The Demise of Executive Order 11246 – What it Means for Federal Contractors

On January 21, 2025, President Trump signed an Executive Order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This order revoked Executive Order 11246, originally signed by President Lyndon Johnson in 1965 and amended in 1967. EO 11246 had been a key legal tool used by the Office of Federal Contract Compliance Programs (OFCCP) within the U.S. Department of Labor to promote diversity and address bias and discrimination among federal contractors. As of January 24, 2025, all audit activities under EO 11246 were terminated, and audits related to veterans and individuals with disabilities were put on hold until further notice.

To give a brief history, the EO was established during the Civil Rights era of the 1960s, and it was built upon other previous Executive Orders.  First, there was Executive Order 8802 on June 25, 1941. Executive Order 8802 was issued to prohibit federal contractors within the defense industry from discriminating on the basis of race or ethnicity and was implemented in part on the urging of prominent civil rights leaders.

Then there was Executive Order 10925 issued on March 6, 1961, by President Kennedy, requiring government contractors to “take affirmative action to ensure that applicants are employed and that employees are treated during employment without regard to their race, creed, color, or national origin”. Executive Order 10925 also created the President’s Committee on Equal Employment Opportunity, which became the Equal Employment Opportunity Commission (EEOC) upon passage of the Civil Rights Act of 1964.

Executive Order 11246, as amended, prohibited all federal contractors and subcontractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity, or national origin. It also imposed affirmative action obligations on contractors.

It should be noted that this directive was one of three legal authorities that the OFCCP enforced, along with Section 503 of the Rehabilitation Act of 1973, which bars discrimination against workers with disabilities, and the Vietnam Era Veterans’ Readjustment Assistance Act, which bars discrimination against veterans.

Specifically, the new EO states:

“The Federal contracting process shall be streamlined to enhance speed and efficiency, reduce costs, and require federal contractors and subcontractors to comply with our civil-rights laws. Accordingly:

“Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity), is hereby revoked. For 90 days from the date of this order, Federal contractors may continue to comply with the regulatory scheme in effect on January 20, 2025.

• The Office of Federal Contract Compliance Programs within the Department of Labor shall 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.”

This EO also directs that federal contractors will be required to certify as part of the contracting process that they do not maintain any DEI programs that violate federal anti-discrimination law, and agency contracts must eliminate any references to DEI.  How that will be implemented is unclear.  The EO did shutter the government’s DEI offices that were established in the last administration, placing DEI designated employees on paid leave for the time being.

Finally, the EO directed agencies to create 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 a part of this plan, each agency shall 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 1 billion dollars.”  How this directive will be enforced is unclear.

What does this mean for federal contractors? OFCCP sent an email to all contractors on Thursday, January 23, 2025, stating that the agency “shall 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.”

Yet, and important to note for federal contractors, the agency reminded them that the 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 still required and that both are enforced by OFCCP.  These requirements are statutory and remain in effect.

On Friday January 24^th, the Acting Secretary of Labor (03-2025) ordered all audits and conciliation agreements to cease:

“3. Orders.

1. 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.
2. 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.”

So, what should contractors do?  The Veteran and Disability aspects of audits are still alive although suspended.  At least for this year, complete the AAPs and then determine how to proceed.  The 90-day grace period gives the new administration time to formulate their approach to compliance in this area.  Also, and very important to understand, the same data and analyses for AAPs are used for Veteran and Disabled requirements.

The regular AAPs do provide a wealth of workforce planning and compliance from FLSA misclassification to possible intervention areas due to indicators in employment activity.  Plans can be created without including any goals and used for workforce compliance purposes.  If the regulations relating to 11246 are not rescinded, a new Democratic administration will reinstate EO 11246 and the regulations will live again.

Lastly, a number of state and local jurisdictions have affirmative action requirements that are separate from the federal requirements.  You can be a contractor of one of these local units that had previously accepted the federal requirements.  Unfortunately, there is no uniform way cities, counties, or other local units of government have to make information on their affirmative action requirements available. Sometimes, this information can be found on the unit of government’s website, though it is often difficult to know what section of the website to search for this information. Sometimes this information can be found by contacting a specific person or agency for the relevant unit of government, although again it may be a challenge to determine who to contact.

For states, they often make their affirmative action laws and regulations available on the state’s website, although there is no consistent pattern as to where this information may be placed.  Click here for a list of state requirements.

Moreover, for banks, their federal contract requirements generally rest on being a depository of federal funds, which is baked in EO 11246.  For them, as well as others, unwinding their operations from federal contractor requirements may not be that easy.

In the end, each organization will have to make a decision on whether or not to continue creating plans (if so, under attorney directed requirements for privileged purposes) or not.  It is a risk management decision for the short term.  In the long term, anything can happen, and they should be prepared for return enforcement of the EO depending on election cycles or the rise of state and local jurisdictions to pick up the slack.

By Anthony Kaylin, courtesy of SBAM-approved partner, ASE.

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