The law on DEI and affirmative action now runs in almost the opposite direction it did a few years ago. Federal affirmative action for contractors, anchored for nearly sixty years in Executive Order 11246, was revoked in January 2025. In its place, federal contractors and grant recipients must certify they are not operating DEI programs that violate anti-discrimination law. Race-conscious college admissions are barred after the Supreme Court’s 2023 decision in Students for Fair Admissions v. Harvard. Workplace DEI programs remain legal in principle but sit inside tight boundaries under Title VII, Section 1981, and a growing body of state law.
What Changed for Federal Contractors in 2025
On January 21, 2025, President Trump signed Executive Order 14173, which revoked EO 11246 in its entirety. Contractors got a 90-day window to wind down compliance, and the Office of Federal Contract Compliance Programs (OFCCP) halted enforcement under the old order.1The White House. Ending Illegal Discrimination and Restoring Merit-Based Opportunity In mid-2025, the Department of Labor formally proposed rescinding every implementing regulation under EO 11246 and removing them from the Code of Federal Regulations.2Federal Register. Rescission of Executive Order 11246 Implementing Regulations The written affirmative action plans, workforce utilization analyses, and race- and sex-based placement goals that federal contractors maintained for decades are no longer required by federal law.
EO 14173 does more than clear away the old framework. It directs federal agencies to identify and act against what the order calls “illegal DEI” programs in both government and the private sector, and it requires OFCCP to stop promoting diversity or holding contractors responsible for workforce balancing based on race, color, sex, religion, or national origin.1The White House. Ending Illegal Discrimination and Restoring Merit-Based Opportunity
The provision with the most bite for private business is the certification requirement. Every federal contract and grant award must now include a term requiring the contractor or grant recipient to certify that it does not operate any programs promoting DEI that violate federal anti-discrimination laws. The order ties this certification to the False Claims Act (31 U.S.C. ยง 3729), which means a false certification could expose a company to treble damages and per-claim penalties.1The White House. Ending Illegal Discrimination and Restoring Merit-Based Opportunity
The order also directs each federal agency to develop enforcement plans targeting the private sector, including identifying up to nine potential civil compliance investigations of publicly traded corporations, large nonprofits, foundations with assets over $500 million, professional associations, and institutions of higher education.1The White House. Ending Illegal Discrimination and Restoring Merit-Based Opportunity
Contractor Obligations That Still Apply
The revocation of EO 11246 did not sweep away every affirmative action duty. Two statutory programs remain fully in force because they rest on federal statute, not executive order. Section 503 of the Rehabilitation Act requires federal contractors to take affirmative action to employ and advance qualified individuals with disabilities.3Federal Register. Modifications to the Regulations Implementing Section 503 of the Rehabilitation Act of 1973 OFCCP has set a utilization goal of 7 percent for each job group in a contractor’s workforce, treated as a benchmark rather than a quota.4eCFR. 41 CFR 60-741.45 – Utilization Goals The Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) imposes parallel duties for protected veterans, including outreach and data collection on veteran applicants and hires.
Recordkeeping obligations continue as well. Contractors must retain personnel and employment records for at least two years from when the record was made or the action taken, whichever is later. Contractors with fewer than 150 employees may retain records for one year. VEVRAA-specific affirmative action program records must be kept for three years.5U.S. Department of Labor. Understanding OFCCP’s Recordkeeping Requirements
Annual EEO-1 reporting also survives. Private employers with 100 or more employees and federal contractors with 50 or more employees must still file, because Section 709(c) of Title VII supplies an independent legal basis for the collection.6U.S. Equal Employment Opportunity Commission. Legal Requirements7U.S. Equal Employment Opportunity Commission. EEO Data Collections
Where the Court Challenges Stand
Several lawsuits have challenged EO 14173 on First Amendment and due process grounds, and the picture is unsettled. A federal district court in Maryland initially enjoined key enforcement provisions, but in February 2026 the Fourth Circuit vacated that injunction and restored the government’s authority to enforce them. A district court in Illinois issued a narrower injunction blocking the Department of Labor from requiring federal contractors to make DEI-related certifications, which is on appeal to the Seventh Circuit. In National Urban League v. Trump, the D.C. district court declined to block the executive orders at all, finding the plaintiffs had not shown a likelihood of success on the merits. Additional challenges are moving through the Ninth Circuit.
For most of the country in 2026, the certification requirement is enforceable, but its scope and constitutionality remain in play. A single appellate ruling could change the compliance picture quickly, so organizations with federal contracts should track the cases closely.
College Admissions After SFFA
Race-conscious admissions at public and private universities are no longer lawful. In Students for Fair Admissions v. Harvard (2023), the Supreme Court held that the admissions programs at Harvard and the University of North Carolina violated the Equal Protection Clause of the Fourteenth Amendment and Title VI of the Civil Rights Act of 1964.8Supreme Court of the United States. Students for Fair Admissions, Inc. v. President and Fellows of Harvard College
Applicants can still write about how race has shaped their experiences, character, or abilities. What universities cannot do is use those narratives as a proxy to sort applicants by racial category or assign a preference based on group membership. Each applicant must be evaluated as an individual, no admissions program can use race as a negative factor, and any residual consideration of race must survive strict scrutiny and have a definite endpoint. A footnote in the majority opinion said the Court was not addressing military academies, which may present “potentially distinct interests.” Lower courts have engaged that footnote, but no definitive ruling has resolved it.
