Trump Alters AI Policy with New Executive Order
On January 23, 2025, President Trump issued an Executive Order entitled “Removing Barriers to American Leadership in Artificial Intelligence.” The Executive Order seeks to maintain US leadership in AI innovation. To that end, the Order “revokes certain existing AI policies and directives that act as barriers to American AI innovation,” but does not identify the impacted policies and directives. Rather, it appears those policies and directives are to be identified by the Assistant to the President for Science and Technology, working with agency heads. The Order also requires the development of a new AI action plan within 180 days. Although the details of the new AI action plan are forthcoming, the Order states that the development of AI systems must be “free from ideological bias or engineered social agendas.”
Earlier in the week, Trump also signed an executive order revoking 78 executive orders signed by President Biden, including Biden’s Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence, issued on October 30, 2023. Biden’s Executive Order sought to regulate the development, deployment, and governance of artificial intelligence within the United States, and the document offered insight into the types of issues that concerned the previous Administration (specifically, AI security, privacy and discrimination). More information on Biden’s Executive Order can be found here.
As relevant to employers and developers of AI tools for employers, the revocation of Biden’s Executive Order is largely symbolic, because it did not directly impose requirements on employers who use AI. Instead, it directed federal agencies to prepare reports or publish non-binding guidance on topics such as:
“the labor-market effects of AI,”
“the abilities of agencies to support workers displaced by the adoptions of AI and other technological advancements,” and
“principles and best practices for employers” to “mitigate AI’s potential harms to employees’ well-being and maximize its potential benefits.”
Biden’s Executive Order had also directed agencies to provide anti-discrimination guidance to federal benefits programs and federal contractors over their use of AI algorithms and to coordinate on best practices for investigating and enforcing civil rights violations related to AI.
While employers may not experience any immediate effects from the two new Executive Orders this week, taken together, they lend support to predictions that the new Administration would take a more hands-off approach to regulating AI. We will continue monitor how the AI legal landscape evolves under the new Administration and continue to report on AI developments that affect employers.
Analyzing President Trump’s Latest Executive Order Titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”
On January 21, 2025, President Trump signed an Executive Order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This Executive Order is a major pivot in federal policy regarding affirmative action and diversity initiatives, which have been in place for decades, particularly within federal contracting. The implications of this Executive Order are far-reaching, affecting both federal contractors and private employers across the United States.
Key Aspects of the Executive Order
A significant component of the Executive Order is the revocation of Executive Order 11246. Enacted in 1965 by President Lyndon B. Johnson, Executive Order 11246 mandated that federal contractors and subcontractors implement affirmative action programs to ensure equal employment opportunities for women and minorities. According to the Department of Labor, this requirement has become deeply embedded in the operational frameworks of approximately 25,000 firms and 120,000 establishments, impacting nearly 20% of the U.S. workforce. By revoking this order, President Trump’s Executive Order effectively dismantles the federal mandate for race and gender-based affirmative action.
The Executive Order further instructs all federal agencies to eliminate any programs, policies, or mandates that are deemed discriminatory or illegal under what the Executive Order characterizes as the guise of DEI (Diversity, Equity & Inclusion). This encompasses the cessation of activities such as promoting diversity initiatives and holding contractors accountable for affirmative action measures. Contractors “may” continue complying with the existing affirmative action requirements under Executive Order 11246 until April 20, 2025. Additionally, the Office of Federal Contract Compliance Programs (OFCCP) is specifically directed to stop engaging in workforce balancing based on race, color, sex, sexual preference, religion, or national origin. The overarching goal, as stated in the Executive Order, is to promote individual initiative, excellence, and hard work, aligning employment practices more closely with merit-based principles.
Despite these sweeping changes, it is crucial for federal contractors and subcontractors to remain compliant with existing anti-discrimination laws, such as Title VII of the Civil Rights Act, the Equal Pay Act, the Age Discrimination in Employment Act and the Americans with Disabilities Act. Moreover, the obligations under the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act remain intact. These statutes continue to require affirmative action and non-discriminatory practices specific to employees who are veterans or are disabled, underscoring the nuanced landscape of compliance that employers must navigate.
