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An executive order titled “Addressing DEI Discrimination by Federal Contractors” (the “Order”) was recently issued, requiring federal agencies to include a contract clause in federal contracts aimed at prohibiting “racially discriminatory DEI activities.” The Order applies to federal contractors and subcontractors, and the clause must be included in contracts by April 25, 2026.
The Order seeks to prevent “disparate treatment based on race or ethnicity in the recruitment, employment (e.g. hiring promotions), contracting (e.g. vendor agreements), program participation, or allocation or deployment of an entity’s resources.”
Penalties for noncompliance include the potential suspension or termination of a contract, the suspension or debarment from government contracting, and potential liability under the False Claims Act.
Contractors and subcontractors should be aware of the new requirements and monitor for additional guidance from federal agencies on implementation. Federal contractors and subcontractors should consult with counsel and audit their DEI policies and practice for compliance.
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