Cybersecurity Executive Order—Key Implications for the Manufacturing Industry
On January 16, 2025, President Joe Biden issued the “Executive Order on Strengthening and Promoting Innovation in the Nation’s Cybersecurity,” a comprehensive directive designed to address the growing complexity and sophistication of cyber threats targeting the United States. The Executive Order aims to establish a cohesive national strategy for improving cybersecurity across federal agencies, private businesses, and critical infrastructure sectors. The Executive Order governs a wide-array of critical issues, including new cybersecurity standards for federal contractors, enhanced public-private information sharing, the promotion of advanced technologies like quantum-resistant cryptography and artificial intelligence (AI), and the imposition of sanctions on foreign cyber actors. The Executive Order’s initiatives demonstrate a commitment to strengthening the nation’s cybersecurity defenses in a rapidly evolving digital landscape and incorporate approaches generally understood as best practices to enhance cybersecurity.
To further advance the initiatives outlined in the order, the Cybersecurity and Infrastructure Security Agency (CISA), a key federal entity responsible for coordinating national efforts to safeguard critical infrastructure, expanded on the directive with detailed implementation frameworks and additional guidance. CISA’s involvement underscores its crucial role in operationalizing the Executive Order and transforming its policy directives into actionable strategies. Through collaboration with industry leaders, technology innovators, and government stakeholders, CISA has addressed specific challenges, including adopting quantum-resistant cryptography, deploying artificial intelligence in cybersecurity defenses, and improving public-private information-sharing mechanisms. These efforts emphasize fostering innovation, enhancing resilience, and protecting the nation’s digital ecosystem from emerging threats. By building on the Executive Order, CISA seeks to bridge the gap between policy objectives and on-the-ground cybersecurity practices, ensuring that the nation’s cybersecurity posture evolves in tandem with the rapidly changing threat landscape.
The transition of the presidency to President Donald Trump on January 20, 2025, has led to questions about the future of the Biden Executive Order. Historically, President Trump has favored deregulation and, during his first term, had repealed several executive orders issued by previous administrations. The possibility of modification or repeal to the Executive Order is particularly significant for the manufacturing sector, which is both a critical component of the U.S. economy and a frequent target of cyberattacks.
The purpose of this guide is three-fold. First, it examines the key elements of the existing Executive Order. Next, it explores the potential modifications that the Trump administration may implement. Finally, it provides guidance tailored to manufacturing companies for navigating this evolving regulatory and threat environment, building on previous related resources published by Foley & Lardner and the Cybersecurity Manufacturing Innovation Institute (CyManII), which are referenced at the end of this alert.
Key Provisions of the Executive Order and their Impact on Manufacturing
Minimum Cybersecurity Standards for Federal Contractors
A central provision of the Executive Order mandates baseline cybersecurity measures for federal contractors. These include securing access to critical systems and data using Multi-factor authentication (MFA), incorporating endpoint detection and response (EDR) tools to monitor, detect, and respond to cybersecurity threats, and using encryption to protect sensitive data both during transit and at rest.
Manufacturers supplying goods or services to the federal government must adhere to these cybersecurity standards to maintain their eligibility for governmental contracts. For many companies, this may require substantial investments in upgrading systems, adopting new technologies, and training personnel. Non-compliance could lead to the loss of profitable federal contracts and potential reputational damage.
Enhanced Public-Private Information Sharing
The Executive Order directs federal agencies to enhance mechanisms for sharing threat intelligence with private-sector entities. This collaboration aims to provide timely and actionable insights to help businesses defend against emerging cyber threats.
This initiative benefits the manufacturing sector as it is a primary target for ransomware attacks and intellectual property theft. Access to real-time threat intelligence allows manufacturers to identify vulnerabilities, respond swiftly to incidents, and mitigate risks more effectively. A ransomware incident plan focused on manufacturing can be found here: Ransomware Playbook.
Transition to Quantum-Resistant Cryptography
The Executive Order highlights the urgent need to adopt quantum-resistant cryptographic algorithms to tackle the long-term threat arising from advancements in quantum computing. As manufacturing increasingly incorporates digital technologies and interconnected systems, safeguarding proprietary designs, supply chain data, and other sensitive information is essential to business. Early adoption of quantum-resistant encryption may provide a competitive advantage and safeguard critical assets against existing and future threats. Guidelines for approaching quantum-resistant cryptography are available from NIST and the first post-quantum encryption standards are found here.
Leveraging AI for Cybersecurity
The Executive Order promotes the use of AI-driven cybersecurity tools to identify and counter advanced cyber threats in real time. AI is potentially transformative for the manufacturing sector because it can automate threat detection and response strategies. AI is also a proven tool for minimizing operational disruptions, protecting intellectual property, and ensuring the integrity of production lines. The pilot programs outlined in the Executive Order could serve as a model for broader adoption across the industry. AI may significantly accelerate the detection and mitigation of cyber-attacks, an area under development by CyManII.
Sanctions on Foreign Cyber Actors
The Executive Order grants the federal government the authority to impose sanctions on individuals and entities responsible for cyberattacks targeting U.S. organizations. Sanctions serve as a deterrent against state-sponsored cyberattacks and industrial espionage. For manufacturers, this provision provides an extra layer of protection and highlights the government’s commitment to safeguarding critical industries.
Potential Changes Under the Trump Administration
Deregulation of Cybersecurity Standards
President Trump’s emphasis on minimizing regulatory burdens may result in a rollback of the cybersecurity requirements in the Executive Order. This could shift the responsibility for implementing robust cybersecurity measures from the federal government to individual companies.
Focus on Supply Chain Resiliency
Based on the criticality of U.S. manufacturing and its role in global competitiveness and economic stability, we anticipate President Trump will issue guidance on securing supply chain resiliency to enhance the productivity of U.S. manufacturers. We will monitor these anticipated changes and publish future alerts as applicable.
Reprioritization of Cybersecurity Initiatives
While the current Executive Order emphasizes quantum-resistant cryptography and AI, the Trump administration might focus first on immediate cybersecurity challenges and delay longer-term solutions that require significant investment.
Reduced Emphasis on Public-Private Collaboration
Changes to information-sharing initiatives could decrease government support for private-sector cybersecurity efforts, which may compel manufacturers to seek alternative sources of threat intelligence.
Selective Sanctions Enforcement
A more selective approach to sanctions could change the deterrent effect on foreign cyber actors, potentially raising the risk of targeted attacks on U.S. manufacturing companies.
Guidance for Manufacturing Companies
Given the uncertainty surrounding the future of the Executive Order, manufacturers must adopt a proactive approach to cybersecurity. Below are actionable steps to enhance resilience:
Strengthen Core Cybersecurity Measures
Adopt Industry Best Practices: Ensure the deployment of MFA, EDR, and encryption on all critical systems.
