On March 26, 2026, President Trump signed an Executive Order entitled “Addressing DEI Discrimination by Federal Contractors” (the “Order”)1 that imposes new requirements to take effect within 30 days. Specifically, the order mandates inclusion of a new clause in federal contracts that will require contractors and subcontractors to agree not to engage in “racially discriminatory DEI activities.” While consistent with prior contractor requirements imposed by the Trump Administration, the new clause will: 1) further require that contractors agree, upon request, to furnish information to the government to demonstrate compliance and 2) impose duties on prime contractors with respect to subcontractors, requiring monitoring and reporting on subcontractor compliance. Of particular importance, the new requirements are expected to increase the risk of False Claims Act (“FCA”) liability and other penalties for noncompliance.
Background
Since January 2025, the Trump Administration has issued a series of executive orders and agency guidance aimed at eliminating DEI programs that it considers to violate federal antidiscrimination laws across the federal government and among those who do business with it. Earlier executive actions (including EO 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”)2 directed agencies to take steps to discourage “illegal DEI discrimination” among contractors and grant recipients, and directed the U.S. Department of Justice (“DoJ”)...
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