirmative action plan rules, or that were accused of discriminatory employment practices.

The executive order was not reliant on any underlying statute, and the president has the legal authority to revoke it. Federal contracting rules that apply to disabled workers and veterans are based on federal law and remain in place following the latest action. The revocation order says that contractors may continue their affirmative action plans for 90 days before phasing them out. The new action also directed the OFCCP to immediately cease auditing and enforcement actions based on affirmative action plan compliance issues.

Instead of eliminating the OFCCP, the new order appears to reorient the agency to prosecute federal contractors that retain diversity, equity, and inclusion (DEI) programs. The order requires the OFCCP to identify contractors for investigations that could lead to civil penalties or disbarment from participating in federal contracting work. Contractors must eventually certify that they have abandoned all DEI efforts.

This second part of the new order raises legal questions that will likely challenge the president’s authority to ban all DEI efforts by contractors. The new order fails to define prohibited conduct or to distinguish between legal and illegal DEI efforts. For example, DEI programs that do not displace a merit-based hiring and promotion system do not violate federal nondiscrimination statutes.

During the Biden administration, businesses and other interested parties successfully sued to prevent a COVID-19 vaccine mandate for employees of contractors from going into effect. Some contractors will likely use the same legal arguments to challenge Trump’s ability to ban all DEI efforts. These proponents could also argue that the ban violates their First Amendment free speech rights.

For now, federal contractors that maintain DEI programs should carefully audit them to make sure that they are not subject to claims that elements of the programs result in employee selections based on race, gender or other protected classifications. In addition to OFCCP investigations, individual parties may file False Claims Act lawsuits against companies alleging that they maintained DEI programs in violation of federal law.

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