Aligning DEI Policies with the New Executive Order:

The landscape of diversity, equity, and inclusion (DEI) in the workplace is shifting in response to

the recent Executive Order on “Ending Illegal Discrimination and Restoring Merit-based

Opportunity”, issued on January 21, 2025. For federal contractors and large private

employers, this means reassessing DEI strategies to maintain compliance while preserving

legally permissible DEI-related initiatives. Here’s what organizations need to consider to adapt

effectively.

1. Conduct a Legal Compliance Review

Rescind or Modify Affirmative Action Policies

With the rescission of Executive Order 11246, federal contractors are no longer required to

maintain affirmative action programs. Companies should evaluate the legal risks associated with

continuing such initiatives and adjust accordingly.

Ensure Nondiscrimination Compliance

Although EO 11246 has been repealed, Title VII of the Civil Rights Act and the Supreme

Court’s ruling in Bostock v. Clayton County still prohibit discrimination based on race, sex,

gender identity, and sexual orientation. Employers must ensure their policies align with these

protections.

Review Certification Language for Federal Contracts & Grants

Federal contractors must certify compliance with all anti-discrimination laws and ensure their

programs do not violate federal standards.

2. Evaluate DEI Programs for Legal Risk

The new Executive Order scrutinizes certain DEI initiatives. Employers should carefully examine

and revise:

Race- or Gender-Based Programs

Avoid explicitly favoring any demographic group. Programs under particular scrutiny include:

● Race-restricted internships or mentorship programs

● Hiring initiatives with demographic targets

Supplier Diversity Programs

While not outright banned, supplier diversity programs must ensure that selection criteria

focus on business qualifications rather than demographic characteristics.

Compensation & Performance Metrics

Companies should avoid linking executive pay or employee performance reviews to achieving

demographic-based DEI goals.

3. Modify DEI Policies to Focus on Compliance & Inclusion

Rather than eliminating DEI programs, organizations should reframe initiatives to align with

legally permissible strategies.

Shift from “Affirmative Action” to “Inclusive Hiring”

● Focus on broad outreach rather than demographic quotas.

● Use structured interviews and blind resume reviews to reduce hiring bias.

Replace Identity-Based Programs with Skills-Based Initiatives

● Offer mentorship and leadership training open to all employees.

● Consider socioeconomic factors instead of race or gender as eligibility criteria.

Ensure Employee Resource Groups (ERGs) Are Voluntary & Open

● ERGs should emphasize professional development rather than advocacy for specific

identity groups.

● Ensure ERGs are voluntary and open to all employees, without giving preferential

treatment to particular groups.

4. Adjust Data Collection & Reporting Practices

Assess Data Collection Obligations

With federal affirmative action reporting potentially being phased out, organizations should

check state and local regulations, which may still require demographic data collection.

Limit Demographic Data Use

If collecting demographic data, use it for compliance monitoring rather than setting hiring

quotas or workforce balance targets.

Prepare for Increased Federal Scrutiny

The Executive Order directs agencies to investigate companies with potentially unlawful DEI

programs. Employers should document compliance efforts to ensure alignment with Title VII

and Supreme Court precedents.

5. Prepare for Contract & Grant Modifications

Anticipate New Certification Requirements

Federal contractors and grant recipients must be ready to certify compliance with the

Executive Order’s anti-discrimination provisions.

Expect Contract Language Updates

Government contracts may be modified to include explicit compliance clauses with federal

anti-discrimination laws.

Monitor State & Local Contracting Requirements

While the Executive Order changes federal policies, some states may continue requiring

affirmative action. Employers must carefully balance compliance with both federal and state

regulations.

6. Monitor Further Guidance & Legal Developments

Stay Alert for Additional Executive Orders

Future guidance or amendments to the Executive Order may further clarify what constitutes

“illegal” DEI programs.

Watch for Potential Litigation

Legal challenges to the Executive Order could impact implementation. Employers should stay

informed about ongoing litigation and any resulting court rulings.

Engage Legal & Compliance Teams

Organizations should work closely with legal counsel to ensure their DEI policies remain

compliant and legally defensible.

While the Executive Order significantly alters federal DEI policies, it does not eliminate the

possibility of fostering an inclusive workplace. Employers should focus on:

● Merit-based hiring

● Inclusive leadership

● Ensuring compliance with Title VII protections

By steering clear of race- or gender-based preference programs, companies can maintain

diversity and inclusion efforts while mitigating legal risks. As the regulatory landscape evolves,

staying proactive and informed is key to navigating these changes successfully.