Trump Administration Issues New Executive Order for Federal Contractors Defining “Illegal DEI” in Terms of Intentional Race and Ethnicity Discrimination but Excludes Sex
John Agbonika, Associate
President Trump’s Executive Order entitled, “Addressing DEI Discrimination by Federal Contractors,” (the “Order”)[1] builds on the Administration’s earlier anti-DEI Executive Orders by defining what it views as prohibited “racially discriminatory DEI activities” in federal contracting. The Order focuses on preventing race- or ethnicity-based disparate treatment in recruiting, hiring, promotion, contracting, mentoring, training, leadership programs and similar opportunities by requiring covered federal contracts to include a lengthy clause controlling federal contractors’ conduct related to racially discriminatory DEI activities and by imposing penalties, such as the termination of contracts, on federal contractors who do not comply with the clause. The Order does not mention discriminatory DEI activities based on sex.
Background
Last year, we wrote about President Trump’s Executive Order (“EO”) 14173, and the litigation and enforcement activity that followed it.[2] As discussed in those posts, EO 14173 revoked EO 11246,[3] directed agencies to target “illegal DEI” programs, and required federal contracts and grants to include counterparty certifications on compliance with federal antidiscrimination law. EO 14173 directed federal contractors to not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws, during their employment, procurement, and contracting practices. However, it did not clearly define what the Administration meant by “illegal DEI.” The Order appears intended to fill that gap by giving agencies and contractors a more specific rule to apply.
The Order
Like EO 14173, the Order’s purported purpose is to promote economy and efficiency in federal contracting by preventing “racially discriminatory DEI,” which it defines as “disparate treatment based on race or ethnicity in recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.” Although EO 11246 (as amended) included sex as a protected trait, EO 14398 does not define “illegal DEI” in terms of sex; it only focuses on “illegal DEI” related to race and ethnicity.
Disparate treatment occurs when an employer intentionally treats some people less favorably than others because of their race, color, religion, sex, or national origin.[4] The Order also broadly defines “program participation” to include access to training, mentoring, leadership development, educational opportunities, clubs, associations, and similar programs sponsored by the contractor or subcontractor. In essence, the Order defines illegal DEI in terms consistent with the current law (except for its exclusion of protections against sexual discrimination) and requires contractors not to intentionally discriminate against someone based upon their protected traits of race or ethnicity.
Furthermore, the Order directs government agencies to ensure by April 25, 2026, that covered federal contracts and subcontracts include a clause prohibiting racially discriminatory DEI activities by adding language that the contractor will not engage in any “racially discriminatory DEI activities,” will provide information and access to records so the contracting agency can ensure compliance with the clause, and will report “known or reasonably knowable” subcontractor conduct that may violate the clause. The Order states that the contracting agencies shall cancel, terminate, or suspend any contract if the contractor or subcontractor does not comply with the Order as well as suspend and debar contractors or subcontractors for their failure to comply with the Order.
Employer Considerations
Though the Order poses harsh ramifications for federal contractors and subcontractors who participate in “racially discriminatory DEI activities,” the Order still does not completely bar every workplace inclusion effort. For instance, if a federal contractor or subcontractor’s DEI programs result in no disparate treatment based on race or ethnicity, then such contractors and subcontractors would still be in compliance with the overall purpose of the Order. However, federal contractors and subcontractors should continue to audit and review their policies and programs that could be characterized as using race or ethnicity as a basis for intentional discrimination.
With the Order, the Administration has attempted to move from speaking generally about “illegal DEI” to identifying what it believes qualifies as impermissible conduct in the federal contracting space and therefore, government contractors should continue to refine their DEI programs to ensure compliance with the newly narrowed prohibitions.
[1] Exec. Order 14398, Addressing DEI Discrimination by Federal Contractors (Mar. 26, 2026), https://www.whitehouse.gov/presidential-actions/2026/03/addressing-dei-discrimination-by-federal-contractors/
[2] See Department of Justice to Use the False Claims Act to Combat DEI (May 29, 2025), https://www.rockymountainemployersblog.com/blog/2025/5/29/department-of-justice-to-use-the-false-claims-act-to-combat-dei.
[3] President Lyndon B. Johnson issued EO 11246, which prohibited federal contractors and subcontractors from discrimination in employment based on race, color, religion, or national origin, and mandated affirmative action by contractors to ensure equal opportunity in employment. See EO 11246, Equal Employment Opportunity, 30 Fed. Reg. 12315 (Sept. 28, 1965). In 1967, President Johnson issued Executive Order 11375, which amended EO 11246 to include sex on the list of protected attributes. See EO 11375, Amending Executive Order 11246, Relating to Equal Employment Opportunity, 32 Fed. Reg. 14299 (Oct. 17, 1967).
[4] Int’l Bhd. of Teamsters v. U.S., 431 U.S. 324, 335 n.15 (1977)