Season 3, Episode 7: Executive Orders, DEI Compliance, and Workplace Challenges Under the Trump Administration

Emily McDonough Souza: Like you said, it's been a flurry of executive orders since President Trump took office last month. The one that has been very newsworthy that I'm sure most of the employers and listeners have heard about is executive order number 14173. And the long title on that is called ending illegal discrimination and restoring merit-based opportunity. And essentially what this executive order does is it directs all federal departments and agencies, which importantly includes all private companies that are either federal contractors or federal grant recipients to eliminate illegal or unlawful DEI initiatives.

Now, I know they can't see me. I'm putting illegal or unlawful in quotes right now, because we really have no guidance on what that actually means at this moment in time. But the executive order did say that within 60 days of when it was initially issued last month, that companies that employ these federal contractors must: number one, eliminate DEI related offices and positions. They must terminate equity related action plans, programs, and contracts. Remove DEI related performance requirements, and then also submit certifications that they do not have any illegal DEI programs - which I know we'll talk about in a moment as to what that actually means. I do think it's important to note that the executive order does not mandate specific changes to the private sector, but it does strongly encourage the private sector to quote “end DEI discrimination”. So, in line with that, the U. S. Attorney General and the director of OMB have been tasked with creating a strategic enforcement plan for the private sector relating to this, and so that report is supposed to identify key sectors of concern within each agency's jurisdiction, most egregious and discriminatory DEI practitioners in each sector of concern, and then more plans of specific steps or measures to deter DEI programs or principles in the private sphere. So, stay tuned for what that report will contain.

Dan Schwartz: Yeah, there was a lot we covered and you mentioned the certifications. Why is that such a big issue? It seems like, hey, you're just certifying this. What's the big deal?

Emily McDonough Souza: Yeah, so you know, the anti DEI directive, so to speak, they themselves were not surprising based in light of statements that President Trump had made during his presidential campaign.

But like you said, what was surprising is that this executive order signaled a new mechanism for enforcement of anti-discrimination laws against federal contractors that has not been widely used in the past, and that is called the False Claims Act. And basically, what the False Claims Act does is it imposes liability on individuals, on companies that defraud the federal government by making materially false or fraudulent statements in order to influence the government to pay them money.

So those statements must be material to the government's decision to make the payment to them and also this false claims act has a provision called a qui tam provision I’m laughing because I said qui tan yesterday, but I think that sounds more sophisticated Dan, but it's a key tam provision that allows private individuals known as relators or whistleblowers to file lawsuits on behalf of the government and then potentially receive a portion of any recovered damages.

So, this is really interesting as to whether or not, you know, significant damages and civil penalties available under the False Claims Act, whistleblowers will have incentives to file these qui tam lawsuits alleging that DEI programs resulted in discrimination. Uh, and to be clear, the executive order requires the head of each agency to include in every contract or grant award two provisions with respect to DEI programs that could affect their liability under the FCA. Number one, it requires a term stating that the contractual recipient agrees that its compliance is in all respects with all applicable federal anti-discrimination laws is material to the government's payment decisions. And then second, it mandates a term requiring the recipient to certify that it does not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws.

So, taken together, these two provisions indicate that the Trump administration plans to use the FCA to enforce these executive orders.

Dan Schwartz: Yeah, so here's a, here's a little fun fact. Whenever I hear qui tam, I think of a Passover snack called the Tam Tam crackers, you know, but I digress for a sec. So, in any event, I think the false claims act is a whole podcast in and of itself, but I think it's really important.

And I really appreciated your talk to the HR conference where  - it’s not just the certifications that are at issues. It's the enforcement mechanism that we're really worried about here. So, or at least we were until February 21st, right? And on that day, I think we heard from a court, right?

Emily McDonough Souza: We did, as you and I both know, we had been revising, updating our presentation up to the very last minute.

And so, this past Friday, February 21st, a U. S. District Court in the District of Maryland recently entered a preliminary injunction for barring enforcement of the certification provisions of this executive order nationwide. And essentially, the court determined, among other things, that requiring federal contractors and grant recipients to certify that they do not operate unlawful DEI programs, without actually further defining what that term means - would unconstitutionally chill First Amendment protected activity. So, of course, the, the government is going to appeal that injunction, and so the long-term status of the executive order is presently unclear, but if it is upheld, the executive order could significantly change the enforcement of anti-discrimination laws going forward with the use of, of the FCA.

