September 2026 Update
Since this article was published, OFCCP has finalized additional regulatory changes affecting government contractors. On August 21, 2026, DOL published final rules revising the regulations implementing Section 503 and VEVRAA and rescinding the regulations that implemented EO 11246. Most Section 503 and VEVRAA changes take effect September 21, 2026. Read our latest Client Alert for a breakdown of the updated requirements and key compliance dates.
The January 2025 EO 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, triggered mixed emotions amongst HR professionals in the GovCon community – shock, disappointment, and celebration, to name a few. While all might not agree with the requirements of EO 14173, most likely agree that it has caused a great deal of confusion and uncertainty about what is expected, or, more importantly, what is no longer allowed of government contractors. In a previous article released shortly after the EO was signed, we outlined the crux of the EO and overarching implications. As time has passed and more information has come to light, including Attorney General Bondi’s July 2025 memo for federal agencies, we are gleaning additional insights to share.
What is “Illegal Discrimination”?
This is a good question, as employment-related discrimination has been illegal for over 60 years since the Civil Rights Act of 1964 was signed and the Equal Employment Opportunity Commission (EEOC) was born. In 1965, EO 11246, Equal Employment Opportunity, was issued, and the Office of Federal Contract Compliance Programs (OFCCP) was established to ensure that federal government contractors complied with equal opportunity laws and affirmative action requirements. EO 14173 revoked EO 11246, which required covered federal contractors to practice affirmative action, develop written Affirmative Action Plans (AAPs), and implement programs to ensure equal opportunities for women and minorities.
Note: EO 14173 did not revoke the statutory requirements of Section 503 of the Rehabilitation Act or the Vietnam Era Veterans’ Readjustment Assistance Act. However, OFCCP finalized changes to the regulations implementing both laws in August 2026. Government contractors remain subject to applicable Section 503 and VEVRAA affirmative action and equal employment opportunity obligations, although certain requirements have changed.
Why Do We Need to Rethink “Illegal Discrimination” Now?
EO 14173 states that education institutions, businesses and the Federal Government “have adopted and actively use 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) that can violate the civil-rights laws of this Nation.” The goal is to restore merit-based hiring and ensure that race, gender, or other protected characteristics are not used as a “plus-factor” or preference when making employment-related decisions.
Per Attorney General Pam Bondi, the following are considered unlawful discriminatory practices:
- Providing preferential treatment based on protected characteristics, thus causing a disadvantage to other qualified persons. Examples:
- Prioritizing an underrepresented group for hire, thus overlooking other qualified candidates.
- Race-based scholarships.
- Limiting access to facilities or resources based on a protected characteristic.
- Using proxies that are a substitute for or replicate protected characteristics. Examples:
- A university’s admission or an employer’s hiring process requiring candidates to reveal “cultural competence,” lived experience,” “diversity statements,” or similar.
- Recruitment strategies that target specific areas or institutions primarily because of racial or ethnic composition.
- Segregation of programs, activities or resources based on protected characteristics. (Note: there are some limited exceptions where federal law permits race-based remedies.) Examples:
- Prohibiting specific races or other protected characteristics from participating in a discussion or group.
- The requirement that a specific percentage of program participants or interviewees be based on a specific protected characteristic, thus overlooking equally or more qualified candidates.
- Training programs that “stereotype, exclude, or disadvantage individuals based on protected characteristics or create a hostile environment.” Examples:
- Diversity, Equity and Inclusion training that includes stereotypical statements based on protected characteristics.
Can You Confidently Certify Compliance?
EO 14173 compels contracting agencies to require contractors and grant recipients to certify that they do not “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” We are beginning to see this requirement included with new solicitations stating that upon submission of a contract, an Offeror is:
1) certifying “that it does not operate any programs promoting diversity, equity, and inclusion that violate any applicable Federal anti-discrimination laws” and
2) confirming that the contractor will comply with all Federal anti-discrimination laws and that compliance with these laws is “material to eligibility for and payment under this contract for purposes of 31 U.S.C 3729(b)(4).”
Enforcement of these obligations is shared between the Civil Rights Division of the Department of Justice (DOJ) and the EEOC. Noncompliance with these requirements or falsely certifying compliance can result in investigations and False Claims Act Violations, making the potential implications significant. In fact, the Department of Justice (DOJ) launched a new Civil Rights Fraud Initiative in May 2025, focused on holding recipients of federal funds accountable for falsely certifying compliance with civil rights laws. The DOJ emphasized that it would target DEI programs regardless of their name if they are still implemented in a manner inconsistent with EO 14173. In light of the DOJ’s recent push encouraging whistleblowers to come forward, the likelihood of consequences for failure to comply is particularly concerning.