Additionally, the Executive Order calls for the development of a new contract term, likely replacing the current Equal Employment Opportunity clause, for inclusion in federal contracts. This term will require contractors to agree that compliance with all applicable federal anti-discrimination laws is essential to the government’s payment decisions. Contractors must certify that they do not operate any programs promoting DEI that violate federal anti-discrimination laws. The White House Fact Sheet on the Executive Order describes this certification as a clear statement that contractors will not engage in illegal discrimination, including any DEI practices the order characterizes as illegal. This certification is expected to be published in the upcoming weeks.
Employers should carefully review their current employment practices to ensure compliance with nondiscrimination statutes, such as Title VII of the Civil Rights Act of 1964. Any policies or practices that might be inconsistent with existing law should be revised to ensure compliance. Additionally, employers should review their Equal Employment Opportunity policies and communications to assess potential risks of enforcement agency investigations.
Employers should also stay informed about potential challenges to the Executive Order and look for additional information about sectors, industries, and organizations that federal agencies may identify for investigation. Guidance from the Attorney General, Secretary of Education, and other federal agencies will be essential as these changes unfold.
The Executive Order “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” represents a pivotal shift in federal policy, reshaping the landscape of affirmative action and DEI initiatives. As the ramifications of this order unfold, it is imperative for employers to remain vigilant and proactive in adjusting their compliance strategies. Staying informed about these developments and seeking guidance from legal advisors will be crucial in navigating this new era of employment practices.
State of Play: Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs
On Monday evening, the Office of Management and Budget (OMB) ordered all federal agencies to temporarily suspend grant and loan payments, with the exception of Social Security, Medicare, and “assistance provided directly to individuals.” In the internal memo, OMB’s Acting Director, Matthew Vaeth, calls for each agency to undertake a comprehensive analysis to ensure all grant and loan programs comply with the Administration’s Executive Orders. The pause applies to an estimated 2,600 accounts across the federal government, and details are still being worked out on federal funding that is statutorily obligated.
While intended to be temporary, the duration of the pause may vary by Department and program. Each federal department and agency are likely to interpret its scope and requirements differently and prioritize review of certain programs before others. This pause may have a profound effect on clients who were expecting to receive federal funds within the next two to six weeks. While the pause has the potential to affect any business or entity receiving federal grants or loans, clients receiving such funds as part of programs related to DEI initiatives, foreign aid, or federal clean energy investments, specifically electric vehicles, may be most impacted.
Some of the questions agencies must answer in the report for OMB include whether or not the program supports illegal immigrants, if the program supports abortion, gender ideology or DEI initiatives, or if the program supports activities that impose an undue burden on the identification, development, or use of domestic energy resources. It’s important to note, only a handful of President Trump’s cabinet secretaries and agency heads have been confirmed, making this process all the more complicated.
Key Facts
All federal assistance – with the exceptions listed above – will be paused starting today, January 28, at 5:00 pm ET.
This affects ALL federal agencies.
The government-wide freeze is temporary and is intended to allow each agency to conduct a comprehensive analysis of all federal financial assistance programs to identify programs, projects, and activities that may be implicated by any of the President’s Executive Orders.
Agencies have until February 10, 2025, to submit to OMB detailed information on each program subject to this pause.
The freeze will include:
Issuance of new awards;
Disbursement of Federal funds under all open awards; and
Other relevant agency actions that may be implicated by Trump’s Executive Orders until OMB has reviewed and provided guidance based on what is received.
Could this Affect You?
Yes, if your business receives federal grants or loans, the pause will almost certainly affect you until at least February 10th and potentially beyond. If your company is concerned about the funding pause, or you are impacted by any of the recent Executive Orders, it is critical to determine the risk posed by the pause or Executive Order and to develop a response that evaluates both their legal and political options.
The High Court’s Low Bar: FLSA Exemption Disputes and the Standard of Review
On January 15, 2025, the U.S. Supreme Court issued its unanimous decision in E.M.D. Sales, Inc. v. Carrera, authored by Justice Kavanaugh, and held FLSA exemptions should be analyzed under the “preponderance of the evidence” standard, rather than the higher “clear and convincing evidence” standard applied by the Fourth Circuit, which hears appeals from the federal district courts in Maryland, North Carolina, South Carolina, Virginia, and West Virginia, and from federal administrative agencies.