Dan Schwartz: Yeah, and I should mention to the listeners, we're recording this a few days before the podcast will be officially released, which is like, you know, always an occupational hazard with these podcasts and that there could be a development. We expect the decision to be appealed. But I think as of now, I think most of us are expecting this injunction to remain in place at least for a short while, and there may be other cases that develop. So, I think for employers, is there anything employers should be doing right now, at least with regard to these executive orders?

Emily McDonough Souza: Well, while the decision is on appeal, the immediate need for employers to overhaul all their policies and procedures and, you know, really freak out about everything that has diminished a bit.

However, employers should still, of course, be reviewing their policies and procedures, but not necessarily taking any steps right now while we're in a bit of a limbo. Because, for example, it's unclear whether the Trump administration is going to really target companies with hiring preferences related to, for example, race, color, sex, sexual orientation, or if it will more broadly challenge DEI policies that generally encourage or promote equity inclusion, such as diversity training programs. There's just a lot up in the air right now. So, I would sit tight and stay abreast of, of any news on what happens with this injunction.

Dan Schwartz: One of the other questions I think that arose at the conference was people were wondering, hey, can an executive order trump state law? And I think we're both under the assumption, at least for now, that look, state laws are state laws. They, they aren't trumped by just a mere executive order from the president, right?

Emily McDonough Souza: Right. I mean, employers, like you said, they still have to abide by state laws. They should continue to do so. You know, in Connecticut, we, of course, have the Connecticut Fair Employment Practices Act. And just like, for example, how Connecticut has its own minimum wage laws that differ from federal minimum wage laws, state laws that require certain things should still be followed, particularly because these executive orders do not supersede our laws.

Dan Schwartz: Yeah, you know, it remains to be seen whether we'll get a case at some point in the future where someone is trying to challenge certain state laws as being superseded by federal law. Typically, that is not the case when it comes to discrimination laws. It's normally the law that provides more protection to an employee, but you know, I wouldn't be surprised in the future if we start to see the federal government making the claim that their laws should be in place rather than the state laws.

So, well, let's switch gears. Emily, was there something that, that I talked about or something else that you found interesting at the meeting?

Emily McDonough Souza: Yeah, Dan. So, you talked a lot about and we got a lot of feedback about this portion of the presentation, which is ICE raids and immigration affecting the workplace.

So, what did you hear? Any feedback from participants regarding that section of our presentation?

Dan Schwartz: Yeah, and we did a podcast episode a few weeks back about ICE, you know, and recently there were headlines about how the Department of Homeland Security is now going to be requiring undocumented immigrants to register with the federal government. We remain A little bit skeptical whether that will happen despite the Department of Homeland Security's suggestion that they will quote “hunt down” these immigrants, but I think it only reinforces something we talked about recently, which is. that employers are likely to be caught in the crosshairs of this enforcement.

You know, right now employers really should be reviewing their I-9 forms, uh, making sure that those are in compliance. They may want to consider using E Verify for some of their new hires. And I think having a rapid response team and probably an immigration attorney on standby in case of an audit of their I-9 forms or in case of a raid where ICE shows up at the door.

One of the other things that I think I've thought about is, is Department of Homeland Security going to affirmatively request that employers verify that they don't have any undocumented workers or to require the employers to report undocumented workers on the workforce, that hasn't happened yet. But given the steps that are seemingly taking place at the federal level, that's just something else I've started to think about. But I think regardless, employers need to have these issues on their front burner. One of the other things I, I kind of found interesting at the meeting is we put up a slide at the beginning that was really asking people how they were feeling. And we, you know, said put in one word, that was there, and the responses that we got were really, really fascinating there, and, and I wouldn't have necessarily thought it, but, you know, the number one word among all the participants was confused. You know, the other words that were prominent there were anxious, stressed, frustrated, uh, there were a few that said excited, hopeful, but certainly a lot of others like scared, nervous, uncertain, worried, overwhelmed, and so I think for employers, this is a really challenging time and it's sort of happened all of a sudden in the ICE and immigration is just one part of it. But that was another big takeaway that I had from the meeting that I thought was was really interesting.

Yeah. So, one of the other things that we talked about at the conference was the NLRB and we've had a couple of developments recently on that as well. Can you talk about that?

Emily McDonough Souza: Yes, so the National Labor Relations Board currently sits without a forum to make any decisions.