Secure Operational Technology (OT): Safeguard industrial control systems (ICS) and other OT components essential to manufacturing operations.
Conduct Regular Assessments: Regular audits can help identify vulnerabilities and prioritize remediation efforts.
Invest in Employee Training: Over 80% of ransomware and other cyber-attacks can be traced to the “human in the loop.” Thus, cybersecurity training is a solid investment to protect your company and its operations.
Monitor Regulatory Developments
Stay Informed: Stay informed about updates to the Executive Order and other relevant cybersecurity policies.
Engage Legal Counsel: Consult legal and compliance experts to assess the potential impact of policy changes on your business operations.
Invest in Advanced Cybersecurity Technologies
Explore AI Solutions: Leverage AI tools for predicting threats, identifying anomalies, and automating incident responses.
Transition to Quantum-Resistant Cryptography: Start planning cryptographic upgrades to protect sensitive data from emerging threats.
Collaborate with Industry Peers: Participate in forums and consortia to exchange best practices and establish standardized cybersecurity protocols.
Secure the Supply Chain
Evaluate Vendor Risks: Perform comprehensive cybersecurity assessments of suppliers and third-party partners.
Develop Redundancy Plans: Identify critical supply chain dependencies and develop contingency plans to mitigate potential disruptions.
Encrypt Communications: Safeguard data transfers throughout the supply chain to minimize the risk of interception.
Build Robust Incident Response Plans
Establish Comprehensive Protocols: Develop incident response plans tailored to manufacturing-specific threats, such as ransomware attacks on production systems. An example of industry guidance and template is available in CyManII’s Ransomware Preparation Guide: Prevention, Mitigation, and Recovery for Manufacturers.
Train Employees: Provide ongoing cybersecurity training to improve awareness and minimize human error.
Test and Refine Plans: Perform regular simulations to assess the effectiveness of response strategies and implement necessary adjustments.
Final Thoughts
The “Executive Order on Strengthening and Promoting Innovation in the Nation’s Cybersecurity” highlights the urgent need for robust cybersecurity measures, particularly within the manufacturing sector, vital to national security, economic stability, and global competitiveness. This sector faces an increasing number of sophisticated threats, including ransomware attacks, vulnerabilities in the supply chain, and intellectual property theft. While the future of the Executive Order under the Trump administration is uncertain, manufacturers cannot afford to delay action. Cyber-attacks on manufacturers will continue to rise in volume and sophistication over the coming years. Proactive measures such as implementing advanced security technologies, strengthening supply chain defenses, and keeping abreast of regulatory changes are essential for mitigating risks and ensuring operational continuity.
Furthermore, adhering to strict cybersecurity standards allows manufacturers to secure federal contracts, establish trust with stakeholders, and gain a competitive edge in the market. As potential changes to the Executive Order could lead to a fragmented regulatory landscape—spanning federal, state, and international levels—manufacturers must prepare for diverse compliance requirements. By prioritizing cybersecurity, the manufacturing sector not only safeguards its critical assets and processes but also reinforces its vital role in driving economic growth and technological innovation.
About CyManII
Launched in 2020 by the U.S. Department of Energy, CyManII works across the manufacturing industry, research and academic institutions, and federal government agencies to develop technologies that enable the security and growth of the U.S. manufacturing sector.
Additional information on cybersecurity risks faced by manufacturers can be found in prior articles authored by Foley & Larder and CyManII, including:
Recommendations for Managing Cybersecurity Threats in the Manufacturing Sector
So, You Think of Cybersecurity Only as a Cost Center? Think Again.
CyManII also contributed to this article.
Tariffs And California’s Anti-Price Gouging Law
Earlier this week, President Donald Trump remarked that he is “thinking in terms of 25%” tariffs on goods imported from Mexico and Canada”. A tariff is a tax levied upon imported goods. When goods enter the United States, they are classified and tariffs are assessed using the Harmonized Tariff Schedule of the United States (HTSUS), a compendium of tariff rates based on a globally standardized nomenclature.
Importantly, the tariffs are paid to the U.S. Customs and Border Protection department. This fact may have important implications under California’s anti price gouging statute, Penal Code Section 396. As discussed in prior posts this week, this statute prohibits, among other things, sales or offers to sell any consumer food items or goods (as defined), goods or services used in emergency cleanup, emergency supplies (as defined), medical supplies (as defined), home heating oil, building materials (as defined), housing (as defined), transportation, freight, and storage services (as defined), or gasoline (as defined) or other motor fuels for a price of more than 10% greater than the price charged by that person for those goods or services immediately before the proclamation or declaration of emergency. However, a greater price increase is not unlawful under the statute if the seller can prove that “the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by that seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency”.
As noted above, tariffs are not imposed by the sellers of goods. Tariffs are imposed by the U.S. government. The statutory exception refers only to additional costs “imposed by the supplier of the goods” (emphasis added). Therefore, it is questionable whether the a seller may impose a greater than 10% price increase based upon an increase in tariffs imposed by the federal government. However, not allowing sellers to justify price increases based on increases in tariffs would likely have the unintended consequence of reducing supplies of much needed goods during emergency.
Understanding President Trump’s Executive Orders on DEI: Implications for Federal Contractors
On January 21, 2025, President Trump signed two Executive Orders (“EOs”) taking aim at diversity, equity, and inclusion (“DEI”) within federal agencies and the federal contractor workforce: Ending Illegal Discrimination And Restoring Merit-Based Opportunity and Ending Radical and Wasteful Government DEI Programs and Preferencing. Accordingly, federal contractors must now re-familiarize themselves with the Trump administration’s view on workplace DEI initiatives. These EOs represent a sharp contrast in the new administration’s expectations regarding workplace DEI compared to the Biden administration.
The Trump administration regards DEI initiatives as suspect based on the belief that these initiatives involve lowering applicable professional standards and discrimination against those viewed as capable of advancing based on merit. As the President articulated in the EO titled “Ending Illegal Discrimination and Restoring Merit Based Opportunity,” DEI is “a pernicious identity-based spoils system.” President Trump stated in his inaugural address that he intends to “forge a society that is colorblind and merit-based.” In furtherance of this objective, the President revoked EO 11246, which for more than six decades has prohibited federal contractors from making employment decisions on the basis of race, color, religion, sex, or national origin. While racial discrimination in hiring remains illegal under the Title VII of the Civil Rights Act of 1964, the Trump administration also ordered the Civil Rights Division of the Department of Justice to immediately freeze much of its activity, including not pursuing any new discrimination cases.