EMD is a food distributor which employs sales representatives to manage inventory and take orders at grocery stores that stock EMD’s products. Several of those sales representatives filed a collective action against EMD, alleging the company violated the Fair Labor Standards Act (“FLSA”) by failing to pay them overtime. EMD argued the sales representatives were exempt from the FLSA’s overtime-pay requirement under the outside sales exemption. For that exemption to apply, EMD had to prove: (i) the employees’ main duty involved making sales or obtaining orders and contracts for service, and (ii) they were “customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty,” according to FLSA regulations.
After a bench trial, the District Court found EMD liable for unpaid overtime because the company did not prove by “clear and convincing evidence”—i.e., that it is “highly probable”—that its sales representatives were outside salesmen. On appeal, EMD argued the District Court should have instead used the less stringent “preponderance-of-the-evidence” standard—which would have required EMD only to prove that its claims are more likely to be true than not. Applying Circuit precedent, the Fourth Circuit disagreed and affirmed the District Court’s judgment.
On appeal, the Supreme Court noted the “preponderance” standard is the default in civil trials, and the Court only deviates from that standard in three circumstances: (i) when a statute requires a heightened standard of proof, (ii) when the U.S. Constitution requires it, and (iii) under Supreme Court precedent in cases in which the government pursues “coercive” (i.e., drastic) action against a person, such as taking citizenship away. The Court noted the FLSA is silent as to the standard of proof for exemptions, and FLSA-exemption disputes do not involve constitutional rights or unusual or coercive government action; thus, none of the three scenarios that would justify applying a heightened standard are present in FLSA exemption cases. Justice Gorsuch’s concurring opinion, joined by Justice Thomas, affirmed that “courts apply the default standard unless Congress alters it or the Constitution forbids it.”
The Court was also not persuaded by the employees’ policy-laden arguments that the FLSA protects the public interest, opining, “Other workplace protections, like those under Title VII, also serve important public interests but are subject to the preponderance standard.” Justice Kavanaugh wrote, “If clear and convincing evidence is not required in Title VII cases, it is hard to see why it would be required in Fair Labor Standards Act cases.”
Burdens of proof in civil trials are of make-or-break importance, and the Supreme Court’s confirmation that no heightened standard applies when evaluating employees’ qualification for an FLSA exemption is an important win for employers defending misclassification claims.
Using the False Claims Act to Police Federal Contractors’ Employment Practices
Two recent events — one settlement and one executive order — have heightened the risk that the False Claims Act (FCA) will be used as a tool to enforce the employment obligations of companies doing business with the federal government.
First, on January 16, 2025, the Department of Justice (DOJ) announced a settlement with Bollinger Shipyard. DOJ alleged that Bollinger violated the False Claims Act by knowingly billing the US Coast Guard for labor provided by workers who were not verified in the E-Verify system. Under FAR 52.222-54, federal contractors are required to enroll in the E-Verify program and verify the employment eligibility of all new employees as well as verify the eligibility of existing employees before assigning them to a contract. This is the first case we are aware of where DOJ has used the FCA to enforce the requirement to use the E-Verify system.
Second, included among the flurry of “Day-One” executive orders issued on January 21, 2025, the Trump Administration issued an executive order entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” Among other things, this sweeping order addressed the “Federal contracting process” in Section 3(b).
Section 3(b) instructs the Office of Federal Contract Compliance Programs to “immediately cease . . . 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.” (emphasis added).[1] That section further purports to prohibit federal contractors from advancing diversity initiatives by directing that “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.”
To give teeth to this new mandate, the executive order attempts to bring its requirements within the purview of the FCA by providing:
(iv) The head of each agency shall include in every contract or grant award:
(A) 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 section 3729(b)(4) of title 31, United States Code; and
(B) 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.
There is tension between this directive and current law. For example, in Escobar, the Supreme Court expressly rejected the notion that the government can establish materiality for FCA purposes through an agreement term. “The materiality standard is demanding. . . A misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant’s noncompliance.” Universal Health Serv. Inc. v. United States ex rel. Escobar, 579 U.S. 176, 194 (2016).
Further, there are few cases where the FCA was used to enforce a contractor’s employment practice obligations under current law. In Hill, the US Court of Appeals for the Seventh Circuit upheld the dismissal of an FCA case where the whistleblower alleged that the city of Chicago failed to follow its required affirmative action hiring plan. United States ex rel. Hill v. City of Chicago, Ill., 772 F.3d 455 (7th Cir. 2014). The court in that case held that the city’s implementation of a program that was different from the plan could not trigger the knowing element required for a false claim. Id. at 456.
