Experts Explore Concept of “Illegal DEI”

HRPA’s February 11th webinar on the Trump administration’s DEI Executive Order (EO) brought together experts and Association members to discuss what the EO means and recommended ways for companies to respond.

Key provisions of EO 14173  – As described in our previous coverage, the DEI Order:

• Rescinds Executive Order 11246, removing federal contractors’ affirmative action obligations (section 503 of the Rehab Act and VEVRAA requirements remain).

• Requires federal contractors to certify that they are in compliance with federal anti-discrimination laws and do not have any DEI programs that violate such laws in any contract or grant awarded.

• Mandates a federal report, due by end of May, focused on private sector oversight of “illegal DEI” naming. 

What practices are likely to be scrutinized? 

• The Order does not change the law defining illegal discrimination, but many believe the Trump administration will use interpretation of the EO to make new case law. As presenter David Fortney of Fortney & Scott LLC emphasized, until challenged in court illegal DEI under the Order is “in the view of the enforcer.”

• One source of information is the Office of Personnel Management memo to agency heads providing guidance that focuses on avoiding DEI programs that take “action motivated, in whole or in part, by protected characteristics.”

• Presenters stressed the need to make sure any programs focused on specific groups (specific recruitment, ERGs, mentoring programs, etc.)  are part of a broad mix and do not include set-asides for protected classes, especially supplier diversity programs.

New certification for federal contractors: Many contractors have begun receiving emails from the government requesting certification that they do “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”

• David Fortney encouraged companies to communicate to all levels of their teams to be on the lookout for these messages and escalate them up the chain for response.

• According to the EO, compliance is required to become a material term of the government contract. Violation of a material term could result in withheld funds and expose employers to complaints brought under the False Claims Act, a favorite tool of the plaintiff’s bar.

Key Takeaways: Presenters stressed the need to be purposeful about clearly understanding your situation by assessing:

1. DEI and talent programs – Carefully review, under supervision of counsel, how all programs that feed into your DEI strategy work, where they are housed within your organization, and what goal they are designed to help achieve. This review should go beyond HR to include legal, procurement, sales/business development, and investor-relations teams. 

2. Risk tolerance – Risk tolerance varies from company to company. Faten Alqaseer, Senior Managing Director at Teneo, suggests companies examine “where you sit in your industry and in the corporate world. Federal contractors in higher risk industries may be more risk adverse,” for example, but companies should understand “who are our stakeholders and what do they care about?”

3. DEI alignment with business goals – Having a full picture of all DEI programs, both legally and operationally, helps the company determine what choices make sense for their business. This alignment helps ensure that companies don’t “lose the narrative” and be branded by the media as either “pulling back on DEI or being full-throated defenders,” advises Alqaseer. Assessing alignment can help determine not only what actions make sense for your company, but whether or not to pursue a public announcement of any changes.

4. Global and state compliance requirements – Some states and global jurisdictions mandate diversity disclosures or have pay transparency laws. These obligations do not disappear under the federal EO. Data collection to comply with these laws or to take voluntary action carries some risk and presenters advise working with counsel on how to appropriately consider data.

For more, read our 3 Key Takeaways and Additional Resources.