What Do Contractors Need to Know About President Trump’s EO “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”?
In this second presidential term, the Trump administration demonstrates greater awareness and sophistication in leveraging existing legal frameworks to enforce its view of DEI initiatives and principles. Accordingly, contractors should expect heightened government scrutiny and legal challenges as the Trump administration seeks to demonstrate its ability to force contractors to align with its viewpoint that explicit efforts to achieve workplace diversity constitute unacceptable racial discrimination.
Agreement Regarding to Materiality Under the False Claims Act: One of the biggest takeaways for federal contractors is that this EO requires the head of each agency to include a contract term in which the contractor agrees 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 (“FCA”) (section 3729(b)(4) of title 31).
Certification: The EO also requires an award recipient to certify that it does not operate any programs “promoting DEI that violate any applicable Federal anti-discrimination laws.” This certification, if viewed as false by the Trump administration’s Justice Department, could become the basis for an allegation of an FCA violation.
Expected Government Investigations: The EO directs the Attorney General to identify “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 one billion dollars.” This demonstrates the Trump administration’s willingness to invest government resources into challenging the DEI programs of large organizations.
Expected Litigation: The EO directs the Attorney General to report on ways in which the private sector can be encouraged “to end illegal DEI discrimination and preferences and comply with all federal civil-rights laws” and to identify opportunities for the Trump administration to engage in lawsuits.
What Do Contractors Need to Know About President Trump’s EO “Ending Radical and Wasteful Government DEI Programs and Preferencing”?
While this executive order is directed to federal agencies, it demonstrates the sweeping nature of the Trump administration’s efforts to eradicate DEI principles from the workplace.
Termination of DEI Programs: The EO mandates the termination of all DEI programs within federal agencies. This includes any initiatives, training, or policies that are specifically designed to promote DEI within the federal workforce, which the EO describes as “radical and wasteful.” Relatedly, the Trump administration issued a memo directing all federal agencies to place any DEI professionals within their ranks on paid leave as of January 22, 2025. The Trump administration also provided agency heads with a directive warning of “adverse consequences” for anyone who fails to report any of their colleagues (to a specified email address created for this this purpose) who try to circumvent orders to immediately cease DEI-related activities.
Prohibition of Preferences Based on Identity: Consistent with EO 11246 (which the President revoked), the new Trump EO explicitly prohibits federal agencies from giving preferential treatment to individuals based on race, color, religion, sex, or national origin in hiring, promotion, or any other employment decisions.
Review and Rescission of Existing Policies: Federal agencies are required to conduct a comprehensive review of their existing policies, programs, and practices to identify any that are inconsistent with the new directive. Any policies or programs that are found to be in violation of the order must be rescinded or modified to comply with the new guidelines. This includes reviewing training materials, hiring practices, and any other initiatives that may have been implemented to promote DEI within the agency.
What Should Contractors Do to Comply with the New EOs?
Contractors should conduct a privileged review of their existing DEI programs to identify any potentially problematic features such as race- or gender-based quotas, or to consider adding a mission statement to clarify that the contractor’s diversity efforts seek to identify and cultivate all existing talent and do not have the effect of lowering any applicable standards or commitment to excellence.
Contractors should also consider a privileged review of their documented merit-based criteria for hiring, promotions, and other employment actions. This may involve updating job descriptions, performance evaluation processes, and training programs to focus on skills, experience, and performance.
Contractors should consider developing consistent guidance for employees, as they may have questions about the organization’s continued commitment to diversity and inclusion, and whether such a commitment is lawful, or where to go if they have concerns.
We will continue to closely monitor the implementation of these executive orders and will report on any new developments.
Will New York’s New Flood Insurance Law Create a Coinsurance Problem for Lenders and Policyholders?
A law recently passed by the New York State Assembly and signed by Gov. Kathy Hochul puts significant limits on the flood insurance that lenders can require borrowers to purchase on loans secured by residential real property. Commentary in the weeks since the law went into effect has focused on potential conflicts between the law and the federal Flood Disaster Protection Act or the potential for loans and properties to be underinsured for flood. Another hidden problem may occur, however, if policyholders opt to purchase coverage for significantly less than the building replacement cost on a policy that includes a coinsurance penalty.
Signed by Gov. Hochul on December 13, 2024, and effective immediately, Assembly Bill A5073A prohibits mortgage lenders from requiring borrowers to obtain flood insurance on improved residential real property at a coverage amount exceeding the outstanding principal mortgage balance as of the beginning of the year for which the policy shall be in effect, or that includes contents coverage. The bill additionally requires lenders to provide clear and conspicuous notice to borrowers that the required flood insurance will only protect the lender’s interest and may not be sufficient to pay for repairs or other loss after a flood.
Of course, purchasing coverage for less than full replacement cost of the insured building carries the risk that coverage will be insufficient to rebuild or repair in the event of a loss. But policyholders who consider taking this chance should also consider whether their flood policy has a coinsurance penalty. These provisions can limit payouts to insureds who purchase coverage for substantially less than the building replacement cost by paying only a fraction of the full loss. For example, both the FEMA and ISO personal flood policies have the potential to pay only a specified portion of the loss or the actual (depreciated) cash value, whichever is greater, when insurance limits are less than 80% of full replacement cost. Even if the policy pays the actual cash value, however, the policyholder and their lender may come in for a nasty shock if the depreciated cash value of the building is many thousands of dollars less than what is needed to complete repairs.
If a coinsurance penalty applies, purchasing coverage at the amount of the outstanding mortgage principal balance under New York’s law thus does not necessarily translate into an insurance payout in that amount. Notably, the notice required to be given to mortgagors by New York does not include a specific warning to the property owner of this possibility.
Listen to this post
What’s Next for OFCCP? Agency Issues First Statement After President Trump’s Revocation of EO 11246
On January 23, 2025, the Office of Federal Compliance Programs (OFCCP) sent out its first official agency communication since the issuance of President Trump’s Executive Order (the “Trump Order”) revoking Executive Order 11246 . The message served to inform contractors of the import of Trump Order, but also that some OFCCP obligations remain.
OFCCP’s message referenced the revocation of EO 11246, noting that, per the Trump Order, “[f]or 90 days from the date of this order, Federal contractors may continue to comply with the regulatory scheme in effect on January 20, 2025,” with OFCCP adding emphasis to the word “may.”
The message also confirmed that per the Trump Order, OFCCP will immediately cease:
Promoting “diversity”.
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.
Importantly, OFCCP noted that requirements under Section 503 of the Rehabilitation Act, 29 U.S.C. 793, and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), 38 U.S.C. 4212, are “enforced by OFCCP, are statutory and remain in effect.” (emphasis in original). Accordingly, federal government contractors are still required to comply with their affirmative action and other OFCCP obligations as they pertain to protected veterans and individuals with disabilities.