Notably, the anticipated agreement clause and certification required by the executive order do not prohibit all diversity programs, but only those that “violate any applicable Federal anti-discrimination laws.” Accordingly, to be actionable under the FCA a plaintiff would likely need to show that a defendant knew at the time of its certification that it intended to violate applicable law.
[1] On Friday, January 24, 2025, Acting Secretary of Labor Vince Micone issued Secretary’s Order 03-2025, which directs “all DOL employees” to “immediately cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246.” The order clarified that it applied to “all pending cases, conciliation agreements, investigations, complaints, and any other enforcement-related or investigative activity.” Notably, it provides that investigations or reviews under Section 503 and VEVRAA are “held in abeyance pending further guidance.”
DHS Expands Categories of Individuals Subject to Expedited Removal (Deportation)
The U.S. Department of Homeland Security (DHS) has published a notice expanding the ability of Immigration and Customs Enforcement (ICE) to remove individuals deemed unlawfully present in the United States who are unable to prove U.S. residency for at least two years. It states, “This designation is effective on 6:00 p.m. EST on Tuesday January 21, 2025.” The new DHS notice rescinds a Biden Administration notice on the same subject issued on March 21, 2022.
Expedited removal is a process used by ICE to remove individuals from the United States without a hearing before an immigration judge. Traditionally, expedited removal has been used to remove individuals with outstanding removal orders issued by an immigration judge, individuals seeking admission at ports of entry who are found inadmissible, individuals unlawfully present who are found near the border shortly after arrival, and individuals who arrive by sea.
The notice already faces a legal challenge. The American Civil Liberties Union filed a lawsuit in U.S. District Court in Washington, D.C. The suit alleges that the notice violates the Fifth Amendment due process clause, the Immigration and Nationality Act, and the Administrative Procedure Act.
Critics warn that the notice is likely to result in the removal of U.S. citizens, individuals with bona fide fears of persecution in their home countries who have not yet filed asylum claims, and individuals with removal orders that may have been issued in absentia.
U.S. Supreme Court Urged to Extend ADA Protections to Former Employees
The U.S. Supreme Court heard oral arguments on Jan. 13, 2025, in Stanley v. City of Sanford (No. 23-997), which addresses whether former employees have a right to sue their former employer under the Americans with Disabilities Act (ADA) for discrimination relating to receipt of post-employment fringe benefits.
Factual Background
Karyn Sanford is a former firefighter for the City of Sanford, Florida. In 2016, Sanford was diagnosed with Parkinson’s disease. Two years later, in 2018, she retired from the fire department as a result of her condition. During her employment with the City, the City’s benefit policy provided a health insurance subsidy to employees until the age of 65 who had retired after 25 years of service or because of a disability. In 2003, the City’s policy was amended to provide this subsidy until the age of 65 only to employees who retire after 25 years of service. The policy was further changed to provide the subsidy to those who retire as a result of disability for a period of only 24 months or until they became eligible for Medicare. As a result, Stanley ceased to receive this subsidy beginning in 2020.
In April 2020, Stanley filed suit against the City alleging the City discriminated against disabled retirees in its administration of these retirement benefits in violation of the ADA. It is the City’s position that former employees, including Ms. Stanley, lack standing to bring discrimination claims under, among others, the ADA for post-retirement fringe benefits.
Procedural History
The U.S. District Court for the Middle District of Florida dismissed Stanley’s complaint, holding that the alleged discrimination relating to cessation of the health insurance subsidy payments occurred after Stanley was employed by the City, thus Stanley was not a “qualified individual” covered by the ADA. The Eleventh Circuit Court of Appeals affirmed the lower court’s decision, finding Stanley was not a “qualified individual” under the ADA as she was not employed by the City when her benefits were terminated, nor did she desire such employment.
Arguments
Before the Court, Stanley’s counsel and the Solicitor General’s office argued the alleged discriminatory actions related to benefits that Stanley earned while employed as a “qualified individual” under the ADA, thus the protections of the ADA extend beyond a period of active employment, including as it relates to post-retirement fringe benefits.
On the other hand, the City’s counsel argued that Stanley could not establish the City discriminated against her as the ADA protections extend only to current employees or applicants, and thus Stanley lacked standing to pursue her ADA claim. Counsel further argued that extending these protections to “unqualified individuals” would impose an undue burden on employers and an influx of litigation relating to post-employment benefits.
