Question: We understand the new administration is aiming to discourage diversity, equity, and inclusion (DEI) programs. As a private sector employer, what actions (if any) should we be taking?
Answer: We recommend reviewing your current practices and policies and then seeking legal counsel to determine what adjustments to make. Important factors will include not only recent federal directives, but also state and local laws, your organization’s workplace culture, and whether you are a federal contractor. Keep reading for a summary of relevant federal pronouncements, followed by our analysis and recommendations.
Federal directives on DEI: On January 21, 2025, President Trump issued Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity. As we previously reported, this order ended Executive Order 11246, which had required federal contractors to implement affirmative action plans focused on race/ethnicity and gender. But that’s only one provision. Other portions of the order impose new obligations on federal contractors and target DEI programs at all private employers. Federal contractors will be required to certify that they don’t “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” The new order also directs each federal agency to actively seek to stamp out any “illegal DEI discrimination and preferences” throughout the private sector, applying strategies such as nominating the “most egregious and discriminatory DEI practitioners in each sector of concern” for civil investigations of discrimination.
Our analysis of legal versus illegal DEI: Despite Executive Order 14173’s negative view of DEI programs, their legality in the employment context depends on how they are implemented. Discrimination on the basis of race, color, sex, religion, and national origin has been prohibited under Title VII of the Civil Rights Act since 1964. Every applicant and employee, regardless of race or sex, is protected from discrimination under Title VII. For example, if you tie managers’ pay to achieving a specified percentage of women or people of color in their departments, your organization has essentially established a quota and is at serious risk for claims of employment-based race and sex discrimination under Title VII. This is not new. In contrast, if you seek to expand your external candidate pool by listing job openings with organizations that serve a specific demographic group, you are free to do so. Inviting external candidates to apply for open positions is different from making an employment decision on the basis of a protected status. However, these lines can blur—for example, if you only invite employees of a particular race or gender to apply for internal promotional opportunities, you could be at risk for a discrimination claim.
Our analysis of special DEI risks for federal contractors: The new requirements for federal contractors to certify that they don’t operate DEI programs that violate federal anti-discrimination laws lay the groundwork for whistleblowers to file lawsuits under the False Claims Act. As explained by the U.S. Department of Justice (DOJ), the False Claims Act (FCA) allows individuals and the federal government to file claims alleging that a federal contractor fraudulently received federal funds or failed to pay the government the amount owed. Damage awards can be tripled, plus the contractor must pay a penalty that is linked to inflation. FCA whistleblowers can collect a cut from the money the contractor is forced to pay the federal government. Claims by individual whistleblowers are called “qui tam” actions. The DOJ recently announced that settlements and judgments in FCA cases during Fiscal Year 2024 exceeded $2.9 billion (yes, billion!). A DOJ chart breaking down the awards over the years shows that individual whistleblowers in qui tam actions were awarded a total of $403,971,450 in 2024. That’s a powerful incentive for a disgruntled applicant, employee, or former employee who believes they may have been denied a job opportunity due to an illegal application of DEI principles. We don’t know how quickly the certification requirements will be rolled out for new federal contracts and grants, or whether employers with existing federal contracts will be required to sign the certification, but your risk exposure as a federal contractor will rocket up as soon as the certification is made.
How to assess DEI policy exposure: We recommend you begin your DEI review by compiling an inventory of policies, language, and practices that could be viewed as DEI-related. Your review should include your employee handbook, any separate policies, the careers page on your company website, posted notices (physical and electronic), employer-sponsored clubs (including employee resource groups), employer-sponsored celebrations, and any other practices that could raise concerns of discrimination if viewed in a negative light. Once your inventory is complete, seek legal counsel to review both the substance and the language. Even if your programs are deemed totally legal, you should consider whether to adjust the descriptions, for example by replacing hot-button terms with phrases such as nondiscrimination and equal employment opportunity.
Federal directives on gender identity: On January 20, 2025, President Trump issued Executive Order 14168, Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government. The Equal Employment Opportunity Commission (EEOC), under the leadership of its new Acting Chair, followed up with a press release, Removing Gender Ideology and Restoring the EEOC’s Role of Protecting Women in the Workplace. These announce a new federal policy to only recognize biological sex (not gender identity), limited to male or female, based on an individual’s sex at birth. They state that each sex is entitled to private single-sex spaces (such as bathrooms and locker rooms), which are to be accessible based on biological sex, not gender identity.
Our analysis of restroom access based on biological sex instead of gender identity: The new federal policy of not recognizing gender identity and of tying bathroom access to biological sex at conception will almost certainly be challenged under Title VII of the Civil Rights Act and end up before the U.S. Supreme Court. As we previously reported, in a 6-3 decision, the Court ruled in 2020 that Title VII protections on the basis of sex encompass protections on the basis of sexual orientation and gender identity (Bostock v Clayton County, Georgia, US, June 2020). However, the Court did not address access to bathrooms or locker rooms. Unfortunately, any answer to this question is likely years away while cases wind their way through the court system. Equally confusing, the new federal policy is in conflict with state laws in California, Oregon, and Washington, which specifically prohibit discrimination on the basis of gender identity and grant employees the right to access private spaces consistent with their gender identity. Arizona, Idaho, and Montana state laws don’t provide such rights, but employers should check to see if their local city or county may have an ordinance addressing this issue.
How to assess exposure to restroom access issues: Employers with workplaces in California, Oregon, or Washington, are in a difficult position. If you allow employees to access bathrooms and locker rooms consistent with their gender identity, you risk an EEOC complaint, but if you assign access based only on biological sex, you risk a complaint from transgender employees under state law. In some cases, you may not even be aware that an employee’s biological sex is different from how they’re presenting themselves at work (and we don’t recommend inquiring unless a specific issue arises and legal counsel advises you to do so). From a practical standpoint, the more single-user restrooms (or changing rooms) you can provide, the better. Having easy access to individual spaces should help employees feel more comfortable and less likely to file complaints, regardless of their perspective on this issue.
Final thoughts: Once you complete your inventory of DEI-related activities and assess your exposure to restroom access issues, contact your Vigilant Law Group employment attorney or other legal counsel for specific advice. These are complex issues and the best path forward for each employer will be unique. Also, amid all these legal compliance concerns, it’s good to pause and consider the human side of these changes. Employees who have been sincerely dedicated to promoting equal employment opportunities for all may feel discouraged or uncertain. Transgender employees may be worried about how they’ll get through the workday if they can’t use the bathroom that corresponds with their gender identity. Emotions may be running high for other employees as well. Talk with your supervisors and managers about your plans for moving forward and ask for their help in ensuring every team member feels valued and is treated fairly. If your supervisors could benefit from brushing up on their leadership skills, ask your Vigilant Law Group employment attorney for a copy of Vigilant’s 2024–2025 Training Catalog, or visit Vigilant’s legal training webpage. We’re here to help!
