The Bottom Line
- The executive orders do not mean that companies need to cease practices intended to diversify their workforce and to promote inclusion and belonging.
- DEI initiatives remain legal as long as they comply with anti-discrimination laws.
- Employers should consult with legal counsel as they shape their continued DEI efforts moving forward.
This week, as President Trump took office, he signed two executive orders that have raised questions for employers about their diversity, equity, inclusion (DEI), and accessibility initiatives. What do they mean? Who do they apply to? What authority do they have? And what is their impact on private employers?
Understanding Executive Orders
An executive order is a published directive from the President, focused on managing operations of the federal government. It is not legislation, and must comply with existing laws and legislation. While Congress cannot overturn an executive order, it can potentially impact the breadth of executive orders by passing new legislation or taking such action as removing funding needed to carry out its directives.
Executive Order on Gender Identity
On January 20, 2025, the President issued the Executive Order Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government requiring federal agencies to remove, and cease issuing, any statements, policies, regulations, and other messages that “promote or otherwise inculcate gender ideology.”
Mandates
Under this Executive Order, federal agencies are directed to only recognize two sexes: male and female, which, the Executive Order states, are binary, biological and “not changeable.”
Agency heads must also rescind all guidance documents inconsistent with the requirements of the order, or the parts of such documents that are inconsistent with the order, including the EEOC’s April 2024 guidance, “Enforcement Guidance on Harassment in the Workplace.” This is significant because that guidance:
- explicitly noted that sex-based harassment in the workplace includes harassment based on an individual’s sexual orientation or gender identity – citing the Supreme Court’s 2020 Bostock decision, which held that Title VII’s prohibition on sex-based discrimination includes sexual orientation and gender identity; and
- noted that harassing conduct based on sexual orientation or gender identity includes the denial of access to a bathroom or other sex-segregated facility consistent with the individual’s gender identity.
The Executive Order also directs the Attorney General to issue guidance “to ensure the freedom to express the binary nature of sex and the right to single-sex spaces in workplaces . . . covered by the Civil Rights Act of 1964.”
Immediate Impact for Employers
This Executive Order applies to federal agencies, not to private employers, and does not alter the fact that federal – and many state and local — anti-discrimination laws prohibit discrimination on the basis of gender identity.
Private employers do not need to change policies or practices based on this Executive Order, and must continue to comply with federal, state and local anti-discrimination laws. This Executive Order is, however, indicative of this administration’s mindset toward protections for transgender employees in the workplace.
Executive Order on DEI Programs
On January 21, 2025 the President issued the Executive Order Ending Illegal Discrimination And Restoring Merit-Based Opportunity, which focuses on dismantling DEI efforts in federal agencies and in relation to federal contractor funding.
It directs “all executive departments and agencies (agencies) to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements” and “[t]o enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.”
Of course, even prior to this executive order, federal civil rights laws such as Title VII of the Civil Rights Act of 1964 already governed, and companies were already prohibited from engaging in any hiring or employment practices – including related to DEI – that conflicted with the law. With greater scrutiny on such endeavors in the current moment, however, what companies choose to call such efforts and how companies carry out such efforts are likely to largely dictate the amount of legal and PR risk they stand to face.
Mandates
The Executive Order revokes prior executive orders promoting diversity and inclusion in the federal workforce and equal employment opportunity obligations for federal contractors and now instead:
- precludes employment, procurement, and contracting practices of federal contractors and subcontractors from “consider[ing] race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws.”
- requires contractors and federal grant recipients to affirm they have complied with all federal anti-discrimination laws in order to receive federal funds; and
- requires all government-wide processes and directives to “[e]xcise references to DEI and DEIA principles, under whatever name they may appear, from federal acquisition, contracting, grants, and financial assistance procedures to streamline those procedures, improve speed and efficiency, lower costs, and comply with civil-rights laws” and to “[t]erminate all ‘diversity,’ ‘equity,’ ‘equitable decision-making,’ ‘equitable deployment of financial and technical assistance,’ ‘advancing equity,’ and like mandates, requirements, programs, or activities . . . .”
The Department of Labor’s Office of Federal Contract Compliance Programs is directed to cease:
- “promoting ‘diversity’”
- holding federal contractors responsible for “taking ‘affirmative action’; and
- allowing or encouraging federal contractors and subcontractors to “engage in workforce balancing based on race, color, sex, sexual preference, religion or national origin . . . .”