2026 Update
The federal contracting requirements surrounding DEI have continued to evolve. EO 14398, issued in March 2026, established additional requirements addressing racially discriminatory DEI activities by federal contractors. FAR model deviations implementing the order introduced FAR 52.222-90, which includes requirements affecting contract performance, subcontract flowdowns, reporting, record access, and potential contract remedies for noncompliance. Government contractors should review applicable solicitations, contracts, modifications, and agency deviations to determine which requirements apply.
Suggested Action Items
If you haven’t already done so, now is the time for a thorough review of your policies, practices and communications. We suggest the following good faith efforts to provide support for confidently certifying compliance based on what we learned from Attorney General Bondi’s memo:
- Examine focus groups, resources, training, and activities to ensure inclusiveness for all employees regardless of race, gender, or other protected characteristics.
- Eliminate quotas and focus on merit, skills, qualifications and performance.
- Ensure programs and policies are not designed in ways that result in discriminatory outcomes.
- Review employment practices related to hiring, termination, promotions, training, compensation, etc., documenting the justified need for each practice and ensuring substitutions for discrimination are not used (e.g., creative language that hides a discriminatory targeted approach).
- Review applicable solicitations, contracts, modifications, and subcontracts for current DEI-related clauses and agency deviation language. Ensure required clauses are appropriately flowed down and that internal processes address applicable reporting, record access, and subcontractor compliance requirements.
- Provide clear paths for reporting and do not allow or tolerate retaliation. Clearly communicate multiple options for reporting, to include a confidential mechanism for doing so.
Other suggestions:
- Consider and evaluate the benefits of employment analytics.
- Review job descriptions to ensure duties and requirements are appropriately documented, as this is often the foundation for job postings and the benchmark for hiring, performing performance evaluations and making compensation decisions.
- Consider state and local directives that may conflict with EO 14173. Perform a risk analysis, seek guidance as needed, and document findings and decision-making for future actions.
- Continue to stay tuned to future regulatory changes and guidance and provide clear communications and direction across your management team so that red flags can be identified quickly and addressed appropriately.
Support for Navigating Evolving Anti-Discrimination Requirements
As government contractors work to align with the changing requirements following EO 14173 and subsequent regulatory developments, it is important to distinguish between requirements that have been eliminated and the affirmative action obligations that remain under Section 503 and VEVRAA. Redstone GCI supports government contractors by developing compliant Affirmative Action Plans and conducting anti-discrimination assessments to identify potential compliance concerns. Our team also reviews employment practices, policies, documentation, and applicable contract requirements, including DEI-related clauses and subcontract flowdowns, and assists HR and compliance teams with updating internal processes and controls as federal requirements continue to evolve.
Sheri joined Redstone Government Consulting, Inc. in December 2012 as a Human Resources Consultant. She provides HR consulting services to our customers on a wide range of issues, from specific projects to an ongoing outsourced solution of the human resources function. Sheri has two decades of experience in providing a comprehensive assessment of all areas of HR, including establishing and implementing policies and practices, contract transition efforts/onboarding, and investigations. Sheri’s experience covers a broad spectrum of compensation planning and analysis for total compensation projects, reasonableness assessments including executive compensation, compensation philosophy development, total reward strategies, benefits analysis, market pay and pay equity evaluations. She regularly supports clients with the analysis and mapping of labor categories and the preparation and analysis of wage calculations and supports clients in pricing disputes with DCAA. Sheri has a wealth of experience in navigating the many compliance challenges associated with Service Contract Act and Davis Bacon Act. She has been a valuable resource to our clients in all these areas. She stays abreast of the various requirements of the Department of Labor and, of great importance to government contractors, the Office of Federal Contract Compliance Programs, as well as other federal and state regulations impacting human resources. Professional Experience Prior to joining Redstone Government Consulting, Inc., Sheri served in various roles in the Human Resources arena. While employed by a mid-size government contractor she assisted with database development, recruiting, affirmative action planning and contract proposals. Sheri later became an Employment Specialist with one of the largest employers in Huntsville, where she assisted and led managers in the interpretation and documentation of the progressive disciplinary process, conducted employee investigations and allegations of discrimination, sexual harassment, wrongful discharge and employee disputes, conducted unemployment hearings and conducted new employee orientation. Sheri developed and presented management training, administered facility compensation plan, monitored staffing budgets and wrote job descriptions and handbook revisions.