Court’s Inquiries
During the argument, the justices peppered both sides with various questions concerning the scope of ADA protections, including whether “former employees” are not afforded such protections in any context. Additionally, Justice Samuel Alito questioned Stanley’s counsel on the complex issues that would be presented to courts in analyzing whether the distinction between an individual who works for 25 years and somebody who works a shorter period of time and retired based on a disability is unlawful. Finally, the justices raised questions concerning the possible impact a decision in Stanley’s favor could have with respect to administration of benefits.
Potential Impact
The decision in this matter, expected this summer, could have significant and wide-ranging consequences for employers around the country. The decision will likely provide guidance to employers as to the limits on ADA protections, especially as it relates to the administration of post-employment fringe benefits.
DOL Ceases All Contractor Enforcement Activity Under EO 11246
Following President Trump’s rescission of Executive Order 11246, on January 24, 2025, the Acting Secretary of Labor issued Secretary’s Order 03-2025 (the “Order”), which orders all Department of Labor employees, including those in the OFCCP, to:
“Cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246 and the regulations promulgated under it. This includes all pending cases, conciliation agreements, investigations, complaints, and any other enforcement-related or investigative activity,” and
“Notify all regulated parties with impacted open reviews or investigations by January 31, 2025, that the EO 11246 component of the review or investigation has been closed and the Section 503 and VEVRAA components of the review or investigation are being held in abeyance pending further guidance.”
Accordingly, contractors currently under an OFCCP audit or selected for a future audit have clarity that the race and sex discrimination elements of those compliance evaluations will be closed by the end of the month. However, it remains to be seen whether and how the agency decides to proceed with the disability and protected veterans components of those evaluations, as those aspects have only been “held in abeyance.”
California Pay Data Report Filing Platform Opens on February 3, 2025: A Preview of What Is to Come
Now that the holiday season is over, what better way to start the new year than talking about the filing of 2024 California pay data reports? The California Civil Rights Department (CRD) recently updated its pay data filing website to show that the 2024 filing platform will open on February 3, 2025, and all filings are due by May 14, 2025. While we wait for CRD to publish updated guidance and templates for the 2024 filings, there are several areas that we expect to continue to remain important for filers.
Quick Hits
The deadline for filing the 2024 California pay reports is May 14, 2025, and the filing platform will open for new filings on February 3, 2025.
California requires covered employers to file payroll employee reports for their own employees and requires covered employers to file labor contractor employee reports for their labor contractor employees.
The California Civil Rights Department has taken legal action against employers that have failed to file payroll employee reports and encourages client employers to report labor contractors that fail to provide necessary information.
California law mandates that private employers with one hundred or more employees, including those hired through labor contractors, must annually submit a pay data report to CRD, detailing employee pay, demographics, and other workforce data, including mean and median hourly wages broken down by race, ethnicity, and gender for each job category; failure to comply can result in penalties of up to $100 per employee for the first offense and $200 per employee for subsequent violations.
Continued Pressure on Labor Contractor Reporting
California began requiring the filing of labor contractor employee reports during the 2022 filing cycle. These reports require private employers with one hundred or more workers hired through labor contractor employers in the prior calendar year with at least one labor contractor employee based in California during the applicable snapshot period to file a labor contractor employee report with California. These reports also provide a window into the pay and demographic information for California labor contractor workers, and an expansion of CRD’s view of employers’ pay practices. This additional reporting requirement complicates the pay data reporting process for California employers because while they are required to file the labor contractor employee reports they must rely on labor contractors to supply this information. This has placed California employers—referred to as “client employers” in the labor contractor employee context—in a difficult position as they are dependent on an outside party to provide detailed demographic, pay, and hours worked information that they must file with CRD. If client employers do not file this information with CRD, they are subject to fines and legal action.
While labor contractors are legally required to provide this information to client employers, labor contractors do not always supply the data. If a labor contractor refuses or fails to provide the necessary information, the client employer may be unable to file its required report or be able to file only a partially complete report. This can occur despite the client employer’s best efforts to obtain the necessary information. In recognition of this issue, in last year’s pay reporting frequently asked questions (FAQ) guidance, CRD stated that while the client employer would ordinarily be assessed for applicable penalties for failing to file a labor contractor employee report if the labor contractor fails to provide the necessary data to the client employer the penalties “may be apportioned to the labor contractor instead.”
