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Steps Employers Should Be Taking Amid Trump DEI Executive Orders and Ensuing Legal Challenges

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The Trump administration is taking steps to end the use of “discriminatory” diversity, equity and inclusion (DEI) programs in the public and private sectors. One of President Donald Trump’s executive orders directs federal agencies to investigate and take action against any companies practicing “illegal DEI” and requires federal contractors to certify that they do not operate DEI programs that violate antidiscrimination laws.

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Enforcement of the DEI executive orders is currently on hold due to ongoing litigation, but companies should not wait to review their DEI practices to ensure compliance with federal, state and local laws.

Employers should not scrap DEI initiatives altogether as commitments to nondiscrimination and equal opportunity are in fact required by law. But employers should work with legal counsel to audit all DEI policies, plans and statements and, at a minimum, remove any preferences or exclusionary practices that favor any group of employees over another based on protected characteristics.

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Hours after taking office, Trump signed a stack of executive orders to implement his agenda, including several that take aim at DEI programs. The executive orders claim that DEI policies and programs violate federal civil rights laws that prohibit discrimination based on protected characteristics. The argument is that DEI is a form of discrimination – undermining equal opportunity laws by, for example, providing preferences to recruiting and/or employing certain individuals over others based on characteristics like race and sex. All the executive orders are crafted to root out DEI practices in the federal government, but some are directed at federal contractors as well as the private sector.

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Although a federal district court has paused implementation of key parts of these executive orders, namely enforcement action the government can take, employers should use this time to audit their policies to ensure compliance with existing laws and to prepare for potential changes.

The primary executive order that focuses on ending DEI beyond the federal government is Executive Order <a href="https://www.whitehouse.gov/presidential-actions/2025/01/ending-illegal-discrimination-and-restoring-merit-based-opportunity/">14173</a>, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (Executive Order 14173). It directs federal agencies to propose ideas for how to encourage the private sector to end “illegal DEI discrimination and preferences.” To carry this out, federal agencies have been tasked with drafting reports that identify “the most egregious and discriminatory DEI practitioners” within key sectors of each agency’s jurisdiction. The agencies also must identify nine potential targets for “civil compliance investigations” from among the following groups: publicly traded corporations; large nonprofit 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. Finally, federal agencies must develop ideas for potential lawsuits and regulatory action the government can undertake to deter DEI practices.

Crucially, Executive Order 14173 does not contain a definition of what constitutes “illegal DEI.” It refers only to ending “illegal preferences and discrimination.” However, two federal agencies have since issued memos that could shed light on what the Trump administration may consider to be illegal.

On Feb. 5, newly confirmed Attorney General Pamela Bondi issued a memo directing the Department of Justice’s (DOJ) Civil Rights Division to investigate, eliminate and penalize illegal DEI preferences, mandates, policies, programs and activities in the private sector (DOJ Memo). To that end, the DOJ Memo requires DOJ staff to develop a report in accordance with Executive Order 14173 that identifies ways to deter the use of DEI in the private sector, including proposals for criminal investigations. The DOJ Memo set March 1 as a deadline for DOJ staff to develop this plan, which should provide more guidance on what is and is not permitted, but the report has not yet been publicly released.

While the DOJ Memo does not define the term “illegal DEI” either, it does offer some guidance on the kinds of activities that the attorney general considers unlawful.

This memorandum is intended to encompass programs, initiatives, or policies that discriminate, exclude, or divide individuals based on race or sex. It does not prohibit educational, cultural, or historical observances – such as Black History Month, International Holocaust Remembrance Day, or similar events – that celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.

Another memo issued on Feb. 5, by the acting director of the Office of Personnel Management (OPM Memo), may also offer some insight into what the Trump administration considers impermissible. The OPM Memo directs federal agencies to end unlawful discrimination practices and policies, which are defined to mean any actions that are “motivated, in whole or in part, by protected characteristics.” For example, federal agencies are required to end “unlawful diversity requirements for the composition of hiring panels” and “candidate pools.”

The OPM Memo additionally calls for the end of “discriminatory” employee resource groups (ERGs), which are voluntary associations made up of employees who share common interests, identities or life experiences. The directive prohibits ERGs from:

Promoting unlawful DEI initiatives and recruitment, hiring, preferential benefits (including career development opportunities), or employee retention

Limiting attendance at ERG meetings and events, or dividing participants who are in attendance, based on a protected characteristic

Permitting the formation of some ERGs but not others

The OPM Memo, however, permits agency directors to let employees host affinity group lunches, engage in mentorship programs, and gather for social and cultural events.