The five-member board has essentially shut down, effectively has shut down, until President Trump makes new appointments to the board. It's unclear when that will be. Um, we really have no indication as to how long that will take. But for employers, this is essentially a mixed bag. On the one hand, the NLRB lacking authority to issue decisions can delay rulings that could have been unfavorable to employers with pending cases.

But then on the other hand, the board will be unable to change employee friendly precedent that has come through over the past four years. So, what do we expect to see going forward? Right now, there is an acting general counsel, not a permanent general counsel. But practically speaking, we do expect a lower volume of unfair labor practice complaints. More favorable settlement agreement terms approved by the regional offices and a complete reversal of the prior general counsel's policy directives. So, for example, the acting general counsel has already rolled back a lot of the prior general counsel's policy agendas and rescinded many of her memos and we have several examples of that. One, they have rescinded the memo that took the position that certain college athletes are employees under the NLRA. The Acting General Counsel also rescinded the memo that declared that the proper maintenance and enforcement of non-compete agreements and employment contracts violated the NLRA.

And then it also rescinded the memo that took the position that so called stay-or -pay provisions, which are those provisions intended to recoup benefits provided to employees if they separate from employment within a certain period of time. We're talking things like clawing back relocation bonuses, sign on bonuses, educational repayment contracts, things of that nature.

That prior memo saying that those benefits were unlawful has, has since been rescinded as well. So, you know, we'll keep looking at this going forward, but right now not a lot going on due to the lack of quorum.

Dan Schwartz: Yeah, and we're seeing that as well at the EEOC. There's not a quorum and that's gonna really limit systemic discrimination claims that have been brought in the past. It'll also limit either new guidance or rescinding regulations there. So, people who are expecting some EEOC action, we may actually get some inaction because of the lack of a quorum, and that may be by strategy as well. So, um, and maybe with that, we close on one aspect that we've heard from the EEOC, and it was something you talked about yesterday that I think is interesting, is there's been some press releases now, we've seen more than one. Talking about anti-American national origin discrimination. Uh, what have we seen, uh, on that and what is that sort of forecast for employers over the next couple of months?

Emily McDonough Souza: Yeah, so the press release that came out last week stated that many employers have policies and practices preferring illegal aliens, migrant workers, and visa holders over American workers, and that they are looking to enforce those national origin bias in companies that the EEOC feels is prioritizing hiring these immigrants and visa holders over workers who are American citizens. So, interestingly enough, the press release last week also announced the settlement of a lawsuit that was filed recently involving this type of discrimination claim. And it's the first resolution of an enforcement action since acting chair Andrea Lucas took the helm at the EEOC, and the lawsuit was against a big hotel in the U.S. territory of Guam, and according to the EEOC, this hotel provided non-Japanese employees, including several former employees of American national origin, with less favorable wages, benefits, and other conditions of employment than it provided employees from Japan in similar positions. So, in the EEOC's view, the alleged conduct violated Title VII of the Civil Rights Act, and uh, there was a 1.4 million dollar settlement, a three year consent decree, and the EEOC took the time in the press release to outline four illegal excuses for why employers may prefer non-American employees. So, we haven't gotten a lot of guidance on, on this type of discrimination yet, but considering the fact that national origin discrimination constituted Those cases constituted just 5.4 percent of EEOC lawsuits last year in 2024. It'll be interesting to see what happens going forward if these types of lawsuits will increase or not.

Dan Schwartz: Yeah, the reverse discrimination type claim, and I use reverse again in those quotes that you were referring to, is, is something that I think is likely to happen a little bit more and I'm a little skeptical to say the least of the notion that the EEOC has proof that many employers discriminate against Americans. I just haven't seen that. I don't think the stats really back that up, but it does seem to set out a new battlefront from the EEOC that we haven't seen in the past. So, I think that that covers it. There was a lot more. I've posted some of it on our blogs at the Employment Law Letter. And at the Connecticut Employment Law Blog, but stay tuned because if the first 45 days are any indication, the next four years are going to be quite busy. So Emily, thanks for joining us.

Emily McDonough Souza: Thanks for having me, Dan.

Dan Schwartz: And with that, we will wrap up another episode of From Lawyer to Employer. As always, we'd love it if you would subscribe to the podcast. Feel free to leave a comment wherever you get your podcasts from. And if you want to send us an email, you can always drop me a note at dschwartz@goodwin.com. We'd love to hear your feedback on these podcasts, good, bad, if you have an idea on a program. Always love hearing from you. And otherwise, we will catch you at the next podcast episode. Thanks again for listening.

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