What are the DEI Compliance Risks Under the 2025 Executive Orders?

President Trump’s January 2025 Executive Order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” significantly targets Diversity, Equity, and Inclusion (DEI) initiatives across the private sector and federal contracting space, increasing DEI compliance risks. According to an article by the Ropes & Gray firm, compliance teams should focus on the following key takeaways:

Increased Enforcement Risk
Federal agencies are directed to identify businesses for potential enforcement actions against DEI practices that violate federal civil rights laws. The Attorney General’s report, due May 21, 2025, will outline specific sectors of concern and propose up to nine civil compliance investigations targeting large corporations, nonprofits, professional associations, and institutions with significant assets. Compliance teams should assess their organizations’ DEI initiatives, particularly any construed as discriminatory, preference-based, or quota-driven.

Heightened Scrutiny of Federal Contractors
The order mandates that federal contractors cease compliance with affirmative action requirements by April 20, 2025. Contractors must also certify they do not operate DEI programs violating federal anti-discrimination laws, which could create False Claims Act or breach-of-contract risks. Compliance officers must immediately begin reviewing contracts, affirmative action policies, and certification procedures to mitigate exposure.

Litigation and Regulatory Landscape
The administration aims to expand litigation against private DEI practices and promote further pressure from plaintiffs’ counsel and advocacy groups. The legal standards governing private-sector DEI programs remain unsettled, adding uncertainty to compliance strategies. Companies should monitor developments closely and adjust policies to avoid triggering enforcement or litigation.

In this evolving regulatory environment, proactive risk assessment and careful alignment with anti-discrimination laws will be critical for mitigating exposure to DEI compliance risks.