The FAQs also state that CRD does not intend to pursue penalties where the client employer can show they made “a timely, good-faith effort” to obtain the required information, but the labor contractor failed to provide the information in a “timely fashion.” The guidance also notifies such client employers that they “should” email CRD to report such labor contractors providing names, addresses, and FEINs/SEINs of the labor contractor, as well as documentation of the effort to obtain the required information.
Importantly, the 2023 FAQs did not require client employers to report such labor contractors but encouraged client employers to do so. There are indications that client employers are increasingly open to reporting labor contractors that fail to provide necessary information, but client employers may be hesitant to do so because they are required to provide documentation of their efforts to obtain this data.
It is possible that this directive could be strengthened in the 2024 guidance to say that client employers must report labor contractors that fail to provide necessary data, but we will have to see. Regardless, it is likely that CRD will continue to pressure both labor contractors to supply full data and client employers to report labor contractors that fail to provide the necessary data for reporting.
Remote Worker Reporting Focus
For the first time during the 2023 reporting cycle, CRD required additional information concerning remote workers. The 2023 payroll employee and labor contractor employee upload templates added new columns requiring that information be added to each row showing the number of employees who did not work remotely, the number of remote employees located within California, and the number of remote employees located outside California. This breakdown allows CRD to see how many employees worked in person at the establishment as well as seeing the home state for all establishment remote employees.
The 2023 FAQs define remote workers as employees who “are entirely remote, teleworking, or home-based, and have no expectation to regularly report in person to a physical establishment to perform their work duties.” The FAQs make it clear that employees in “hybrid roles or (partial) teleworking arrangements expected to regularly appear in person to a physical location to perform their work duties” are not “considered remote workers for pay data reporting purposes.” These new requirements place a greater burden on employers to track their remote employees and review these details closely when completing the required California pay data reporting.
Enforcement Activity
The CRD states on its website: “Employers should be aware that CRD is actively pursuing non-filers.” On July 5, 2023, CRD announced that it had sued Cambrian Homecare, Inc., for failing to report employee pay data “[d]espite repeated warnings.”
While we wait for CRD to publish updated 2024 reporting guidance and templates, now may be a good time for employers to assess their preparations to file the 2024 payroll employee and labor contractor employee pay data reports.
OFCCP Ordered to Stop All Enforcement Activity and Close Open Audits Under Revoked Executive Order 11246
In response to President Trump revoking Executive Order 11246, Acting U.S. Department of Labor (DOL) Secretary Vincent Micone issued an Order on January 24th, instructing DOL employees including OFCCP to stop all enforcement activity under the rescinded Executive Order 11246. Specifically, the order instructs OFCCP to
Cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246 and the regulations promulgated under it. This includes all pending cases, conciliation agreements, investigations, complaints, and any other enforcement-related or investigative activity.
Notify all regulated parties with impacted open reviews or investigations by January 31, 2025, that the EO 11246 component of the review or investigation has been closed and the Section 503 and VEVRAA components of the review or investigation are being held in abeyance pending further guidance.
As indicated in the Order, by January 31st federal contractors with open audits or investigations pursuant to EO 11246 should receive communication from OFCCP that their reviews are closed.
Additionally, given Section 503 (Individuals with a Disability) and VEVRAA (Protected Veterans) reviews are on hold until OFCCP and contractors receive further guidance, contractors presumably are under no obligation to submit VEVERAA and Section 503 related materials to OFCCP in connection with any open reviews.
Beltway Buzz, January 24, 2025
The Beltway Buzz is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
The Trump Administration 2.0. President Donald Trump began his second term in office this week, and as expected, began with a flurry of actions and executive orders (EOs). Below is a roundup of the key actions President Trump took during this first week.
President Trump’s Executive Order Guts OFCCP, Targets Private-Sector DEI
Rescission of EO 11246. On January 21, 2025, President Trump issued an executive order, entitled, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The EO makes seismic changes to federal contracting employment policy by revoking Executive Order 11246, issued in 1965, that establishes nondiscrimination and affirmative action obligations for federal contractors. President Trump’s EO further prohibits the Office of Federal Contract Compliance Programs (OFCCP) from promoting diversity, requiring contractors to take “affirmative action” and “[a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.”