Workplace DEI Under Title VII
Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, and national origin. Every DEI initiative sits inside those limits. The EEOC has issued guidance stating that DEI programs become unlawful when they involve employment actions motivated by a protected characteristic, even partially.9U.S. Equal Employment Opportunity Commission. What You Should Know About DEI-Related Discrimination at Work
The agency’s guidance flags specific practices that can cross the line. Hiring, firing, promotion, compensation, access to training and mentorship programs, selection for interviews, and work assignments are all covered. Limiting membership in employee resource groups or affinity groups to certain racial or gender groups can constitute unlawful segregation, even if the programming content is identical for everyone. Separating employees into groups by race or sex for DEI trainings also risks a violation.9U.S. Equal Employment Opportunity Commission. What You Should Know About DEI-Related Discrimination at Work
The Weber/Johnson Framework
The Supreme Court’s decisions in United Steelworkers v. Weber (1979) and Johnson v. Transportation Agency (1987) permit a voluntary plan that considers race or sex if it is designed to break down old patterns of segregation or address a clear imbalance in traditionally segregated job categories. The plan must be temporary, must not create an absolute bar to advancement for other employees, and must not unnecessarily harm their interests. That framework technically still stands, but legal experts widely view it as narrow and shrinking. Any employer relying on Weber/Johnson to justify weighting protected characteristics in employment decisions is taking a substantial legal risk.
What Stays Legal
Unconscious bias training remains lawful as long as attendance does not depend on an employee’s race or sex and the training does not single out groups for differential treatment. Broad recruitment outreach, including partnerships with professional organizations serving underrepresented communities, is permissible because it expands the applicant pool without predetermining who gets hired. Mentorship and sponsorship programs that pair junior employees with senior leaders based on professional development needs, rather than demographic matching, are similarly safe. The line runs between expanding opportunity at the front end and weighting outcomes at the decision point.
Section 1981 and Muldrow Have Raised the Litigation Risk
The statute driving much of the current DEI litigation is not Title VII. Section 1981 of the Civil Rights Act of 1866 guarantees all persons the same right to make and enforce contracts regardless of race, and it applies to private employers directly.10Office of the Law Revision Counsel. 42 USC 1981 – Equal Rights Under the Law It has no administrative exhaustion requirement, no cap on damages, and no minimum employer size. A plaintiff can file directly in federal court and seek unlimited compensatory and punitive damages.
Recent challenges under Section 1981 have targeted scholarship programs limited to minority applicants, investment programs alleged to favor certain racial groups, and employer policies that plaintiffs claim gave preferential treatment based on race.11Legal Information Institute. Section 1981 Section 1981 reaches only race-based claims and requires proof of intentional discrimination, so it does not cover disparate impact or discrimination based on sex, religion, or other characteristics. For race-related claims, though, the absence of damage caps makes it a powerful tool.
A 2024 Supreme Court decision lowered the threshold for Title VII plaintiffs at the same time. In Muldrow v. City of St. Louis, the Court held that an employee challenging a job transfer under Title VII only needs to show some harm to an identifiable term or condition of employment; the harm does not need to be significant or material.12Supreme Court of the United States. Muldrow v. City of St. Louis, Missouri Reassignments, changed duties, or altered schedules connected to a diversity initiative can now support a discrimination claim if the employee links the change to a protected characteristic. Documenting the business rationale for every personnel decision matters more than it did before.
Damages Exposure
When a discrimination claim proceeds under Title VII, federal law caps the combined compensatory and punitive damages based on employer size:13Office of the Law Revision Counsel. 42 USC 1981a – Damages in Cases of Intentional Discrimination in Employment
- 15 to 100 employees: $50,000
- 101 to 200 employees: $100,000
- 201 to 500 employees: $200,000
- More than 500 employees: $300,000
These caps cover future losses, emotional distress, and punitive damages combined. They do not cap back pay, which is calculated separately and can accumulate for up to two years before the complaint was filed. Attorney fees are also awarded on top. The caps apply only to Title VII; a plaintiff who adds a Section 1981 race claim faces no cap. That is why plaintiffs’ attorneys pair the two whenever the facts allow, and why aggregate exposure in a class action or pattern-or-practice suit can reach well into the millions.
State-Level DEI Restrictions
Since 2023, at least 18 states have enacted laws restricting DEI initiatives at public universities and state agencies. The laws vary but commonly eliminate DEI offices and staff positions, ban mandatory diversity training, exclude diversity statements from hiring and promotion decisions, and prohibit using race or sex in admissions or employment at public institutions.14MOST Policy Initiative. DEI Restrictions
The trend is spreading beyond public institutions. Dozens of bills in roughly two dozen states have proposed extending anti-DEI restrictions to entities that receive state funding or hold state contracts. Some proposals would bar those entities from accepting federal grants that require compliance with DEI policies and would mandate public compliance reports. Nineteen state attorneys general have sent letters to private companies demanding an end to DEI policies, citing both SFFA and federal executive action.
For organizations operating across state lines, this creates conflicting exposure. A program lawful in one state may collide with a public-sector ban in another, especially for companies that hold state contracts or receive state funding.
What to Do Now
Programs designed around expanding access and evaluating individuals on documented qualifications remain defensible. That means broadening recruitment sources, offering mentorship based on professional development needs, running bias awareness training that treats all employees the same, and grounding hiring and promotion decisions in written criteria. What is not defensible is tying any employment action to an employee’s or applicant’s race, sex, or other protected characteristic, regardless of the stated purpose.
Federal contractors carry an additional task. Before signing any contract or grant instrument that contains the EO 14173 certification, audit every internal program that could be characterized as DEI, get employment counsel to review whether any element involves a protected-characteristic preference, and document the review. With False Claims Act liability attached, a casual certification is one of the more expensive mistakes an organization can make in the current environment.