The employment law landscape for federal contractors has changed fundamentally since early 2025. Contractor HR teams that built their compliance programs around the prior regulatory framework are now operating on outdated assumptions. The rules have changed, and in some cases, they have changed dramatically. This post outlines what HR professionals need to understand about the current environment.
The End of Executive Order 11246 and the Reshaping of OFCCP
On January 21, 2025, President Trump issued Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, which revoked Executive Order 11246. That prior order had for decades required federal contractors above certain employee and contract value thresholds to develop written Affirmative Action Plans (AAPs) covering women and minorities, conduct workforce analyses, set placement goals, and submit to compliance reviews by the Office of Federal Contract Compliance Programs (OFCCP).
EO 14173 eliminated the prior framework and directed OFCCP to immediately cease holding federal contractors responsible for affirmative action obligations under Executive Order 11246. Contractors were told to wind down compliance with the prior regulatory scheme by April 21, 2025.
Just days later, then-Acting Secretary of Labor Vincent Micone issued Secretary’s Order 03-2025, directing OFCCP to cease and desist all investigative and enforcement activity under Executive Order 11246. That cease and desist remains in full force and effect today. The affirmative action program obligations tied to Executive Order 11246 are gone. HR teams that spent years building and maintaining AAPs for women and minorities under that framework no longer have a federal obligation to do so.
What Remains: Section 503 and VEVRAA Are Still in Effect
The rescission of Executive Order 11246 did not eliminate all federal contractor affirmative action obligations. Two significant statutes remain in effect and continue to be enforced by OFCCP: Section 503 of the Rehabilitation Act, which covers individuals with disabilities, and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), which covers protected veterans.
Secretary’s Order 03-2025 initially placed OFCCP’s Section 503 and VEVRAA activity in abeyance as well, largely because the prior compliance review structure had so thoroughly entangled those programs with the Executive Order 11246 framework that they needed to be operationally separated. Secretary of Labor Lori Chavez-DeRemer has since issued Order 08-2025 lifting that abeyance. OFCCP has resumed processing complaints under Section 503 and VEVRAA, including complaints that were held during the abeyance period.
Importantly, OFCCP has exercised its discretion to administratively close all pending compliance reviews that were in process, given that those reviews significantly comingled Executive Order 11246 obligations with Section 503 and VEVRAA reviews. The scheduling list released in November 2024 has been abandoned. Contractors who were on that list should have received or should expect to receive formal notification of administrative closure.
The Section 503 and VEVRAA affirmative action program certification portal remains closed while OFCCP works to revise its processes. However, the underlying obligations under Section 503 and VEVRAA, including their implementing regulations, remain in effect. Contractors should continue to comply with those obligations even while the certification system is offline.
OFCCP also renewed its Veterans Affairs Health Benefits Program enforcement moratorium, which exempts VAHBP providers from enforcement of affirmative obligations under Section 503 and VEVRAA through May 2027. That moratorium does not relieve VAHBP providers of their nondiscrimination obligations or of being subject to complaint investigations.
The New DEI Executive Order: A Different Kind of Compliance Risk
While the prior affirmative action framework has been dismantled, federal contractors now face a new and distinct compliance obligation running in the opposite direction. On March 26, 2026, President Trump issued an executive order titled Addressing DEI Discrimination by Federal Contractors, which prohibits what the order calls racially discriminatory DEI activities.
The order defines racially discriminatory DEI activities as disparate treatment based on race or ethnicity in recruitment, hiring, promotions, vendor agreements, program participation, or the allocation of an entity’s resources. The executive order’s reach extends to training programs, mentoring, leadership development, educational opportunities, clubs, associations, and similar programs that are sponsored or established by a contractor.
Within 30 days of the order, federal agencies were directed to begin including a specific compliance clause in contracts. That clause requires contractors to certify that they will not engage in racially discriminatory DEI activities, cooperate with agency investigations, report subcontractor violations, and acknowledge that noncompliance is material under the False Claims Act.
The False Claims Act reference is significant. It means that private individuals may bring whistleblower actions against contractors they believe are violating the DEI clause, and the Department of Justice may pursue civil enforcement. Contractors found in violation may face contract cancellation, suspension, debarment, and potential False Claims Act liability. HR teams should treat this as a serious enforcement mechanism, not a symbolic gesture.
What This Means Practically for HR Teams
The combined effect of these changes presents HR teams with a genuinely novel compliance challenge. The old framework required affirmative outreach and goal setting with intent to increase representation of women and minorities. The new framework prohibits treating employees or applicants differently based on race or ethnicity, and extends that prohibition to vendor selection, program participation, and resource allocation.
HR teams should conduct a thorough review of their current programs and practices with this shift in enforcement priorities in mind. Areas that warrant particular attention include:
- Recruiting and hiring processes: Review how job postings are written, where they are distributed, and whether any selection criteria or sourcing practices could be characterized as treating candidates differently based on race or ethnicity.
- Training and development programs: Examine whether any mentoring, leadership development, or educational programs have eligibility criteria tied to race or ethnicity. The executive order specifically covers these program types.
- Vendor and supplier programs: Review supplier diversity programs and any vendor selection or preference criteria that take race or ethnicity into account.
- Internal resource allocation: Audit how the organization allocates access to resources, opportunities, and programs to ensure no differential treatment based on race or ethnicity.
- Contract review: Work with legal and contracts management to understand when the new DEI compliance clause will appear in your organization’s contracts and ensure the organization can certify compliance.
- Subcontractor oversight: The executive order requires prime contractors to report known or reasonably knowable subcontractor violations. HR teams need processes to surface potential compliance concerns in the subcontractor chain.
- Section 503 and VEVRAA: Do not allow the changes to the Executive Order 11246 framework to create the mistaken impression that all contractor employment obligations have gone away. Obligations to individuals with disabilities and protected veterans remain, and OFCCP is actively processing complaints in those areas.
The Subcontractor Dimension
The new DEI executive order places an affirmative reporting obligation on prime contractors with respect to their subcontractors. If a subcontractor is engaged in conduct that may violate the DEI clause, the prime contractor is expected to report that to the contracting agency and take remedial action as directed. This is a meaningful shift in how subcontractor relationships need to be managed.
HR teams should work with procurement and legal colleagues to understand what due diligence processes are in place for subcontractor selection and monitoring. Organizations that rely on large subcontractor networks face a potentially significant compliance management challenge that deserves attention now, before contract clauses are signed and certifications are made.
A Moment That Calls for Careful Assessment
The current environment asks HR teams to do something genuinely difficult: unwind compliance habits built over decades while simultaneously building new ones oriented toward a very different set of risks. Organizations that previously invested heavily in formal DEI programming tied to federal contractor obligations need to evaluate those programs carefully considering the new executive orders. At the same time, they cannot lose sight of the obligations that remain, particularly under Section 503 and VEVRAA.
The regulatory picture is still evolving. The Federal Acquisition Regulatory Council has been directed to amend the Federal Acquisition Regulation to incorporate the new DEI clause and remove inconsistent provisions, with interim guidance due within 60 days of the March 2026 order. Contractor HR teams should expect additional implementation guidance in the months ahead and should monitor for developments closely.
What is clear is that the compliance calculus for federal contractors has changed in ways that matter. Proactive assessment of current practices, honest conversations with legal counsel, and careful attention to how contracts are being structured going forward are all essential steps for HR teams navigating this new landscape.
