Diversity, equity, and inclusion (DEI) programs have been a cornerstone of American workplaces for decades. However, these programs have recently become targets of criticism, especially from President Donald Trump’s administration, leading to new challenges for employers. In January 2025, President Trump issued multiple Executive Orders aimed at eliminating DEI programs in federal agencies. On January 21, 2025, he issued Executive Order (EO) 14173 titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which specifically targets DEI programs in the private sector. The EO also dramatically alters affirmative action requirements for private employers who are federal contractors. Federal contractors must comply by April 22, 2025, or risk suspension or termination of their contracts and even debarment from future federal contracts.
1. Assess Your Risk Tolerance
EO 14173 urges private employers to end DEI programs that are deemed to “illegally discriminate.” The U.S. attorney general, in consultation with relevant federal agency heads, is responsible for developing measures to deter DEI programs involving “illegal discrimination or preferences,” identifying “egregious and discriminatory DEI practitioners,” and considering litigation options against employers with unlawful DEI programs. The EO also revokes affirmative action requirements for federal contractors concerning minorities and women. However, affirmative action for veterans and individuals with disabilities remains intact. Notably, the EO demands that federal contractors certify they don’t have DEI programs violating federal anti-discrimination laws.
Despite EO 14173’s intent, it offers zero guidance on what makes a DEI program illegal. This lack of clarity leaves employers in a quandary, facing potential backlash from employees and public outcry, such as boycotts. Nonetheless, Title VII of the Civil Rights Act of 1964 remains effective. Employers need to weigh their risk tolerance in deciding whether to maintain, modify, or eliminate their DEI programs. Companies like Amazon, Target, and Walmart have opted to end their DEI initiatives, while others, such as Costco, JP Morgan Chase, and Microsoft, have chosen to amplify their DEI efforts.
2. Document the Rationale Behind DEI Programs
Given the ambiguity surrounding EO 14173, employers should meticulously document the rationale behind their DEI programs. This documentation should provide a clear purpose for the DEI initiatives, outlining factors like legal considerations, including federal, state, and municipal requirements, business demands, and the need to recruit and retain skilled employees regardless of demographic characteristics. This documentation process can serve as a protective measure, demonstrating the company’s commitment to lawful and inclusive practices.
State requirements can also impact how employers navigate EO 14173. While the attorney general of Arizona has not aggressively opposed EO 14173, 13 other state attorneys general have taken a firm stance against it, including those from California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York, Rhode Island, Vermont, and Washington. In a joint statement issued on January 31, 2025, these attorneys general claimed that the president’s efforts to target DEI programs do not align with efforts to combat discrimination and stated that DEI programs are consistent with state and federal anti-discrimination laws.
3. Review Policies, Procedures, and Training Materials
To mitigate the risks associated with EO 14173, employers should thoroughly review their policies, procedures, and training materials. These elements should be designed to cultivate an inclusive workplace for all employees. Companies should also adopt a broad view of diversity, considering various factors such as different skill sets, educational backgrounds, work histories, and life experiences. It’s crucial to eliminate any language in these documents that could be interpreted as overtly political or suggest a quota-based approach.
By focusing on creating an inclusive environment, employers can justify their DEI programs as essential for their business operations and employee well-being. Regularly updating and revising these materials, based on evolving legal landscapes and business needs, will help ensure compliance and sustainable DEI practices. Additionally, fostering a culture of inclusivity can enhance employee morale and productivity, further supporting the organization’s overall goals.
4. Develop an Internal and External Communication Strategy
Effective communication is vital for navigating the uncertainties posed by EO 14173. Employers should develop comprehensive communication strategies for both internal and external stakeholders. This involves crafting messages that clearly articulate the company’s stance on DEI and the actions taken in response to EO 14173. Addressing employees, shareholders, and the public with transparent and consistent messaging can help manage perceptions and maintain trust.
Internal communications should emphasize the organization’s dedication to fostering an inclusive workplace and the rationale behind any changes to DEI programs. External communications, on the other hand, should highlight the company’s commitment to diversity and inclusion, positioning these efforts within the broader context of business goals and societal values. Engaging with stakeholders through regular updates, informative sessions, and open dialogues can further reinforce the company’s commitment to DEI principles.
5. Monitor the Legal Landscape
EO 14173 calls on private employers to abolish DEI programs assessed as “illegally discriminatory.” The U.S. attorney general, in cooperation with relevant federal agency leaders, is tasked with creating measures to prevent DEI initiatives involving “illegal discrimination or preferences,” identifying the most egregious DEI practitioners, and considering legal actions against employers with unlawful DEI programs. The EO also eliminates affirmative action requirements for federal contractors regarding minorities and women, while preserving affirmative action for veterans and individuals with disabilities. Additionally, it mandates federal contractors to certify that their DEI programs do not violate federal anti-discrimination laws.
Despite its aim, EO 14173 fails to specify what makes a DEI program illegal, leaving employers confused and vulnerable to employee backlash and public criticism, including boycotts. Title VII of the Civil Rights Act of 1964 still stands, so employers must decide whether to keep, change, or scrap their DEI programs based on their risk tolerance. Companies like Amazon, Target, and Walmart have ended DEI initiatives, whereas Costco, JP Morgan Chase, and Microsoft have intensified their DEI efforts.