DEI Executive Order Reshapes Compliance Obligations for Government Contractors

A new executive order targeting diversity, equity and inclusion (DEI) programs and federal contractors is the latest development in a stream of political and legal activity reflecting the Trump Administration’s anti-DEI agenda.

Kilpatrick writes about the March 26 DEI executive order in an article on its website. The order targets federal contractors and substantially expands prior measures by defining prohibited conduct, mandating compliance certifications, and creating direct exposure under the False Claims Act (FCA).

Beginning in January 2025, Trump issued three executive orders addressing what it characterized as “illegal DEI,” followed by interpretive guidance from both the Equal Employment Opportunity Commission (EEOC) and Department of Justice (DOJ).

There has been a great deal of uncertainty about how the Trump administration would enforce these orders. That changed at the recent Federal Bar Association’s 2026 Qui Tam Conference, where a DOJ official explained that the administration is not investigating organizations for having DEI programs. Instead, it is focusing on what it considers potentially discriminatory practices, particularly where hiring, promotion, or compensation decisions are tied to demographic characteristics.

Meanwhile, the Fourth Circuit lifted a preliminary injunction against two early executive orders, finding them neither unconstitutionally vague nor in violation of free speech protections.

The March 2026 order requires contractors to certify that they are not engaging in race or ethnicity-based disparate treatment in recruitment, hiring, and program participation. It also mandates reporting of subcontractor violations and imposes obligations to provide access to financial records.

The DOJ separately filed suits claiming violations of the Title VII of the Civil Rights Act of 1964 against the State of Minnesota and Minneapolis Public Schools, alleging unlawful race- and sex-based employment preferences.

For counsel advising federal contractors and grant recipients, enterprise risk management review of DEI-related policies is now urgent. Each compliance certification submitted under the new order potentially constitutes a discrete false claim, raising FCA exposure significantly.

Counsel should audit existing DEI frameworks against current DOJ guidance and assess whether subcontractor oversight obligations are adequately addressed in contract structures.