On January 21, 2025, the White House announced an Executive Order entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The Order instructs federal agencies to take administrative and legal action against diversity, equity, and inclusion (“DEI”) programs, which it defines as systems of race- and sex-based preferences. The Order is directed at both public- and private-sector conduct.
Private employers and educational institutions with DEI policies should consider consulting with an employment law practitioner to ensure those policies can withstand any legal challenges, including under Title VII of the Civil Rights Act. The Order directs the U.S. Attorney General and the heads of agencies to propose a strategic plan to identify key sectors of concern within each agency’s jurisdiction and “the most egregious and discriminatory DEI practitioners in each sector of concern,” as well as “up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.”
Further, participants in federal programs must be highly attentive to changes in agency guidance, rules, and contract language, because the Order directs agency program changes and expressly contemplates use of the False Claims Act as an enforcement tool. Of particular note is that the Order directs that each agency include in all contracts and grant awards (1) a term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable federal anti-discrimination laws is material to the government’s payment decisions for purposes of the False Claims Act, and (2) a term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws. This means that the Administration is already thinking that the Department of Justice, or individual private citizens acting as qui tam relators, might bring False Claims Act cases against federal program participants whose DEI policies are inconsistent with the Administration’s interpretation of federal anti-discrimination laws. A federal program participant that violates the False Claims Act can face severe financial penalties, including three times the value of claims submitted, plus a civil penalty per claim.
Today is too soon to know where this will lead. Private-sector actors would be well served to pay close attention to risks related to their policies and relationships with federal agencies.