A Roadmap for review: Why federal contractors should assess their DEI programs

March 6, 2025

Blog Post

Federal contractors are experiencing a time of unprecedented uncertainty on many fronts. The Trump administration has taken steps to change the way employers think about diversity, equity, and inclusion initiatives (DEI) in the workplace, with even more impacts on federal contractors. Almost daily, the Trump administration is pushing out directives in the form of executive orders targeting DEI initiatives that intend to affect federal contractors and private sector employers generally; however, the legality of these directives is uncertain. In the meantime, what should federal contractors do to protect themselves and minimize the risk of noncompliance with a moving target?

In short, we recommend that federal contractors and private sector employers review their current recruiting, hiring, performance, and training policies and initiatives. In this article, we hope to offer federal contractors and private employers a roadmap on what to review and how to spot red flags and potential landmines.

Enforcement of anti-DEI initiatives

The recent executive orders attempt to eliminate illegal DEI programs at both federal agencies and for federal contractors. Indeed, they go as far as to require federal contractors to certify that they are not utilizing DEI programs that violate the administration’s policies. Some orders focus on gender, specifically attempting to defend women from what the Trump administration deems gender ideology extremism, to reinforce the concept of biological sex, and directing federal agencies to recognize only male or female sexes. The eExecutive orders state the administration’s intent to use the False Claim Act as a sword to enforce its anti-DEI position against federal contractors, to create hotlines to report illegal DEI practices, and to encourage agencies to create lists of companies for high-profile anti-DEI lawsuits.

Are the executive orders legal?

There are a number of legal challenges already underway, and it will take time for the courts to work out what parts of the executive orders will withstand legal scrutiny. One court has already issued an order providing some temporary protections for federal contractors, specifically. In a U.S. District Court for the District of Maryland, Judge Abelson temporarily blocked part of the executive order directives in this area. As a result of this temporary but important decision, Judge Abelson held that the Trump administration is prevented from:

Altering or ending DEI-related federal contracts
Bringing any False Claims Act enforcement action premised on any certification made pursuant to the Certification Provision; and
Bringing any other False Claims Act enforcement action, or other enforcement action, under the Enforcement Threat Provision.

See MH’s Employment Group’s article on this case here.

Make time for internal DEI review

The executive orders themselves gave federal contractors a grace period to get their DEI-related programs into compliance by April 21, 2025, but even that has been called into question with recent agency actions. Accordingly, we recommend that federal contractors conduct a thorough review of their policies, practices, and programs to determine what, if anything, needs to change to be compliant with current state and federal anti-discrimination laws. We recommend doing that as soon as reasonably possible.

What should I review?

More specifically, to mitigate their potential risks, federal contractors should review the following:

Hiring and promotion criteria

We recommend that decisions regarding hiring and promotions be based on objective criteria and should avoid demographic factors. Internal hiring and promotion decisions should be documented in alignment with those objective criteria.

Employment policies and handbooks

Based on recent case law changes in the areas of affirmative action, hiring preferences, and recruiting, we recommend consulting with an experienced employment attorney to ensure your policies conform to the recent Muldrow vs. City of St. Louis U.S. Supreme Court decision and other relevant rulings.

Company website and social media platforms

We recommend that companies review their websites, including information for potential customers and potential employees to ensure compliance. Companies might consider taking down information related to previous DEI initiatives while the reviews, updates, and legal challenges are underway.

Training - DEI, onboarding, and harassment

We recommend that companies review existing training program materials to ensure they conform with recent legal rulings and internal policy changes. Once any relevant updates are made to company policies and employment handbooks, federal contractors should then educate their HR teams on how to implement DEI-related initiatives in a legally compliant way. That means training employees on relevant federal anti-discrimination laws and the implications of EO 14173 on DEI practices.

Review federal contracts

We recommend that companies determine which existing federal contracts (and proposals that might be incorporated into those contracts) contain references to DEI programs and whether eliminating those programs would impact compliance with Title VII of the Civil Rights Act and EEOC guidelines.

Review solicitations for future bids/work

With regard to new contracting opportunities, we recommend that companies be on the look-out for DEI-related certifications in new solicitations and amendments. If companies are not sure if they are compliant with the standard in the solicitation, follow-up. It is important that companies understand the requirements and avoid making any inadvertent misrepresentations, which can have serious penalties far beyond the loss of a potential contract.

What might be considered a red flag or landmine?

Explicit preferences

Federal contractors and private sector employers alike should avoid explicit preferences in their employment policies and practices. If a program provides an advantage to one demographic group over another, that might provide a basis for legal challenges. We recommend focusing inclusion efforts to provide opportunities for all qualified persons.

“Affirmative Action” and other hot-button terms.

Make a list of terms that the company wants to avoid using and terms that are acceptable to describe the Company’s inclusion programs. Replace or eliminate hot-button terms.

Next steps

We recommend federal contractors prioritize the following next steps:

Update policies and procedures to reflect recent legal changes in case law.
Determine the delicate balance that the company will strike between adhering to anti-discrimination laws that apply to all employees (regardless of majority or minority status) and promoting a diverse destination-of-choice workplace.
Train leadership and HR team members on how to implement DEI-related initiatives in a legally compliant way.
Document all communications with federal contracting officers regarding any potential issues or questions regarding DEI compliance or programs.
Design and implement measures to address potential whistleblower concerns regarding DEI practices within the Company.
Stay informed and monitor the evolution of legal guidance as courts issue decisions, the administration updates guidance, and federal agencies begin implementation of related objectives.
Identify lists of concerns and questions for counsel. We know that companies want to be as efficient as possible, but some questions and concerns may require assistance from experienced federal government contracting and/or employment counsel. If most of the review and updates will be handled in-house to keep costs down, keep a list of questions and concerns to discuss with counsel to keep legal assistance targeted and efficient.

McDonald Hopkins is here to help. We can help simplify the chaos to figure out how legal changes apply to your business. Please reach out to Carissa Siebeneck Anderson in the government contracting and procurement practice or Karina Conley in the labor and employment practice for assistance.

Employers, especially those with military-affiliated employees, must be aware of these changes: they greatly expand potential liability under USERRA, increase exposure to damages, and limit the defenses available to employers in legal disputes.

For now, board member Wilcox is re-employed and the NLRB can resume its operations, having the minimum three-member quorum needed to render decisions. However, this battle is far from over and is likely headed to the United States Supreme Court for a potentially historical reframing of the extent of the President’s authority over all executive branch employees.

Diversity, Equity, and Inclusion (DEI) initiatives have been a central focus for many companies seeking to foster inclusive workplaces. However, as legal scrutiny intensifies, businesses must carefully evaluate their DEI programs to ensure compliance with evolving employment law standards.