Dive Brief:
- President Donald Trump has directed executive departments and agencies to insert a clause in federal contracts and subcontracts requiring these partners to agree they will “not engage in any racially discriminatory DEI activities” or risk the cancellation of their contracts, according to a Thursday executive order.
- The order additionally directs several agency leaders, including the chair of the U.S. Equal Employment Opportunity Commission, to identify economic sectors that present a “particular risk” of entities engaging in racially discriminatory DEI practices and provide further guidance for contracting agencies to ensure compliance.
- Departments and agencies have until April 25 to include this clause in their contracts, and agency leaders have until July 24 to review their agency’s implementation of the order and ensure compliance.
Dive Insight:
In the order, President Trump touted his administration’s “significant progress” in ending DEI initiatives, but noted that some groups continue their programs and “often attempt to conceal their efforts to do so.”
In contracting, “DEI activities … create unnecessary costs by reducing the pool of available labor by artificially limiting companies to hiring or promoting certain individuals, suppliers, or intermediaries based on their race or ethnicity,” according to the order. “These costs are inevitably passed on to the Federal Government when it contracts with companies who engage in racially discriminatory DEI activities, or who use subcontractors who do so.”
The order requires contractors to turn over “all information and reports,” including “books, records, and accounts,” for review by agencies. It also directs the attorney general, in consultation with contracting agencies, to consider whether to bring False Claims Act charges against contractors or subcontractors who violate the clause.
The order is the latest in a series of DEI-related executive orders from the second Trump White House. Shortly after taking office in January 2025, Trump signed one order rescinding former President Biden’s order that required agencies to create equity teams and created a federal DEI steering committee; one that eliminated consideration of federal job candidates’ commitment to the concepts of gender identity or equity; and one that directed all agencies and federal contractors to end their DEI programs “under whatever name they appear.”
While various groups have challenged the orders in court, they have largely withstood this pressure. In February, for example, the 4th U.S. Circuit Court of Appeals vacated a lower court’s preliminary injunction on the two orders, finding the plaintiffs lacked standing to challenge most of the provisions.
Beyond the White House, EEOC and the U.S. Department of Justice have also weighed in heavily on DEI, with the former signaling recently that — newly armed with a quorum since the fall — it would begin to heavily target private companies’ DEI initiatives as a basis for discrimination claims. In a February letter, Andrea Lucas, chair of the agency, warned the entire Fortune 500 against DEI-based discrimination.
Employers have been getting the message. Survey results published by law firm Littler Mendelson earlier this month showed that employers considered DEI the single top issue affecting workplace policy and regulatory changes after Trump’s first year in office — more than double the rate naming artificial intelligence.