Executive Order 14173: What Federal Contractors Need to Know

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Scott Kelly: Hey everybody, Scott Kelly here, a shareholder in the Birmingham office of Ogletree Deakins and a co-chair of our OFCCP Compliance Government Contracting and Reporting Practice group. I’m joined today by my colleague and fellow shareholder, Lauren Hicks, and we thought it might be good to try to unpack one of the various executive orders that President Donald Trump has issued since being inaugurated on January 20th. And this one deals with federal contracting, grant recipients, and even private employers and their DEI and DEIA practices. And the executive order I’m talking about is Executive Order 14173, titled Ending Illegal Discrimination and Restoring Merit-Based Opportunity. This executive order had a little bit of an interesting rollout, in my opinion. We started hearing about it from the press on the evening of Tuesday, January 21st. I know Lauren was sending me texts saying, are you seeing this, and have you looked at this? And we were on different social media platforms trying to pull down texts of the order because it had not been loaded yet to the Whitehouse.gov website, where it did end up appearing the next morning.

But it really is a very large executive order with a lot of different ramifications for different interested parties. We’re going to try today to spend some time talking about the interests as it would pertain to federal contractors and subcontractors that have really become accustomed to dealing with the government because they know that there are strings attached to doing business with the government, especially from an employment-related standpoint with the different affirmative action regulations that have been in place since Executive Order 11246 was signed into law by President Lyndon Johnson. So, with that, Lauren, will you kick us off and tell everyone what the articulated purpose was of this executive order?

Lauren Hicks: The executive order, which purports to end illegal discrimination and restore merit-based opportunity says that civil rights protections are a bedrock to supporting equality of opportunity. But then goes on to note that race- and sex-based preferences were occurring under the guise of DEI or diversity, equity, and inclusion or DEIA. And they claim that those programs have violated federal laws and threatened safety and merit by diminishing individual aptitude, hard work, and determination, focusing on how people were born or immutable traits. So, the new policy orders executive departments and federal agencies to terminate all discriminatory and illegal preferences, mandates, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements. And, instead, the new wave they have identified is to enforce long-standing civil rights laws and combat illegal private-sector DEI preferences, mandates, policies, programs, and activities. So, shifting the focus, Scott, to terminating what they view as unlawful. And then along the way, it revoked some EOs.

Scott Kelly: That’s right, several in fact. But at first there in section three of the executive order that is titled Terminating Illegal Discrimination in the Federal Government, that they first went with some environmental justice DEI executive orders, a DEI in the Federal Workforce Executive Order. And then President Obama’s amendment to Executive Order 11246 that gave protections on the basis of sexual orientation and gender identity. All three of those were revoked in this section three of the new 14173. And there was also, and probably the biggest splash and certainly impacts a lot of the clients, Lauren, that you and I deal with was the revocation of Executive Order 11246, which required not all federal contractors and subcontractors, but contractors that met certain employee and contract thresholds to comply with both affirmative action and non-discrimination requirements for women and minorities. That was a pretty big blow to the civil rights community, I believe, and really a lot of employers that had those obligations ingrained in their systems and in basically their daily lives for decades. I don’t really know how to emphasize the huge impact that that is having for our clients. Would you agree with that?

Lauren Hicks: Absolutely. It had a lot of key provisions related to some basic protections that were basically, I think, fundamental to a lot of businesses, many of which were very normalized, even to the public. For example, perhaps seeing the tagline, equal opportunity employer, things like that. However, we should note it did not specifically revoke a couple of protections that fall within OFCCP’s universe. So, 503 of the Rehabilitation Act, which relates to individuals with disabilities and VEVRAA or the veterans-based laws are statutory, and this executive order did not address them. So just to carve that out, we’re talking about the sort of demolition of affirmative action and OFCCP’s laws. That is largely true because 11246 was perhaps the media of their jurisdictions, but just noting for the listeners that disabilities and protected veteran-based regulations are still in effect.

Scott Kelly: That’s right. And the executive order directed, or really ordered, I guess to use the word appropriately, OFCCP to immediately cease, and this again was on January 21st, promoting diversity. They were to immediately cease holding contractors accountable for taking affirmative action and for allowing contractors to engage in workforce balancing. It was also a reference in the executive order to an executive order that really was an amendment as I was reading it, and Lauren, you tell me if I’m wrong there, but an amendment to 11246 that appears to have been saved, and that’s executive order 13279, which dealt with laws for faith-based in community organizations. And it basically said that federal contractors should not consider race, color, sex, sexual preference, religion, or national origin in ways that would violate the civil rights laws.

So, I think we’re still trying to unpack what the connection is here and maybe why President Trump didn’t go ahead and rescind or revoke this executive order and just include those requirements in 14173 as opposed to apparently keeping what was kind of on the books since I think it was 2002 or around that time that President Bush signed this particular faith-based executive order. Anything to clean me up on for that?

Lauren Hicks: No, that’s exactly right. I think it was interesting that certainly the Trump administration has demonstrated it understands how to do a clean rescission of an executive order, right? There have been dozens that they have very cleanly rescinded in a short period of time. And this one is kind of interesting, Scott, because they did seem to go out of their way to create a few new obligations, some of which are seemingly more expansive even than what existed before. And though the connection there with the faith-based executive order from the Bush administration is a little bit odd, they did go out of their way to retain most of the protected classes that existed under 11246 or seemingly to do so, although probably worth noting that it did remove gender identity and that is also coming from another executive order that they had passed.