Although the OPM Memo specifically applies to federal agencies, the Trump administration recently said in a legal filing that this directive is one of the ways it has provided guidance on what constitutes “unlawful discrimination related to DEI.”

Even though the Trump administration has not fully defined what qualifies as illegal DEI and the federal government is currently enjoined from taking any enforcement action against companies in relation to Executive Order 14173, it is advisable that employers act now to conduct a comprehensive audit of all DEI-related programming. Importantly, employers should be reminded that federal, state and local law remains unchanged – employers cannot discriminate against individuals based on a protected characteristic and must accordingly maintain a commitment to equal opportunity in the workplace.

Employers should begin by gathering all policies, protocols, plans, statements and other materials that relate to commitments and/or efforts surrounding DEI in the workplace or with respect to company resources. Once such materials are gathered, employers should review them with legal counsel to ensure compliance with existing laws.

Indeed, long before Trump issued his directives, federal courts made clear that certain kinds of DEI practices – e.g. employment decisions based on a protected characteristic – are not permitted. Thus, as a first order of business, employers should make sure there are no existing hiring quotas or other forms of preference that benefit individuals of certain protected characteristics over others, both for recruitment efforts and in relation to professional opportunities available to employees.

Further, the audit should look for any policy that could arguably “discriminate, exclude, or divide individuals based on race or sex” and consider potential modifications to comply with the guidance provided in the DOJ Memo.

Another area for review is ERGs, which sometimes offer mentorship or training opportunities for members. Although nothing under federal law or the executive orders issued to date appears to prohibit the existence of ERGs, employers should carefully scrutinize the rules and practices that govern these groups.

Employers are also advised to review their existing antidiscrimination training materials. While promoting awareness of unconscious biases and historical data should not land a company in hot water, statements that assign blame to or criticize one or more protected characteristics for existing disparities could run afoul of the law.

Similarly, businesses should ensure they do not have any policies that mandate unlawful practices in relation to third parties. Requiring that suppliers or vendors utilize DEI policies that are illegal for employers themselves to use is impermissible.

As it does with the private sector, Executive Order 14173 prohibits federal contractors and subcontractors from considering race, color, sex, sexual preference, religion or national origin in ways that violate civil rights laws. But the directive imposes an additional requirement for these contractors to certify that they do not operate programs that promote DEI in a manner that violates antidiscrimination laws. The certification component is meant to expose contractors that breach these rules to False Claims Act litigation, i.e., whistleblower lawsuits that can be brought by private citizens on behalf of taxpayers. Therefore, it is crucial that federal contractors take the same steps set forth above to, at a minimum, ensure that they do not operate any DEI programming that provides preferences to certain groups or excludes others.

Executive Order 14173 also rescinds several former executive orders that related to DEI initiatives. Perhaps most notably, Trump revoked Executive Order 11246, a directive from 1965 that required federal contractors with at least 50 employees and a single contract of $50,000 or more to develop an affirmative action program to “recruit and advance” qualified women and minorities. Executive Order 14173 does not apply, however, to affirmative action compliance obligations for individuals with disabilities or protected veterans. Executive Order 14173 also directs the Department of Labor’s Office of Federal Contract Compliance Programs to stop allowing or encouraging federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion or national origin.

Executive Order 14173 gives federal contractors until April 21 to comply with the new rules, but the aforementioned federal court decision has temporarily paused the certification requirement. Nonetheless, as with the private sector, we recommend that federal contractors and subcontractors conduct an audit with legal counsel to revise any plans that prioritize the recruitment or retention of employees based on a protected characteristic or that are aimed at workforce balancing, with the exception of policies that apply to veterans or individuals with disabilities.

While much remains unknown about when the federal government may provide additional guidance on how to comply with the DEI executive orders, and whether they will ultimately survive legal challenges, it is clear that the Trump administration will continue to carefully scrutinize DEI practices in the private sector. Employers should therefore act accordingly to review and, where appropriate, modify their policies.

BakerHostetler’s Labor and Employment Practice Group is already working with dozens of clients on these kinds of audits and is ready to assist your organization as well.

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