Dear Clients,
We wanted to provide an analysis of the newly issued Executive Order (“ENDING ILLEGAL DISCRIMINATION AND RESTORING MERIT-BASED OPPORTUNITY”) dated January 21, 2025. Before this Executive Order, the Office of Federal Contract Compliance Programs (“OFCCP”) was charged with administering and enforcing three equal employment opportunity laws: Executive Order 11246, as amended (“Executive Order 11246”); Section 503 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. 793 (“Section 503”); and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended, 38 U.S.C. 4212 (“VEVRAA”).
Executive Order 11246
Executive Order 11246, issued by President Lyndon B. Johnson in 1965, applied to businesses with federal contracts and federally assisted construction contracts totaling more than $10,000. If applicable, Executive Order 11246 generally required businesses to agree to the following as conditions of federal/federally assisted contracts: (i) to not take adverse employment actions against applicants/employees who ask about discuss or share information about pay, (ii) to not discriminate on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin; and (iii) to take affirmative actions to ensure equal employment opportunity. If a business (to which Executive Order 11246 applied) had at least 50 employees and a single contract of $50,000 or more, then it was also required to develop an Affirmative Action Program (AAP), as described at 41 CFR 60‐2. Businesses whose sole coverage under Executive Order 11246 derived from construction contracts or federally assisted construction contracts were not required to develop AAPs but were nevertheless required to comply with 16 specific affirmative actions outlined in the equal opportunity construction contract clause.
The January 21, 2025 Executive Order specifically revokes Executive Order 11246 as amended (see Executive Order, Sec. 3(a)) and in its original form (See Executive Order, Sec. 3(b)(i)). In this same provision, the Order provides a 90-day safe harbor (until April 21, 2025) in which employers may continue to comply with the regulatory scheme and requirements in place prior to the Executive Order. (See Executive Order, Sec. 3(b)(i))(“For 90 days from the date of this order, Federal contractors may continue to comply with the regulatory scheme in effect on January 20, 2025.”)
The Order further mandates the OFCCP to “immediately cease . . . (A) Promoting diversity (B) Holding Federal contractors and subcontractors responsible for taking affirmative action; and (C) Allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” (See Executive Order, Sec. 3(b)(ii))(internal quotation marks omitted)(emphasis added).
Additionally, the Order states, “[i]n accordance with Executive Order 13279 of December 12, 2002 . . . the employment, procurement, and contracting practices of Federal contractors and subcontractors shall not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws.” (See Executive Order, Sec. 3(b)(iii))(emphasis added). In effect, the Order fully revokes Executive Order 11246—including its requirement of an Affirmative Acton Program and the requirement of the applicable federal contracts/subcontracts that businesses take affirmative actions to ensure equal employment opportunities. (See Executive Order, Sec. 3(a),(b)(i)).
For existing federal contracts, the Order also requires the Director of the Office of Management and Budget (OMB) to “excise references to DEI and DEIA principles from Federal . . . contract[s], grants, and financial assistance procedures . . .” (See Executive Order, Sec. 3(c)(ii))(internal quotation marks omitted).
For federal contracts moving forward, the Order requires the head of each federal agency to include in every contract or grant award:
- A provision that makes the federal subcontractor/contractor/grant recipient “agree that its compliance in all respects with applicable Federal anti-discrimination laws is material to the government’s payment decisions.” (See Executive Order, Sec. 3(b)(iv)(A)).
- A term requiring the federal subcontractor/contractor/grant recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws. (See Executive Order, Sec. 3(b)(iv)(B)).
Based on the Order’s revocation of Executive Order 11246, the OFCCP is prohibited from encouraging or requiring employers to take affirmative actions to promote workplace balance in favor of the protected categories covered by Executive Order 11246 (race, color, religion, sex, sexual orientation, gender identity, and national origin). Thus, employers are no longer required to compile or submit Executive Order 11246 AAPs and are no longer required to take affirmative actions to ensure equal employment opportunity outlined in Executive Order 11246. Importantly, despite the revocation of Executive Order 11246, the protections against discrimination in hiring and employment regarding race, color, religion, sex, sexual orientation, gender identity, and national origin are still in existence under other federal statutes, including, without limitation, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (as amended) (ADA), and The Pregnant Workers Fairness Act, among others.
Section 503 of the Rehabilitation Act
Under Section 503 (as adjusted), a business with a federal contract of more than $15,000 is required to treat qualified individuals with disabilities without discrimination on the basis of their physical or mental disability in all employment practices, and to take affirmative action to employ and advance in employment individuals with disabilities. (See "Federal Acquisition Regulation; Inflation Adjustment of Acquisition‐Related Thresholds," 75 FR 53129 (2010)). For companies with at least 50 employees and a single contract of $50,000 or more, Section 503 requires such companies to develop a Section 503 Affirmative Action Program, as described in 41 CFR 60‐741, Subpart C. Section 503 also applies to businesses with federal construction contracts, but not to businesses with federally assisted construction contracts.