OFCCP also promised that “[a]dditional information regarding OFCCP’s current activities will be forthcoming in the upcoming weeks,” and that any questions should be submitted to the OFCCP Customer Service Helpdesk.
What Employers and Nonprofits Should Know About Trump’s Executive Order Banning Diversity Preferences
Following his inauguration on January 20, President Trump signed a slew of executive orders, including a handful related to Diversity, Equity, and Inclusion (DEI) initiatives.
On January 21, President Trump signed an executive order (EO) entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (DEI EO), which aims to end DEI preferences in both the public and the private sectors, including nonprofits. Section 4 of the DEI EO tasks all federal agency heads with “encouraging” private sector companies to end DEI preferences, in part by threatening legal action against them.
Executive orders[1] are directives from the President and have the force of law. Because they are not legislation, they do not require approval from Congress, and Congress cannot directly overturn them, though it does have ways to affect their implementation. And, affected parties can challenge executive orders in court.
The DEI EO, taken together with the US Supreme Court’s ruling in Students for Fair Admissions v. President and Fellows of Harvard College, which found that Harvard University’s and the University of North Carolina’s race-based admissions systems violated the equal protection clause of the 14th amendment, may portend an end to private sector and nonprofit DEI programming and initiatives as we have come to know them. Even if the DEI EO is successfully challenged, employers in the public and private sectors should be prepared for increased scrutiny of any DEI initiatives and programming.
An Overview of the Executive Order
The DEI EO begins with the premise that longstanding civil rights laws designed to protect against discrimination have been used by institutions to adopt “dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called ‘diversity, equity, and inclusion’ (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA)” which could violate those laws. According to the executive order, these actions “diminis[h] the importance of individual merit, aptitude, hard work, and determination when selecting people for jobs and services…”
The executive order mandates the following at the federal government level:
The termination of all “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements” in any executive department or agency.
The revocation of five executive orders from 1965, 1994, 2011, 2014 and 2016[2] focused on equal employment opportunities and promotion of diversity for the federal government and federal contractors.
That the Office of Federal Contract Compliance Programs (OFCCP) within the US Department of Labor immediately cease (1) promoting diversity, (2) holding federal contractors or subcontractors responsible for affirmative action, and (3) allowing workforce balancing based on race, color, sex, sexual preference, religion, or national origin.
The executive order also provides the following with respect to private sector employers:
The heads of all federal agencies must take action to advance in the private sector “the policy of individual initiative, excellence, and hard work.”
Most notably, within 120 days, the US Attorney General, in consultation with the heads of relevant agencies and in coordination with the Director of the Office of Management and Budget (OMB), must submit a report containing “recommendations for enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” The report should contain a proposed strategic enforcement plan identifying: “(1) key sectors of concern within each agency’s jurisdiction; (2) the most egregious and discriminatory DEI practitioners in each sector of concern; (3) a plan of specific steps or measures to deter DEI “programs or principles” (whether specifically denominated “DEI” or otherwise) that constitute illegal discrimination or preferences.
As part of this plan, each agency is required to identify up to nine potential civil compliance investigations of:
Publicly traded corporations.
Large nonprofit corporations or associations.
Foundations with assets of $500 million or more.
State and local bar and medical associations.
Institutions of higher education with endowments over $1 billion.
In addition, within 120 days, the Attorney General and the US Secretary of Education must jointly issue guidance to all state and local educational agencies that receive federal funds, as well as all institutions of higher education that receive federal grants or participate in the federal student loan assistance program regarding the measures and practices required to comply with the principles set forth in the Supreme Court’s Students for Fair Admissions decision.
What Should Private Sector Employers (Including Nonprofits) Do Now?
The executive order raises significant questions regarding private sector use of DEI preferences and even calls into question the ability of a company to sustain or encourage an internal culture that celebrates or seeks out diversity. Because the executive order does not define “illegal discrimination or preferences,” it can be difficult to determine whether a specific practice is likely to be the target of negative government attention.
Notably, nothing in the executive order suggests that employers may not take action to seek out a diverse candidate pool, so long as ultimate hiring decisions are based on qualifications alone and do not involve illegal preferences. Therefore, to lower the risk of enforcement action by the federal government, private sector employers (including nonprofit organizations) may choose to recruit across a broader spectrum and prioritize seeking out a wide range of diverse characteristics, rather than just focusing on protected characteristics like race or sex.
At a minimum, employers who fall into one or more of the five categories to be scrutinized for potential civil compliance investigations may wish to assess their risk-tolerance and consider whether suspending affirmative action plans or DEI initiatives is in line with their company’s priorities. But, even for employers who are not the target of civil compliance investigations, these executive orders may embolden employees and applicants who feel they have been mistreated as a result of diversity initiatives to bring private claims of discrimination against their employers.
What Should Government Contractors Do Now?
Significantly, the DEI EO’s revocation of Executive Order 11246, first issued in 1965 (one year after President Johnson signed the Civil Rights Act of 1964) (EO 11246) reflects a sea change in the affirmative action obligations of government contractors. Under EO 11246, federal contractors were required to analyze workforce data and engage in good faith efforts to provide equal employment opportunities for women and minorities, but they were not required to apply quotas or preferences for those groups. President Trump’s revocation of this longstanding requirement potentially eliminates entirely the requirements that government contractors develop and certify annually their affirmative action plans.
The DEI EO permits federal contractors to operate under current rules for 90 days while they await further guidance from the government on new requirements. We anticipate that private plaintiffs will be exploring their options in terms of legal remedies in response to the revocation.
Potential Implications for Nonprofits Beyond Employment Matters
DEI principles are integral, and in some cases central, to the mission of many nonprofits. The DEI EO is drafted broadly and could encompass programmatic activities in addition to employment-related or contractual matters. As a result, while some organizations may be more risk averse and may elect to change or terminate certain programs, other organizations may decide to stay the course and continue to pursue programs that could draw the attention of the Administration, Attorney General, or relevant agencies. The decision will depend in part on the organization’s specific priorities and level of risk aversion. If an organization ultimately seeks to terminate programs or make fundamental changes to their mission, there may be other legal impediments that could arise under the federal tax law and state nonprofit laws, particularly those that apply to charitable organizations.