Attempted Private Sector Reach
The Executive Order also discourages the private sector’s commitment to DEI principles by directing the Attorney General to consult with government agencies and submit a report within 120 days recommending measures for enforcement and to encourage the private sector to follow suit. The report is supposed to contain a proposed strategic enforcement plan that identifies the following:
- The “most egregious and discriminatory DEI practitioners in each sector of concern.”
- A plan of specific steps or measures to deter DEI programs or principles, including identifying up to 9 potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of $500 million or more, State and local bar and medical associations, and institutions of higher education with endowments over $1 billion.
- Other strategies to encourage the private sector to end DEI discrimination and preferences.
- Litigation that would be potentially appropriate for federal lawsuits, intervention and potential regulatory action and sub-regulatory guidance.
Immediate Impact for Employers
As we await the full impact of this Executive Order on the private sector, private employers should review current policies, programs and practices to assess legal compliance with federal, state and local anti-discrimination laws.
Caution: The Shifting Landscape of Anti-Discrimination Litigation
In the current environment, employers should also remain mindful of the increasing trend of failure to hire/failure to promote discrimination claims by white and male applicants/employees, who allege that they were not hired or promoted in part because of their gender and/or race.
Further emboldening such potential plaintiffs, the new acting Chair of the Equal Employment Opportunity Commission stated:
Consistent with the President’s Executive Orders and priorities, my priorities will include rooting out unlawful DEI-motivated race and sex discrimination; protecting American workers from anti-American national origin discrimination; defending the biological and binary reality of sex and related rights, including women’s rights to single sex spaces at work; protecting workers from religious bias and harassment, including antisemitism; and remedying other areas of recent under-enforcement.
Employers should proactively train on hiring and promotion practices to ensure compliance with federal, state and local anti-discrimination laws. Staying ahead of potential challenges with thorough compliance reviews and clear, consistent policies will be key to reducing risk in this evolving legal landscape.
The Future of DEI in Corporate America
These Executive Orders reflect a continuation of a growing trend since the Supreme Court’s June 2023 ruling in SFFA v. Harvard — which overturned affirmative action plans in college admissions. That decision already inspired a wave of intense legal and PR scrutiny on corporate DEI initiatives, and such efforts are now likely to further intensify.
Initial Private Sector Responses
In response to this legal and PR pressure, companies like Meta and Harley-Davidson have already rolled back DEI initiatives, while others, like Costco, doubled down when faced with a shareholder challenge to its DEI initiatives. In fact, Costco’s Board rejected a challenge to their DEI efforts and recommended that shareholders vote against the proposal to prepare a report evaluating “the risks of maintaining DEI efforts” at its January 23, 2025 shareholder meeting, citing the positive impact of its initiatives on its business and growth:
Our success at Costco Wholesale has been built on service to our critical stakeholders: employees, members, and suppliers. Our efforts around diversity, equity and inclusion follow our code of ethics . . . and reinforce with everyone at our Company the importance of creating opportunities for all. We believe that these efforts enhance our capacity to attract and retain employees who will help our business succeed . . . As our membership diversifies, we believe that serving it with a diverse group of employees enhances satisfaction . . . And we believe (and member feedback shows) that many of our members like to see themselves reflected in the people in our warehouses with whom they interact.
Having diversity in our supplier base, including appropriate attention to small businesses, is beneficial for many of the same reasons diversity benefits our Company. We believe that it fosters creativity and innovation in the merchandise and services that we offer our members.
Last night (January 23, 2025), shareholders of Costco opted to follow that recommendation, with an overwhelming majority (98%) voting down the proposal. Such staunch support from Costco’s leadership and shareholders may signal (or indeed spur) an appetite across corporate America for continued DEI efforts even in the face of the new administration’s initiatives.
Companies Do Not Have to Discontinue DEI Efforts
Additional data points will provide further guidance for navigating these unchartered waters over the coming months, which are anticipated to include:
- Further executive action;
- Regulatory changes (including how the new acting Chair of the EEOC modifies existing guidance pursuant to the Gender Identity executive order);
- Legal challenges by civil rights groups;
- The Attorney General’s report due in April (as required by the DEI Programs executive order); and
- Proposed legislation (such as the “Dismantle DEI Act of 2024”)
In the meantime, employers should remain mindful that the new executive orders do not render illegal many of the day-to-day practices and initiatives that companies have implemented to diversify their workforce populations, and to increase inclusion, belonging and retention.
These efforts, such as employee resource groups and mentorship programs are critical to employee development and retention – and remain lawful and useful to employees, provided they comply with anti-discrimination laws.