Private-Sector DEI Enforcement. Other aspects of the EO directly target diversity, equity, and inclusion (DEI) programs in the private sector. For example:
The EO requires each federal contractor “to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”
The EO requires the U.S. attorney general to develop a strategic enforcement plan identifying “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.”
What’s Left? The EO does not address federal contractors’ obligations under the Vietnam Era Veterans’ Readjustment Assistance Act and the Rehabilitation Act of 1973.
Diversity, Equity, and Inclusion
President Trump and most Republicans view DEI efforts with significant skepticism, so it was no surprise that President Trump issued an executive order, entitled, “Ending Radical And Wasteful Government DEI Programs And Preferencing,” on his first day back in the White House.
The EO calls for “the termination of all discriminatory programs, including illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities in the Federal Government, under whatever name they appear.” (Emphasis added.)
The EO does not directly implicate DEI programs operated by federal contractors. However, the EO does eliminate “DEI or DEIA performance requirements for employees, contractors, or grantees” and requires agencies to submit to the Office of Management and Budget the names of “Federal contractors who have provided DEI training or DEI training materials to agency or department employees.”
More Federal Contractor Issues
President Trump rescinded Executive Order 14055 of November 18, 2021 (“Nondisplacement of Qualified Workers Under Service Contracts”). The EO requires that successor federal contractors offer employment to employees employed under the predecessor contract. This is a bit of déjà vu for President Trump, as he rescinded the same executive order on October 31, 2021. Indeed, this issue has been going back and forth in Washington, D.C., for at least thirty years.
In a housekeeping measure, President Trump revoked Executive Order 14069 of March 15, 2022 (“Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency”). The proposed rule to implement the EO was rescinded on January 8, 2025.
EO Relating to Gender and Employment Policy
President Trump issued an executive order, entitled, “Defending Women From Gender Ideology Extremism And Restoring Biological Truth To The Federal Government.” According to the EO, “It is the policy of the United States to recognize two sexes, male and female” and “the Executive Branch will enforce all sex-protective laws to promote this reality.”
Regarding enforcement of federal employment laws, the EO directs agencies to use “give the terms ‘sex’, ‘male’, ‘female’, ‘men’, ‘women’, ‘boys’ and ‘girls’ the meanings set forth in section 2 of this order when interpreting or applying statutes, regulations, or guidance and in all other official agency business, documents, and communications.” (Emphasis added.)
The EO further instructs the attorney general to issue guidance (1) “to ensure the freedom to express the binary nature of sex and the right to single-sex spaces in workplaces and federally funded entities covered by the Civil Rights Act of 1964” (e.g., bathrooms, locker rooms, etc.); and (2) addressing what the Trump administration believes is the misapplication of the Supreme Court’s decision in Bostock v. Clayton County (2020) beyond the employment context.
The EO directs the U.S. Equal Employment Opportunity Commission (EEOC) to rescind—in its entirety or the relevant provisions—its “Enforcement Guidance on Harassment in the Workplace” (April 29, 2024). With Democrats in the majority at the Commission (see below) this recission is unlikely to happen.
Immigration
As expected, immigration-related executive orders featured prominently this week. In addition to addressing unlawful immigration and the situation at the Southern border, several of President Trump’s actions will have a direct impact on employment-based immigration. Yvonne Toy, Marissa E. Cwik, Christina M. Kelley, and Ashley Urquijo have the details on President Trump’s executive orders relating to birthright citizenship, “Enhanced Vetting and Screening,” and other issues. (A federal judge in Washington has already blocked the implementation of the birthright citizenship executive order for fourteen days, describing it as “blatantly constitutional.” Ashley Urquijo, Brittani B. Holland, and Rosa M. Corriveau have additional details.)
In addition to these EOs, President Trump issued an order rescinding Executive Order 14110 of October 30, 2023 (“Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence”). That EO encouraged multiple agencies, including the U.S. Department of Labor and U.S. Department of State, to streamline their processes to make it easier for experts in artificial intelligence (AI) or other emerging technologies to work in the United States. These initiatives, such as the potential updating of Schedule A of the permanent labor certification process, are unlikely to move forward in the new administration.