[1] (1) Initial Rescissions Of Harmful Executive Orders And Actions; (2) Ending Radical And Wasteful Government DEI Programs And Preferencing; (3) Reforming The Federal Hiring Process And Restoring Merit To Government Service
[2] (1) Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity), (2) Executive Order 12898 of February 11, 1994 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations); (3) Executive Order 13583 of August 18, 2011 (Establishing a Coordinated Government-wide Initiative to Promote Diversity and Inclusion in the Federal Workforce); (4) Executive Order 13672 of July 21, 2014 (Further Amendments to Executive Order 11478, Equal Employment Opportunity in the Federal Government, and Executive Order 11246, Equal Employment Opportunity); and (5) The Presidential Memorandum of October 5, 2016 (Promoting Diversity and Inclusion in the National Security Workforce).
Additional Authors: Lauren C. Schaefer and Brian D. Schneider
DEI Changes from the Start: Key Executive Orders Signed on Trump’s First Day
On January 20, 2025, Donald J. Trump was sworn in as the 47th President of the United States. Fulfilling one of his major campaign promises, he issued a series of executive orders on his first day in office. Two of these orders represent a significant shift regarding gender and diversity, equity, and inclusion (DEI) initiatives.
One order declares that the federal government only recognizes two immutable sexes: male and female. This Order, entitled, “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” rejects “gender identity” as a basis for policy decisions and emphasizes that sex is a fixed biological characteristic. It directs federal agencies to use clear, sex-based language in all official documents and communications, and seeks to ensure that facilities and programs meant for one sex are not accessed based on gender identity. Specifically, the Order requires government-issued identification documents, including passports, visas, and Global Entry cards, to reflect the holder’s sex assigned at birth. The Order also calls for revisions to policies concerning women’s spaces, healthcare, and legal protections, aiming to uphold sex-based rights.
Another order, entitled, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” aims to end what President Trump deems “discriminatory” DEI initiatives implemented by the Biden administration. In this Order, federal agencies are mandated to terminate these initiatives, including terminating DEI-related positions, training, and programs, under whatever name they appear (including in relation to “environmental justice”). Federal agencies are directed to revise employment practices to focus solely on merit, performance, and skills, without considering DEI factors. The aim of this Order is to ensure equal treatment for all Americans, reducing federal spending on what the Order labels “wasteful” and “discriminatory” policies.
President Trump also issued an order that reverses several executive orders from the Biden administration. The Order highlights a commitment to undoing practices deemed to have harmed the nation, particularly focusing on issues of DEI, border control, and climate-related regulations. The Order asserts that these policies from the Biden administration created divisiveness, inflated costs, and strained public resources. Among the revoked prior orders are:
Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government;
Executive Order 13988, Preventing and Combatting Discrimination on the Basis of Gender Identity or Sexual Orientation;
Executive Order 14091, Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government; and
Executive Order 14069, Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency.
Additionally, this Order creates a broad review process, wherein the Domestic Policy Council and National Economic Council have been tasked with reviewing federal actions from the Biden administration to determine which additional policies should be rescinded or amended to “increase American prosperity.”
Yesterday’s wave of executive orders marks just the beginning of what is expected to be a series of significant policy shifts under President Trump’s administration. As these changes unfold, they will likely have widespread impacts on everything from federal regulations to national security. With more orders likely on the horizon, it is crucial to stay informed and to prepare to accommodate the evolving policy landscape.
EPA Administrator Nominee Advances to Senate for Confirmation Vote: Nomination Hearing Highlights
The Senate Committee on Environment and Public Works (EPW) on January 23, 2025, advanced the nomination of Lee Zeldin to the full Senate for a vote to confirm him as the next Administrator of the U.S. Environmental Protection Agency (EPA). The 11-8 vote to advance the nomination was largely along party lines, with Senator Mark Kelly (D-AZ) as the only Democrat to vote in favor of advancing Zeldin’s nomination. Zeldin is expected to be confirmed by the Senate.
EPW held a hearing on the nomination of Lee Zeldin to be Administrator of EPA on January 16, 2025. The hearing provided insights into the issues of highest interest and concern to EPW members. Chairman Shelly Moore Capito (R-WV) noted several issues on which she hoped EPA would focus, including cleaning up brownfields and Superfund sites, addressing “legacy [per- and polyfluoroalkyl substances] PFAS contamination,” and reliability and affordability of electricity. Senator Sheldon Whitehouse (D-RI), ranking Democrat on EPW, stated that climate change is the number one issue for him.
Republicans raised a range of issues both for awareness and for Zeldin to focus on at EPA. Of particular interest, newly elected Senator John Curtis (R-UT) mentioned the low approval rate for new chemicals under the Toxic Substances Control Act (TSCA). Senator John Boozman (R-AR), who also Chairs the Senate Committee on Agriculture, Nutrition, & Forestry, spoke about pesticides and the need for a “predictable, science-based system.” PFAS was identified as an important issue from several perspectives, including cleanup, ongoing critical uses (e.g., defense), and the need to protect “passive receivers.” Several Republicans highlighted “cooperative federalism” as an issue.
Most Democrats emphasized climate change as a top priority issue with Zeldin. Other issues raised by Democrats included problems with cross-border pollution (both air and water), potential cuts to EPA budget and personnel, and lead in drinking water, and they flagged concerns about Clean Air Act attainment due to ongoing wildfires.
Both Republican and Democratic Senators mentioned plastics, but from differing perspectives. Senator Jeff Merkley (D-OR) stated his strong opposition to “thermal melting of plastics.” Senator Dan Sullivan (R-AK) talked about the need to clean up ocean plastics and stated that he is working on “Save Our Seas 3.0.”
Rescinded Biden Immigration Executive Orders: What Employers Need to Know
As many expected, President Donald Trump has not only issued Executive Orders (EOs), but he has also rescinded many EOs issued by the Biden Administration concerning immigration, including the following: “The Restoring Faith in Our Legal Immigration Systems and Strengthening Integration and Inclusion Efforts for New Americans” EO which particularly affects business immigration. This EO formed the basis of policy guidance that, for example, streamlined the naturalization process, led to a reduction in the number of visa denials and Requests for Evidence (RFEs) that had been issued during the first Trump Administration, and reinstated the USCIS policy of deferring to prior approvals. Immigration advocates have been predicting the loss of these benefits under the new Trump Administration. Employers should expect a return to the days of costly RFEs and slower adjudications.
Other Biden-era EOs regarding immigration that have been rescinded include:
EO 13993 – “Revision of Civil Immigration Enforcement Policies and Priorities.” This EO prioritized enforcement on the grounds of national security, border security, and public safety and required notification to state and local authorities of at-large enforcement actions. Based upon the new Trump EOs, enforcement in all areas of business immigration, including I-9s audits and workplace enforcements (colloquially referred to as ICE Raids), will be expanded.