Scott Kelly: That’s right. And as a member of some of these communities, at least from a sexual orientation standpoint, I will note that a throwback to this faith-based executive order dealing with sexual preferences feels a little bit like that was purposeful, and it would just be interesting to see how that shakes out and if more guidance is given related to protections for individuals that identify for sexual orientation or gender identity protections.

I will note, and this is a whole other subject that we shouldn’t go into today, just in the interest of time, is that acting chair of the EEOC Andrea Lucas has come out since being appointed as acting chair and after President Trump has dismissed or terminated two of the Democratic commissioners, Charlotte Burrows and Jocelyn Samuels, has started to take some different positions contrary to the ones that the commission had taken previously and has even mentioned that she, because there is a lack of a quorum, she can’t take some official actions, but they are taking some actions over at the EEOC regarding sexual orientation and gender identity. So, I just encourage employers to keep an eye on those quickly and fastly moving developments. But Lauren, you mentioned something about this executive order creating some new responsibilities or obligations for federal contractors and subcontractors. Why don’t you help us unpack what some of those are?

Lauren Hicks: We don’t have a lot of details yet, but there are a couple more obligations seemingly headed the way of federal contractors. It states that each agency has to insert contractual language requiring federal contractors and grant recipients, Scott. So that is one of the expansions that this new executive order seemingly made from what we would compare to 11246, the prior executive order. And it’s that these contractors and grant recipients will have to agree in all respects with all applicable federal anti-discrimination laws that it is material to the government’s payment decisions for purposes of the False Claims Act. So that’s a new sort of representation or element of a contract. We don’t know exactly what format this is going to flow down, but certainly, we expect to see some language in the future flowing down in the contract language.

And then, the second component is requiring contractors and grant recipients to certify that they do not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws. So, a couple of interesting things there. We don’t know what certify means. We don’t know if that will be an affirmative certification on an annual or ongoing basis. We don’t know if that is a certification at one point in time when you first take on the contract or the grant or if it’s sort something that will be through SAM.gov. So, a lack of clarity, certainly, around the certification requirement.

And then the other interesting part of both of these provisions is that they seemingly include all applicable federal anti-discrimination laws. And, Scott, previously under OFCCP’s authorities were a limited scope under 11246, and then you had disabilities and protected veterans. This certainly, unless they come back and clarify that it was meant to be on a more narrow basis, seemingly actually expands federal contractor obligations related to their contractor status to potentially other anti-discrimination laws such as the Age Discrimination Employment Act or GINA. So that’s kind of an interesting element, not necessarily expanding into a new protected class but newly attached to your federal contractor status. And Scott, what do you think that’s going to mean?

Scott Kelly: Isn’t that the million-dollar, maybe higher, question? And I am using a little hyperbole there. I think that for me what that probably means is you need to do some type of analysis of what kind of DEI programming that you have within your organization to ensure that it doesn’t violate any applicable federal anti-discrimination laws. I know this administration is taking a very hard line on DEI and following on the different media reports and social media reports and the different actions that are being taken within the federal workforce related to those subjects. I don’t know if that’s some kind of bellwether of what the future may hold for federal contractors or not, but I will remind everyone that not all DEI programming would be, per se unlawful, that there are plenty of DEI programming that don’t infringe upon Title VII protections, but looking at those I think with legal counsel involved would be a prudent move for contractors to consider.

I think that unpacking what all this means as it relates to False Claim Act liability is something we ought to maybe put a pin in, and you and I can maybe find some other folks to talk about that with us here on another podcast sometime soon. But I do think that it is changing the game for federal contracting. And as you mentioned, also for federal grant recipients or those that are receiving federal financial assistance, some of these kinds of additional burdens that federal contractors have incurred are now, in my opinion, going to be burdens that folks that are receiving federal grant monies are going to have to consider just possibly increasing risk profile and considerations of different approaches that they’re going to take to all types of things. I think the dust is going to have to settle a little bit more, and I’m hopeful that we’re going to see some more guidance from the federal government in the days and the weeks ahead.

I know that a lot of folks are interested in what OSCCP is going to do, and I wonder, I know we’ve been going on a little bit about this executive order. We really didn’t even get into the private chilling or encouragement rather of the federal government to private industry to try to encourage them to stand down from DEI programming. And maybe we’ll leave that for another day as well. But maybe we should meet again and talk about what all this means, what’s happening at OFCCP, because there was a labor secretary order that was issued that we can get into maybe on our next episode. Does that sound like a good plan to you, Lauren?

Lauren Hicks: That sounds good. And could we wrap it up by noting that a couple of key takeaways? I think one of which would be we have taken an old framework of OFCCP’s regulations that was pretty predictable and stable and reliable over many decades, and now all of that is gone, and we’ve sort of taken away what has been quite a stable area of the law and replaced it with a substantially unknown replacement. And that is the second takeaway. I think it would make sure that listeners understand is that there could be an impulse probably to say, okay, 11246 is gone. Ding-dong, the witch is dead. But for some folks, but actually it was replaced with a new framework. So, it’s not sort of, okay, now we don’t have to think about this anymore. Most employers, of course, want to think about these things on an ongoing basis, but instead it’s, while we don’t know the particulars yet, there is a new framework that federal contractors will now be dealing with and grant recipients.

Scott Kelly: All right, well, thank you for leaving us with those frameworks. We appreciate you all joining in and listening to what we have to say, and we look forward to providing more information to you all really soon. Thanks.

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