Federal government initiatives surrounding diversity, equity, and inclusion (DEI) practices are being reformed by Executive Orders (EOs).

EOs 14151 and 14173 required the termination of governmental DEI programs, contracts, and grants. Soon after issuance, a federal district court in Maryland issued an injunction prohibiting portions of the EOs from taking effect. The court held the plaintiffs demonstrated a likelihood of success on their claims regarding the unconstitutionality of three provisions as result of vagueness and free speech implications:

• Termination Provision - Requiring federal agencies to terminate DEI programs
  
  
• Certification Provision - Requiring federal contractors and grant recipients to certify compliance of not operating “illegal DEI programs” enforceable under the Federal False Claims Act
  
  
• Enforcement Threat Provision - Directing the attorney general to encourage cessation of private sector DEI programs and to investigate said compliance of publicly traded companies, large nonprofit organizations, and others
  
  

The injunction initially provided immediate relief for organizations from compliance, but currently the above provisions remain enforceable pending the Trump administration’s appeal before the U.S. Court of Appeals for the Fourth Circuit. While there is continued uncertainty as to the constitutionality of provisions concerning DEI programs within federal contracts and grants, the administration is, pending the outcome of the appeal, advancing its interests by closing federal DEI offices, placing federal employees on leave, rescinding prior EOs, directing the nonenforcement of current DEI requirements and expanding DOJ authority to investigate those thought to be in noncompliance.

EO 14281 centers on the disparate impact theory of liability which is codified in statute under Title VII. Disparate impact does not require intent to discriminate, just a policy or procedure that had a disproportionate negative impact on a particular group. Claimants had used the theory to contest employment practices like background screenings, aptitude and strength tests, English-only requirements, and artificial intelligence tools containing purported biases. The new administration believes that this theory hinders businesses from making merit-based decisions that unintentionally lead to disparate outcomes, “all but require[ing]” employers to consider race in its decision making and, therefore, should be outlawed.

To be compliant with the EO, the EEOC, DOJ and other federal agencies were directed to:

• Report on existing regulations, guidance, rules or orders imposing disparate impact liability alongside a plan for amendment or repeal such provisions
  
  
• Assess pending investigations, civil suits or positions under every civil rights law relying on the theory and then take action to enforce the EO
  
  
• Evaluate consent judgments and permanent injunctions relying on the theory and then take action to enforce the EO
  
  
• Have the EEOC and DOJ issue joint guidance or assistance to promote equal access to employment irrespective of whether an applicant has a college education
  
  
• Determine whether federal authorities preempt state laws imposing disparate impact liability and, if so, act appropriately
  
  

While private plaintiffs can still file disparate impact claims against private employers under Title VII or other federal regulations, we expect a chill in the EEOC’s ability to pursue said claims. Claimants could strategize to file under state laws in areas like New York, California, Illinois, Colorado or Minnesota where disparate impact claims fall under state antidiscrimination statutes. Other states have endorsed the disparate impact theory of liability via bill submission and caselaw.

Organizations should continue to monitor the evolving DEI landscape and review employment policies with the assistance of counsel.

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