Trump Order Forces Contractors to Weigh Bias Risk With DEI Fears

Federal contractors are attempting to balance compliance with President Donald Trump’s executive order overhauling their longstanding employment and pay data reporting obligations with heightened discrimination risks that accompany axing those safeguards.

Trump’s Executive Order No. 14173 eliminated the US Department of Labor federal contracting watchdog’s ability to monitor these companies for bias based on race, sex, and other characteristics, and to ensure they have adequate affirmative action plans.

With the Office of Federal Contract Compliance Programs’ power gutted, tens of thousands of companies with contracts worth a total of $769.5 billion in 2024 can pull back from anti-bias audits of their workforces. But the resulting blind spots could invite bias claims under Title VII of the 1964 Civil Rights Act and other antidiscrimination statutes, labor and employment lawyers said.

“Do we expect to see a rise in discrimination claims or even more fundamentally a rise in actual bias in the employment process in the American workplace? The answer is quite possibly, even likely,” said Mickey Silberman, founder of Silberman Law PC.

Decades-old EO 11246, which Trump overturned, had obligations for contractors beyond what is required under Title VII, the Equal Pay Act, and other civil rights laws. OFCCP required companies to proactively look at their workforce to mitigate hiring and pay discrimination and conduct outreach to diverse job candidate slates.

The DOL halted all enforcement at OFCCP on pending cases, conciliation agreements, investigations, and complaints under the executive order.

The agency retained the power to enforce Section 503 of the Rehabilitation Act and the Vietnam Era Veterans’ Readjustment Assistance Act, which police bias and require affirmative action steps for disabled workers and veterans. Those statutory duties can’t be undone by executive action, but even those reviews are paused pending further guidance.

Hidden Barriers

As companies walk the line of avoiding employee discrimination charges and scrutiny from a Trump administration antagonistic to diversity programs, they may look to continue pay and hiring analyses under privilege, labor attorneys said.

The formerly required analyses allowed employers to proactively review their workforce and find potential barriers to diverse hiring hidden to both employees and employers.

For example, if a company had 100 White applicants and 100 Black applicants for a job and hired 26 White applicants and zero Black applicants, there may be bias within the process, Silberman said.

If no applicants bring a claim of discrimination, without practicing “proactive EEO,” an employer is blind to those trends or barriers, he added.

The OFCCP’s audits of hundreds of companies annually as well as its complaint intake process have resulted in administrative lawsuits against high-profile companies.

JPMorgan Chase & Co., Hewlett Packard Inc., and AT&T Inc. settled with the OFCCP in cases alleging pay discrimination in the last five years. In the past decade, the OFCCP obtained over $260.8 million on behalf of over 250,900 employees, according to DOL data.

By continuing those analyses under privilege, companies can “take a hard look at the problem and not be afraid of what they’re going to see,” said Jenny Yang, a strategic partner at Working IDEAL. Yang was OFCCP’s director under former President Joe Biden, as well as an Obama-era chair of the Equal Employment Opportunity Commission.

Goal Setting Scrutiny

Trump’s order provided a 90-day window when companies “may continue” to comply with the prior regulatory scheme.

Previous OFCCP obligations for contractors to create affirmative action plans that compare the “utilization of women and minorities to their availability” may be targeted by the administration given its hard-line stance on diversity, equity, and inclusion programs.

Any goal-setting affirmative action plans should be wound down by contractors, Silberman said.

“The bottom line is employers that continue to set race and gender goals and announce them, either within their organization or outside the organizations, are a very attractive target to this administration’s vigorous attacks on DEI and affirmative action,” he said.

Although the agency required AAPs for hiring, it did not ask for hiring quotas, which are illegal.

Beyond those obligations, many companies have set aspirational hiring goals as part of DEI programs, but may now retreat from these objectives under Trump.

“As a matter of law, I think it’s fully lawful. As a matter of pragmatism, I can appreciate that no one wants to put a target on their back, and that is one easy way to avoid some of that,” said Yang.

‘Damned if You Do’

The first Trump administration targeted race-based goals at companies and had the OFCCP conduct inquiries into Microsoft Corp. and Wells Fargo & Co.'s pledges to double their number of Black leaders. Those investigations, which legal experts said broke civil rights laws, were closed under Biden.

“This is really intimidation. This isn’t about the law. Because legally they can’t prosecute you for things that are fully lawful, the law remains the same,” Yang said.

Along with the OFCCP overhaul, Trump’s order “encouraged” private companies to end DEI programs the administration deems discriminatory and directed agencies to identify up to nine potential civil compliance investigations of private companies.

A Wednesday memo from Attorney General Pam Bondi called for criminal investigations of DEI programs.

Companies should be wary of rolling back initiatives without replacing them, which can lead to employee frustration and become fodder for plaintiffs’ attorneys in civil rights class action cases, Yang said.

“And you usually have the data that also supports the practice problems or the cultural problems,” she said.

The new memo also upped the ante for federal contractors by directing the Justice Department to identify those who “provided DEI training” or “materials” to agency employees.

“You’re damned if you do and you’re damned if you don’t,” Matthew Camardella, an attorney at Jackson Lewis P.C., said of companies re-evaluating their anti-bias compliance practices.

“I don’t believe that a company can do anything that eliminates risk, and I don’t think a company can do anything to fully placate either side of the equation,” he said.