EO 14010 – “Creating a Comprehensive Regional Framework to Address the Causes of Migration, to Manage Migration Throughout North and Central America, and to Provide Safe and Orderly Processing of Asylum Seekers at the United States Border.” This EO called for the United States to address the root causes of migration, expand asylum protection in other countries, create more paths for lawful migration to the United States, and strengthen U.S. asylum policies. The Trump Administration is closing the border and has already shut down the CBP One App for asylum applicants.
EO 14011 – “Establishment of Interagency Task Force on the Reunification of Families.” This EO ended the child separation policy and created a task force to facilitate reunification. According to reporting, there are still many children who have yet to be reunited with their families.
EO 14013 – “Rebuilding and Enhancing Programs to Resettle Refugees and Planning for the Impact of Climate Change on Migration.” This EO called for minimizing delays in resettlement, reunifying families, restoring and expanding USRAP, and protecting Afghans and Iraqi Special Immigrants. Since Jan. 20, 2025, Afghans have been prohibited from boarding flights to the United States.
Whether rescinding a Biden EO effectively resurrects a prior Trump EO is still an open question.
What Every Multinational Company Should Know About … Managing Import Risks Under the New Trump Administration (Part II): The Implications of President Trump’s “America First Trade Memorandum”
During his campaign, President Trump often stated that he would be implementing an “America First” international trade policy, which he said explicitly would include higher tariffs, potentially on imports from the entire world. On January 20, President Trump issued a presidential memorandum taking the first steps toward implementing this agenda. This “America First Trade Policy” memorandum directs that multiple federal agencies report back to him by April 1, 2025, on a number of potential measures designed to help implement “a robust and reinvigorated trade policy that promotes investment and productivity, enhances our nation’s industrial and technological advantages, defends our national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
While the memorandum mostly is cast as a request for informational trade reports, the best way to view this memorandum is as a potential roadmap to the international trade priorities of the new administration. The wide range of issues covered, including the causes of the U.S. annual trade deficits in goods, the economic and national security implications and risks of such deficits, a specific focus on all aspects of trade with China, and an evident desire to reshore significant amounts of goods produced abroad by U.S. companies indicate that nearly all aspects of U.S. international trade are under scrutiny.
As detailed in Part I of our three-part series on Managing Import Risks Under the New Trump Administration, many multinational companies are actively engaged in risk planning the potential impact of the new administration on their international supply chains. The issuance of this new memorandum underscores the urgency of proceeding along these lines. Thus, a thorough understanding of the potential implications of this new memorandum is essential for risk planning a response. Below we list the implications of each of the ordered study items:
“Addressing Fair and Unbalanced Trade”
The memorandum directs an investigation of the “causes of our country’s large and persistent annual trade deficits in goods,” as well as the national security implications of the same. This, as well as the other actions indicated in this section, calls on agencies to address unfair and unbalanced trade by investigating trade deficits, unfair practices, and currency manipulation, and to recommend appropriate measures to combat the same. The most likely implication of this report will be to start establishing a basis for increasing tariffs, potentially on many or all global trading partners.
The memorandum directs an assessment of the feasibility of establishing, and recommendations regarding the “best methods for designing, building, and implementing, an External Revenue Service to collect tariffs, duties, and other foreign trade-related revenues.” In other words, Trump is seeking guidance on the best way for the U.S. government to collect external trade revenue, including tariffs. While many commentators expressed puzzlement regarding the purpose of this new way of collecting tariffs — since Customs & Border Protection already is set up to collect these tariffs — it is possible that this request expresses dissatisfaction with CBP oversight of the use of Chinese parts and components for third-country assembly, which the new administration reportedly has viewed as an end-run around the Section 301 tariffs. It also could open the way to other ways of taxing non-U.S. companies that would fall outside of the collection of tariffs.
The memorandum directs early preparations for the trilateral United States-Mexico-Canada Agreement (USMCA) review, including an assessment of the “the impact of the USMCA on American workers, farmers, ranchers, service providers, and other businesses.” The focus on the USMCA raises questions about how these potential changes may impact U.S.-Mexico economic relations and Mexico’s role as an essential U.S. trading partner. If the U.S. finds Mexico’s trade practices to be noncompliant with the terms of the USMCA or unfairly advantageous, Mexican goods may be subject to new tariffs. Further, with President Trump elsewhere promising new 25 percent duties on Canada and Mexico as retaliation for a perceived lack of urgency regarding immigration and fentanyl exports to the United States, there is a strong possibility that changes could upend trade within the USMCA region on a far quicker timeframe.
The memorandum directs an investigation of exchange rate policies of trading partners. Here, Trump is seeking an assessment of any potential currency manipulation or misalignment that prevents effective balance of payment adjustments or that provides trading partners with an unfair competitive advantage in international trade. Trump also calls for the identification of any countries that should be designated as currency manipulators, which almost certainly is directed at countries that maintain large trade deficits with the United States, particularly China. This could mark the end of the longstanding “strong dollar” informal trade policy of the United States, which dates back to the Clinton administration and could mark a return to Reagan-era intervention in currency markets on a multi-country basis to lower the value of the dollar.
The memorandum directs a review of all current free trade agreements, as well as countries “with which the United States can negotiate agreements on a bilateral or sector-specific basis to obtain export market access.” In other words, Trump is calling for a review, and potential revision, of all of America’s free trade agreements, with a view toward obtaining reciprocal and mutually advantageous concessions.
The memorandum directs a review of policies and regulations regarding the application of antidumping and countervailing duty laws, including with regard to transnational subsidies, cost adjustments, affiliations, and zeroing. The United States already maintains a record inventory of antidumping and countervailing duty orders, which could effectuate any changes to calculation methodologies in annual administrative reviews. Changes designed to increase calculated margins also could encourage more industries to file new antidumping and countervailing duty petitions, particularly against China (the most frequent target of such actions by far).
The memorandum directs an assessment of the “loss of tariff revenues and the risks from importing counterfeit products and contraband drugs” that result from the current implementation of the de minimis exemption, as well as any necessary modifications to that exemption. This provision, among others, signals the Trump administration’s attention toward the flow of fentanyl and counterfeit goods across U.S. borders, including those originating from or passing through Mexico. Depending on the outcome, this could cause significant economic challenges for Mexico’s largely export-driven economy and severely impact U.S.-Mexico trade relations, particularly because it is impossible to divorce this issue from the upcoming trilateral review of the USMCA.
The memorandum directs an investigation into whether any foreign country subjects U.S. citizens or corporations to discriminatory or extraterritorial taxes. Given the expansive use of Section 301 in the first administration, such reports could serve as a basis for expansive action in return, much as the Section 301 investigation into Chinese intellectual property practices morphed into a decision to raise tariffs on more than half of all imported Chinese goods.