Regarding protections against discrimination in employment/hiring, Section 503’s protections for individuals with disabilities are likely unaffected by the Executive Order, and are similarly upheld under other federal statutes, including, without limitation, the ADA. However, the Executive Order’s effect on affirmative actions required under Section 503 and Section 503 AAPs are less clear. As mentioned above, effective immediately, the Executive Order prohibits the OFCCP from “[p]romoting diversity[;] Holding Federal contractors and subcontractors 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.” (See Executive Order, Sec. 3(b)(ii))(internal quotation marks omitted)(emphasis added). Notably, the Order omits “individuals with disabilities” from the list of protected categories the OFCCP is prohibited from allowing or encouraging Federal contractors to use to engage in workforce balancing. (See Executive Order, Sec. 3(b)(ii)(“The Office of Federal Contract Compliance Programs within the Department of Labor shall immediately cease . . . [a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.”)).
While the Order mandates the OFCCP to “immediately cease . . . Promoting diversity . . . [and] Holding Federal contractors and subcontractors responsible for taking affirmative action . . .” the fact that the Order does not mention “individuals with disabilities” at all and omits any reference to Section 503, may suggest that Section 503’s requirements (including affirmative action programs and affirmative actions) are left untouched by the Order, especially given Section 503’s basis in statute. However, because the Executive Order prohibits the OFCCP from “holding federal contractors and subcontractors responsible for [] affirmative action,” companies may wish to hold off on preparing Section 503 AAPs and await further guidance from the government regarding whether the AAPs and affirmative actions are still an enforceable requirement under Section 503.
Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA)
Under VEVRAA, businesses with a federal contract of $100,000 or more are required to treat qualified individuals without discrimination based on their status as a protected veteran in all employment practices, and to take affirmative action to employ and advance in employment protected veterans. Though VEVRAA itself has not been amended, the jurisdiction threshold has been adjusted to $150,000 for inflation. (See "Federal Acquisition Regulation; Inflation Adjustment of Acquisition‐Related Thresholds," 80 FR 38293 (2015)). Under VEVRAA, if a company has at least 50 employees and a single contract of $150,000 or more, then it is required also develop a VEVRAA AAP, as described in 41 CFR 60‐300, Subpart C.
Similar to the protections for individuals with disabilities under Section 503 (which are untouched by the Order), the protections for protected veterans under VEVRAA are similarly untouched by the Executive Order. Like the Order’s effect on Section 503, the Executive Order’s effect on the affirmative action and AAP requirements under VEVRAA are similarly vague, albeit somewhat clarified by the Order’s rationale and stated scope. The Order states it does not apply to “lawful Federal or private-sector employment and contracting preferences for veterans of the U.S. armed forces or persons protected by the Randolph-Sheppard Act, 20 U.S.C. 107 et seq.” (See Executive Order, Sec. 7(a))(emphasis added). The Order also omits “protected veterans” from the list of protected categories the OFCCP is prohibited from allowing or encouraging Federal contractors to use to engage in workforce balancing. (See Executive Order, Sec. 3(b)(ii)(“The Office of Federal Contract Compliance Programs within the Department of Labor shall immediately cease . . . [a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.”))
While the Executive Order mandates the OFCCP to “immediately cease . . . Promoting diversity . . . [and] Holding Federal contractors and subcontractors responsible for taking affirmative action . . .” the Order’s specific exemption of “lawful . . . private sector employment and [federal] contracting preferences for veterans,” may suggest that VEVRAA’s requirements (including affirmative action programs and affirmative actions) are left untouched by the Order. (See Executive Order, Sec. 3(b)(ii)) (internal quotation marks omitted)(emphasis added). Accordingly, the most conservative approach would be to proceed with compiling VEVRAA AAPs (and taking affirmative actions required under VEVRAA) as usual, barring further guidance. However, because the Order prohibits the OFCCP from “holding federal contractors and subcontractors responsible for [] affirmative action,” companies may wish to hold off on compiling VEVRAA AAPs and await further guidance regarding whether the AAPs and affirmative actions are still an enforceable requirement.
As the Executive Order requires the Director of the OMB to “(i) review and revise all Government-wide processes, directives and guidance . . .” we can expect to receive additional information regarding the administration’s respective interpretations of Section 503 and VEVRAA moving forward. (See Executive Order, Sec. 3(c)(i))(internal quotation marks omitted).
As this area of law is changing rapidly, our Employment Law attorneys will continue to monitor and advise our clients of any critical updates. If you have any questions, or need any additional information, please contact any member of our Labor and Employment practice group.
Best Regards,
Felicity A. Fowler