On January 21, 2025, President Trump issued an executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This sweeping directive significantly alters the federal government’s approach to diversity, equity, inclusion, and accessibility (DEIA) initiatives by revoking previous executive orders, including some that had been in place for decades. The administration frames the order as a return to civil-rights principles rooted in individual merit and the prohibition of unlawful discrimination. However, it has sparked controversy and left many organizations questioning how to navigate this new legal landscape.
Key Components of the Executive Order
1. Revocation of Prior Executive Orders:
- The executive order explicitly revokes several prior directives, including:
- Executive Order 12898 (Environmental Justice in Minority Populations and Low-Income Populations)
- Executive Order 13583 (Promoting Diversity and Inclusion in the Federal Workforce)
- Executive Order 13672 (Amendments to Equal Employment Opportunity in the Federal Government)
- Executive Order 11246 (Equal Employment Opportunity, issued in 1965)
By dismantling these policies, the administration claims to eliminate race- and sex-based preferences, which it argues undermine traditional values of hard work and individual achievement.
2. Streamlining Federal Contracting:
- Federal contractors and subcontractors are no longer required to promote diversity or take affirmative action to balance their workforce.
- Agencies are directed to revise all acquisition, contracting, grants, and financial assistance procedures to remove references to DEI or DEIA principles.
3. Private Sector Compliance:
- The executive order encourages federal agencies to investigate private-sector practices deemed discriminatory under civil-rights laws. This includes scrutinizing large organizations and nonprofits, potentially setting the stage for increased litigation or enforcement actions.
4. Impact on Education:
- Federal funding recipients in education are directed to comply with measures outlined in Students for Fair Admissions, Inc. v. Harvard, which restricts race-conscious admissions practices.
What Should Private Sector Employers (Including Nonprofits) Do Now?
The executive order raises significant questions regarding private sector use of DEI preferences and even calls into question the ability of a company to sustain or encourage an internal culture that celebrates or seeks out diversity. Because the executive order does not define “illegal discrimination or preferences,” it can be difficult to determine whether a specific practice is likely to be the target of negative government attention.
Notably, nothing in the executive order suggests that employers may not take action to seek out a diverse candidate pool, so long as ultimate hiring decisions are based on qualifications alone and do not involve illegal preferences. Therefore, to lower the risk of enforcement action by the federal government, private sector employers (including nonprofit organizations) may choose to recruit across a broader spectrum and prioritize seeking out a wide range of diverse characteristics, rather than just focusing on protected characteristics like race or sex.
At a minimum, employers who fall into one or more of the five categories to be scrutinized for potential civil compliance investigations may wish to assess their risk-tolerance and consider whether suspending affirmative action plans or DEI initiatives is in line with their company’s priorities. But, even for employers who are not the target of civil compliance investigations, these executive orders may embolden employees and applicants who feel they have been mistreated as a result of diversity initiatives to bring private claims of discrimination against their employers.
What Should Government Contractors Do Now?
Significantly, the DEI EO’s revocation of Executive Order 11246, first issued in 1965 (one year after President Johnson signed the Civil Rights Act of 1964) (EO 11246) reflects a sea change in the affirmative action obligations of government contractors. Under EO 11246, federal contractors were required to analyze workforce data and engage in good faith efforts to provide equal employment opportunities for women and minorities, but they were not required to apply quotas or preferences for those groups. President Trump’s revocation of this longstanding requirement potentially eliminates entirely the requirements that government contractors develop and certify annually their affirmative action plans.
The DEI EO permits federal contractors to operate under current rules for 90 days while they await further guidance from the government on new requirements. We anticipate that private plaintiffs will be exploring their options in terms of legal remedies in response to the revocation.
Potential Implications for Nonprofits Beyond Employment Matters
DEI principles are integral, and in some cases central, to the mission of many nonprofits. The DEI EO is drafted broadly and could encompass programmatic activities in addition to employment-related or contractual matters. As a result, while some organizations may be more risk averse and may elect to change or terminate certain programs, other organizations may decide to stay the course and continue to pursue programs that could draw the attention of the Administration, Attorney General, or relevant agencies. The decision will depend in part on the organization’s specific priorities and level of risk aversion. If an organization ultimately seeks to terminate programs or make fundamental changes to their mission, there may be other legal impediments that could arise under the federal tax law and state nonprofit laws, particularly those that apply to charitable organizations.
For further details, see the full executive order here: Ending Illegal Discrimination and Restoring Merit-Based Opportunity.
Kenneth R. Cerini, CPA, CFP, FABFA
Managing Partner
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.
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