The memorandum directs a review of all trade agreements on “the volume of Federal procurement” related to the Buy American and Hire American executive orders. By calling for recommendations to ensure such agreements are being implemented in a manner that favors domestic workers and manufacturers, Trump indicates potential restrictions on the use of foreign firms that supply the U.S. government.
“Economic and Trade Relations with the People’s Republic of China”
The memorandum directs a review of the Economic and Trade Agreement Between the U.S. and the Government of the People’s Republic of China (PRC) to determine whether the PRC is acting in accordance with this agreement. By seeking recommendations on appropriate actions to be taken based on the findings of this review, “up to and including the imposition of tariffs or other measures as needed,” Trump is signaling that new tariffs may be imposed on Chinese goods if the U.S. finds the PRC is not acting in compliance with the agreement.
The memorandum directs an examination of potential additional modifications to the Section 301 tariffs on China, particularly with respect to industrial supply chains and circumvention through third countries. It is widely viewed that China failed to act in accordance with the earlier, partial settlement of certain Section 301 tariffs, which were suspended in the first Trump administration. It is likely this review will be used as a basis for further increasing the Section 301 tariffs on many Chinese products.
The memorandum directs an investigation into other acts, policies, and practices by the PRC that may be unreasonable or discriminatory and that may burden or restrict U.S. commerce, and recommendations regarding appropriate responsive actions. Again, Trump here is signaling that changes to the U.S.-PRC trading landscape are imminent if the U.S. finds the PRC is engaging in discriminatory acts that restrict U.S. commerce. The likely endpoint is an expansion of earlier Section 301 tariffs based on a far wider-ranging set of grievances with Chinese trading practices.
The memorandum directs a study of legislative proposals, and any needed changes to them, regarding permanent normal trade relations status for imports from China. There is bipartisan agreement in Congress regarding taking a skeptical approach to China, in matters of trade and otherwise. In addition to telegraphing a desire to permanently enshrine restrictions on trade with China into U.S. law (which would be much more difficult for a future administration to reverse), these efforts could reach related trade issues such as further restrictions on trade with China based on the treatment of the Uyghur people and their role in producing products intended for sale in the United States.
The memorandum directs an assessment of the status of U.S. intellectual property rights such as patents, copyrights, and trademarks conferred upon PRC persons. In other words, changes may be implemented to “ensure reciprocal and balanced treatment of intellectual property rights with the PRC.”
“Additional Economic Security Matters”
The memorandum directs a full economic and security review of the U.S. industrial and manufacturing base to assess whether to initiate investigations to adjust imports that threaten national security. This review of U.S. manufacturing and industrial vulnerabilities will inform new policies aimed at insulating domestic industries from reliance on imports. There is a high likelihood that this could lead to further revisions to CFIUS (Committee on Foreign Investment in the United States) reviews, which were considerably tightened in recent years.
The memorandum directs an assessment of the effectiveness of the exclusions, exemptions, and other import adjustment measures on steel and aluminum in responding to threats to the national security of the United States. This provision, like the above, illustrates Trump’s goal of safeguarding domestic industrial and manufacturing industries from relying on imports.
The memorandum directs a review of the U.S. export control system and advice regarding necessary modifications in light of developments involving strategic adversaries or geopolitical rivals, as well as all other relevant national security and global considerations. With an eye toward “identifying and eliminating loopholes in existing export controls, especially those that enable the transfer of strategic goods, software, services, and technology to strategic rivals and their proxies,” this provision implicates potential changes to the U.S. export control landscape, with the technology sector being most vulnerable to such changes. Trump’s call for recommendations of “enforcement mechanisms to incentivize compliance by foreign countries, including appropriate trade and national security measures,” illustrates the administration’s inclination to use trade measures as negotiation tools.
The memorandum directs a review of the rulemaking by the Office of Information and Communication Technology and Services (ICTS) on connected vehicles, and consideration of expanding the controls. In other words, this provision marks the potential expansion of controls on ICTS transactions to connected products other than vehicles.
The memorandum directs a review of the legal landscape regarding U.S. investments in certain national security technologies and products in countries of concern. If the U.S. finds this legal landscape does not contain sufficient controls to address national security threats, changes may be implemented, including potential modifications to the Outbound Investment Security Program.
The memorandum directs an assessment of any distorting impact of foreign government financial contributions or subsidies on U.S. federal procurement programs. In other words, Trump is seeking guidance, regulations, or legislation to combat any such distortion to protect federal procurement programs from unfavorable impacts of foreign governments.
The memorandum directs an assessment of the “unlawful migration and fentanyl flows from Canada, Mexico, the PRC, and any other relevant jurisdictions” and seeks recommendations of appropriate trade and national security measures “to resolve that emergency.” This provision raises the prospect that new tariffs or other measures may be imposed to pursue Trump’s broader policy goals of combating unauthorized migration and fentanyl flows from other countries, with the focus being on Canada, Mexico, and the PRC. Elsewhere, Trump has promised 25 percent tariffs to incentivize solving these concerns, beginning potentially as soon as February 1, 2025.
Implications
While the memorandum outlines a vast series of reviews of U.S. trade policy and investigations of trade imbalances and unfair practices, it is not yet clear how this very broad laundry list of international trade objectives will play out. Potential outcomes range from using the threat of tariffs to accomplish other goals (e.g., immigration, fentanyl) to setting up renegotiations of Free Trade Agreements on more favorable terms (particularly for the USMCA), to the establishment of permanently higher tariffs. Notably, the memorandum raises questions as to the future of U.S.-Mexico trade relations, a focus that takes on increased urgency given the impending trilateral review when combined with President Trump’s focus on immigration and fentanyl from Mexico and Canada. The focus on revisiting the USMCA threatens increased restrictions or provisions that may disadvantage Mexico’s export-driven economy and impact Mexico’s role as a key U.S. trading partner, with particularly strong implications for the U.S. automotive sector.
Given these concerns, Part III of this series will focus on concrete steps that multinational companies can take to risk plan for potential major changes in the international trade environment, particularly with regard to the topics of potential changes to tariff rates, potential changes to the USMCA, and potentially greater scrutiny of supply chain integrity requirements, particularly as they relate to China and imports using Chinese parts and components.
Mr. Robot Goes To Washington: The Shifting Federal AI Landscape Under the Second Trump Administration
President Trump’s inauguration on January 20, 2025, has already resulted in significant changes to federal artificial intelligence (AI) policy, marking a departure from the regulatory frameworks established during the Biden administration. This shift promises to reshape how businesses approach AI development, deployment, governance, and compliance in the United States.