Regulatory Orders
Regulatory Freeze Pending Review. This EO is a common practice for new administrations. It immediately pauses any pending or proposed rules, orders the withdrawal of rules sent to, but not published in, the Federal Register, and orders a sixty-day postponement of the effective date of rules that have been published but have not gone into effect.
Rulemaking Transparency. On October 19, 2019, President Trump issued two executive orders (EO 13891, Promoting the Rule of Law Through Improved Agency Guidance Documents, and EO 13892, Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication). The EOs state that agency guidance documents should not form the basis of enforcement actions and that agencies should solicit public feedback prior to issuing such guidance documents. These EOs were rescinded by President Biden on his first day in office. This week, President Trump rescinded the rescission, setting the stage for more transparency in agency guidance documents.
Personnel Decisions
National Labor Relations Board (NLRB). Perhaps the biggest news about the Board is that, as of this writing, General Counsel Jennifer Abruzzo is still employed. It was widely believed that firing General Counsel Abruzzo was a top priority during President Trump’s first week. President Trump named Marvin Kaplan chair of the NLRB. The Board currently has a 2–1 Democratic majority with two vacant seats. Despite being designated as chair, Kaplan will not have the votes to reverse recent Board decisions until the two vacancies are filled.
EEOC. President Trump named Andrea Lucas chair of the EEOC. The EEOC currently has a 3–1 Democratic majority that it will enjoy at least until July 2026, when Chair Jocelyn Samuels’s term expires.
The First January Inauguration. On January 20, 1937, President Franklin D. Roosevelt was sworn in as President of the United States. It was Roosevelt’s second inauguration, but the first inauguration of a president to occur in January. All previous inaugurations (with the exception of George Washington) occurred on March 4. The U.S. Congress had set this date as Inauguration Day because it was the day that the U.S. government began operations in 1789 following the ratification of the U.S. Constitution. March 4 was also the date on which new congressional sessions commenced.
This created a very long four-month lame-duck period between November elections and the beginning of a new Congress and new administration. The problems associated with this extended lame-duck period became more pronounced with Roosevelt’s first inauguration—he had to wait four months before he and the 73rd Congress could address the Great Depression. The 20th Amendment—adopted in January 1933 and effective as of October 15, 1933—addressed this lame-duck problem by rescheduling Inauguration Day for January 20 and the commencement of Congress on January 3.
CFPB Takes Action Against Illinois Mortgage Lender for Redlining Violations
On January 17, 2025, the CFPB filed a complaint against an Illinois-based non-depository mortgage lender for allegedly engaging in discriminatory practices. The CFPB alleges the lender engaged in improper redlining by deliberately excluding certain neighborhoods from its services based on the racial and ethnic composition of those areas, in violation of the Equal Credit Opportunity Act (ECOA).
The CFPB claims the lender violated ECOA by engaging in a pattern of discriminatory conduct against applicants on the basis of race or nationality. Specifically, the CFPB alleges the lender:
Concentrated office locations and marketing efforts in majority-white neighborhoods. The CFPB alleges the lender intentionally avoided locating offices and marketing its services in majority-Black and Hispanic neighborhoods in the Chicago and Boston metropolitan areas.
Discouraged prospective minority applicants. The lender allegedly engaged in practices that discouraged borrowers from applying for mortgage loans to purchase properties in majority-Black and Hispanic neighborhoods.
Failed to maintain sufficient training and compliance monitoring. The lender’s employees allegedly received little to no training on fair lender laws and regulations. The lender also allegedly failed to adequately monitor employee conduct for compliance with fair lender laws and did not perform any internal analyses to monitor for redlining.
The CFPB asserts that these actions resulted in a disproportionately low number or mortgage applications and loan originations from majority-Black and Hispanic neighborhoods.
To address these alleged violations, the CFPB is seeking a court order that would:
Ban the lender from engaging in mortgage lending for five years. This would prohibit the lender from engaging in any residential mortgage lending activities or receiving compensation for any such mortgage lending activities.
Impose a $1.5 million civil penalty. The penalty would be deposited into the CFPB’s victims relief fund to provide financial relief to harmed consumers.
Putting It Into Practice: This action is the latest of a flurry of redlining settlements by federal regulators in advance of the administration change (previously discussed here and here). It remains to be seen how the Trump Administration will approach ECOA enforcement. Lenders should nonetheless ensure their fair lender compliance protocols align with federal regulators’ standards and expectations.
Listen to this post