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President Trump Issues Executive Order Prohibiting Use of “Diversity, Equity, and Inclusion” for Federal Contractors and Grant Recipients

CATEGORY: Special Bulletins
CLIENT TYPE: Nonprofit, Private Education, Public Education, Public Employers, Public Safety
PUBLICATION: LCW Special Bulletin
DATE: Jan 29, 2025

On January 21, 2025, President Donald Trump released an Executive Order (EO) titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” that effectively prohibits federal government agencies, contractors and subcontractors, and federal grant recipients from instituting policies that allow for race- or sex-based preferences. The EO makes clear that it does not apply to employment practices or contracting decisions that prefer veterans of the U.S. armed forces.

Diversity, Equity, and Inclusion Policies

The EO specifically targets Diversity, Equity, and Inclusion (DEI) policies, describing such measures as potentially violating federal civil rights laws that protect individuals from discrimination based on race, color, religion, sex, or national origin.

The EO requires removing DEI references from all federal acquisitions, contracts, grants, and financial assistance procedures, including all references to “diversity,” “equity,” “equitable decision-making,” “equitable deployment of financial and technical assistance,” “advancing equity,” and similar terms.

The EO immediately directs all executive departments and agencies of the federal government to terminate all policies, programs, activities, and requirements that promote race- or sex- based preferences.

For example, the Department of Labor was ordered to immediately cease the following conduct:

    • Promoting “diversity”;
    • Holding federal contractors or subcontractors responsible for taking “affirmative action”; and
    • Allowing federal contractors or subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.

Federal Contractors, Subcontractors, and Grant Recipients

For 90 days from the issuance of this January 21, 2025 EO, federal contractors and subcontractors are allowed to continue operating in compliance with existing policies. However, after that time, any employer that contracts or subcontracts with a federal government agency, or receives federal grant funds, must revise its contract or grant award in the following ways:

    • Each contract or grant award must incorporate a term requiring the contractual counterparty or grant recipient to agree that the government’s payment decisions are contingent on compliance with all applicable federal antidiscrimination law.
    • Each contract or grant award will incorporate a term certifying that the contractor or grantee does not operate any DEI programs that would violate applicable federal anti-discrimination laws.

At this stage, we advise clients that receive federal grants or who are federal contractors or subcontractors to carefully evaluate their existing DEI initiatives to ensure compliance with federal anti-discrimination law, and to consider whether such practices might be construed as unlawful.

Liebert Cassidy Whitmore attorneys are available to assist with such evaluations and provide guidance in developing policies that comply with federal civil rights law.

Educational Institutions in Receipt of Federal Funds or Student Loan Assistance

Within 120 days of the January 21, 2025  EO, the U.S. Attorney General and Secretary of Education will issue guidance to all State and local educational agencies  that receive federal funds, and educational institutions that receive federal grants or participate in federal student loan assistance under Title IV of the Higher Education Act to ensure that such institutions comply with the mandates of the EO, and do not promote race- or sex-based preferences in their policies.

Private Sector Entities May Be Impacted

Private sector entities whose policies encompass DEI principles are not exempt from the EO.

Within 120 days of January 21, 2025 EO,  the Director of the Office of Management and Budget (OMB) is required to submit a report containing a strategic plan identifying specific steps to deter DEI programs, and to identify potential investigations of large non-profits, state and local bar and medical associations, and institutions of higher education with endowments over $1 billion.

Liebert Cassidy Whitmore attorneys continue to closely monitor the issuance President Trump’s Executive Orders and will provide updates to assist our clients with compliance. If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office.

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