Historical Context and Initial Actions
The first Trump administration (2017–2021) prioritized maintaining US leadership in AI through executive actions, including the 2019 Executive Order (EO) on Maintaining American Leadership in Artificial Intelligence and the establishment of the National Artificial Intelligence Initiative Office. This approach emphasized US technological preeminence, particularly in relation to global competition.
For its part, the Biden administration’s approach to AI development emphasized “responsible diffusion” — allowing AI advances and deployment while maintaining strategic control over frontier capabilities.
In a swift and significant move, President Trump revoked President Biden’s October 2023 Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence on his first day in office. This action signals a clear pivot toward prioritizing innovation and private sector growth and development over regulatory oversight and AI safety (or at least a move away from government mandates and toward market-driven safety measures).
Emerging Policy Priorities
Several key priorities have emerged that will likely shape AI development under the second Trump administration:
Focus on National Security: The Trump administration EO framed AI development as a matter of national security, particularly with respect to competition with China. This is an area where the administration is likely to enjoy bipartisan support.
Energy Infrastructure: The Trump administration’s declaration of a national energy emergency on his first day in office highlights the administration’s recognition of AI’s substantial computational and energy demands. And on his second day in office, President Trump followed the declaration with the announcement of a private-sector $500 billion investment in AI infrastructure assets code-named “Project Stargate,” with the first of the project’s data centers already under construction in Texas.
Defense Integration: Increased military spending on AI capabilities and the administration’s focus on military might indicate an emphasis on accelerated development of defense-related AI applications.
Regulatory Shifts and Business Impacts
The new administration’s approach signals several potential changes to the AI regulatory landscape:
Federal Agency Realignment: Key agencies like the Federal Trade Commission may relax their focus on consumer protection to allow more free market competition and innovation.
Preemption Considerations: The administration might pursue federal legislation to create uniform standards that preempt the current patchwork of state and local AI laws and regulations.
International Engagement: Restrictions on international AI collaboration and technology sharing, particularly regarding semiconductor exports used for AI (which had already been tightened under the Biden administration), are likely to be enhanced.
Strategic Planning Considerations
The AI policy shift creates new imperatives for business leaders, including:
Multi-jurisdictional Compliance: Despite potential reduced federal oversight, businesses must maintain compliance with any applicable federal, state, and local regulations and international requirements, including the EU AI Act for those organizations doing business in EU countries.
Investment Strategy: Changes in federal policy and potential international trade restrictions could transform AI development costs, investment patterns, and technology budgets.
Risk Management: Businesses should maintain robust internal governance frameworks regardless of regulatory requirements, particularly considering the ongoing operational and reputational risks.
Looking Ahead
While specific policy developments remain in flux, the Trump administration’s emphasis on technological leadership and reduced regulatory oversight suggests a significant departure from previous approaches. The continued integration of AI into critical business functions, however, necessitates continued attention to responsible development and deployment practices, even as the regulatory landscape evolves.
Businesses should stay informed of policy developments while maintaining robust AI governance and compliance frameworks that can adapt to changing federal priorities while ensuring compliance with any applicable legal and regulatory obligations and standards.
New York State Proposes Bill That Would Place Restrictions Noncompetes and Other Restrictive Covenants
With the Federal Trade Commission’s Noncompete ban essentially dead, state legislatures, as expected, are taking restrictive covenant lawmaking into their own hands.
We previously reported that in 2023, while the FTC Noncompete ban was pending, New York Governor Kathy Hochul vetoed a bill that sought to ban all noncompetes in the State of New York, stating that a “balance” was needed instead of a strict ban on all noncompetes. On January 9, 2025, the New York State Assembly introduced NY A01361 (the “Bill”) to the Assembly Labor Committee that, if passed, would allow “employers to request or require a prospective or current employee to execute a restrictive covenant not to engage in specified acts in competition with the employer after termination of the employment relationship as a condition of employment, continued employment, or with respect to severance pay,” but only subject to certain requirements (discussed below).
The Bill would amend New York Labor Law to add Section 191-d: “Restrictive covenants.” Under this section, an Employee is defined as “any person employed for hire by an employer in any employment,” including “in a supervisory, managerial, or confidential position.” An Employer includes “any person, corporation, limited liability company, or association” as well as “the state[,] . . . political subdivisions, governmental agencies, public corporations, and charitable organizations.” The Bill also defines restrictive covenant as an agreement between an employee and an employer concerning existing or prospective employment, or an agreement between employee and employer with respect to severance pay.
The Bill outlines that for a restrictive covenant to be enforceable it must meet the following requirements:
If the covenant is a condition to commence employment, the employer must disclose the terms and conditions of the covenant in writing at the time of offer or thirty days prior to commencement of employment;
If the covenant is a condition to existing employment or severance pay, the terms and conditions must be disclosed in writing at least thirty days before covenant takes effect;
The agreement, whether a condition to commence or continue employment or for severance pay, must be signed in writing by both parties and must expressly state that employee has the right to counsel prior to signing;
The agreement cannot be more restrictive than necessary to protect an employer’s “legitimate business interests” and “shall be limited to protecting the employer’s trade secrets;”
The agreement must be reasonable in scope and limited to the services provided by the employee within the last two years of service; and
The agreement does not waive other legal rights under any other law, rule, regulation, or common law, and does not penalize an employee for challenging the validity or enforceability of the agreement.
Furthermore, the Bill would also bar non-service agreements, including agreements that prohibit employees from accepting business from clients or providing services to clients without solicitation by the employee. The Bill would also prohibit agreements that restrict employees from working with former colleagues, whether through use of no-hire agreements or other related restrictions.
In addition to the above-outlined requirements, the Bill provides that for the restrictive covenant to remain enforceable, an employee must voluntarily resign his or her employment or be terminated for good cause, defined as “a reasonable basis related to an individual employee for termination of the employee’s employment in view of relevant factors and circumstances.” A written document outlining what constitutes good cause must be provided to all employees. Should an employer violate any provisions of the section, the Commissioner of Labor can impose a civil fine up to $5,000.
While it is too early to tell if this Bill will advance, its introduction shows that there is still interest in the New York State legislature (as there is in other state legislatures) in regulating the use of noncompetes and other restrictive covenants.
The 2025 Bill on the state level follows at least three bills introduced in the New York City Council in 2024 that seek varying restrictions on noncompetes, from a complete ban on noncompetes to a ban on the use of noncompetes for low-wage earners only. The New York City Council bills were all referred to the Committee on Consumer and Worker Protection (the “Committee”) and have remained in the Committee without further action.
We will continue to monitor and provide updates on this topic.
Gianna Dano, a Law Clerk in Epstein Becker & Green’s Newark Office (not admitted to practice), contributed to the preparation of this piece.