On January 21, 2025, President Trump issued an Executive Order targeting diversity, equity, and inclusion (DEI) and diversity, equity, inclusion, and accessibility (DEIA) programs.1 Among other things, Executive Order 14173 (EO 14173), titled "Ending Illegal Discrimination and Restoring Merit-Based Opportunity" revoked Executive Order 11246. We unpacked the key provisions of E.O. 14173 in a previous alert.  How will this development impact federal contractors, subcontractors and other companies? 

Overview of E.O. 11246

E.O. 11246, now revoked, provided much of the basis for regulations implementing the requirement that federal contractors and subcontractors engage in affirmative action efforts to ensure that contractors and subcontractors refrained from discrimination against any employee or applicant for employment because of race, creed, color, or national origin.   EO 11246 also required federal contractors and subcontractors that met specified jurisdictional thresholds to develop written affirmative action plans.  These federal contractors and subcontractors, and private employers with at least 100 employees, must also submit workforce data annual report (“EEO-1”) to the Equal Employment Opportunity Commission (the “EEOC”).  Thereafter, the government added two additional equal opportunity mandates: Section 503 of the Rehabilitation Act of 1973 (“Section 503”), which covers individuals with disabilities and the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (“VEVRAA”), which covers protected veterans.  Note that VEVRAA requires covered contractors and subcontractors to submit to the EEOC an annual VETS-4212 report, which is a workforce data report specific to protected veterans.

On February 21, 2025 the United States District Court for the District of Maryland enjoined the Trump administration from implementing E.O. 14173 and another Executive Order ending DEI programs within the federal government. (E.O. 14151). As we summarized in a previous alert, the Court found that certain provisions of these two executive orders violate the First and Fifth Amendments to the United States Constitution in that they are unconstitutional content-based and viewpoint-discriminatory restrictions on protected speech (First Amendment) and deny Plaintiffs protection under the Fifth Amendment right to Due Process.

A panel of the United States Court of Appeals for the Fourth Circuit lifted the injunction on March 14.  As we wrote in a previous alert, in lifting the injunction the panel noted that the challenged executive orders directed government agencies to take certain actions, and there was not yet a basis to conclude that the agencies would do so in an unconstitutional manner. 

What Happened?  

On January 24, acting U.S. Department of Labor (DOL) Secretary Vincent Micone released an agency Order directing DOL employees to stop “all investigative and enforcement activity” related to E.O. 11246. Secretary Micone stated that the DOL “no longer has any authority” under the rescinded order.  The Order also ordered Section 503 and VEVRAA components of any ongoing review or investigation be held in abeyance pending further guidance.

Additionally, news outlets reported that on February 25, 2025, in response to Trump’s mandate to reduce all agency workforces, acting director of OFCCP, Michael Schloss sent a memo to Secretary Micone detailing Schloss’ plans for a reduction in force at OFCCP. 

Undoubtedly, the revocation of E.O. 11246, the planned reduction in force at OFCCP, and a host of other executive orders and agency activities are causing confusion among employers and federal contractors and subcontractors who are perplexed about whether to collect, report, or store demographic data about their employees and prospective employees as required in Section 709(c) of Title VII of the Civil Rights Act of 1964 and implementing regulations (including FAR 22.8).  On the one hand, the status of the executive orders issued by President Donald Trump is in flux as courts across the country are addressing challenges raised to the legality of the orders; on the other hand federal contracting and subcontracting entities are confronted with managing the legal and business risks associated with “illegal DEI and DEIA policies.”  Federal contracting agencies have also begun to announce Federal Acquisition Regulation (FAR) Class Deviations to FAR 22.8 in order to implement the recent executive orders related to DEI. These FAR Class Deviations will result in modifications to existing and future federal contracts, affecting both federal contractors and subcontractors.

What Should Federal Contractors and Subcontractors Do? 

Continue Compliance with Other Federal and State Law

Federal contractors and subcontractors must still fulfill obligations under federal and state laws, like those requiring submission of workforce and/or pay data under applicable federal and state law. 

Permissive and Mandatory Steps

Federal contractors may continue to comply with the regulatory scheme implementing E.O. 11246 for 90 days from the date EO 14173 was published.  How to determine whether to continue developing and maintaining affirmative action plans through April 21, 2025, is a business decision that should be made on a case-by-case basis.

Additionally, OFCCP still has authority to investigate and enforce claims under Section 503 of the Rehabilitation Act or VEVRAA brought by a federal contractor or subcontractor employee.  

Ongoing Affirmative Action Obligations 

Federal contractors and subcontractors who were in the process of drafting or implementing affirmative action policies should be mindful that E.O. 14173 did not revoke the federal contractor and subcontractor mandates under Section 503 or VEVRAA to take affirmative action for individuals with disabilities and protected veterans.  Accordingly, business with at least 50 employees (or those expecting to grow to that size) and with contracts valued at least $50,000 (for coverage under Section 503, or $150,000 under VEVRAA)  should continue with instituting affirmative action plans for individuals with disabilities and protected veterans.  As referenced above, however, OFCCP has been directed to hold review and enforcement proceedings in abeyance.

Next Steps

Overall, federal contractors and subcontractors should thoughtfully review their employment policies and practices to ensure that decisions, and records about employment decisions, accurately reflect merit-based employee selection and advancement processes. We also recommend waiting for additional details from the agency and seeking legal counseling before making any changes to your existing policies.

Before making any changes to current candidate or employee data collection practices, federal contractors and subcontractors should review their policies and procedures to determine compliance with both federal and state anti-discrimination laws, as well as for data reporting requirements.