In 2025, DEI leaders face a shifting political and legal landscape under the Trump administration’s new executive orders. For companies—especially those involved in federal contracting—understanding these legal changes is paramount. The complexity of these shifts requires companies to rethink their DEI strategies or risk facing significant legal and reputational consequences.
The impact of recent executive orders
On January 21, 2025, the Trump administration issued an executive order aimed at dismantling certain DEI initiatives within the federal government and private-sector federal contractors. The order stipulates that private organizations involved in federal contracts can no longer conduct DEI training that focuses on race or gender. It also revokes specific provisions of the 1965 Equal Employment Opportunity Order, restricting certain affirmative action programs tied to identity.
These actions have sent waves through corporate America, particularly for industries heavily dependent on government contracts, such as defense, tech, and infrastructure. Companies are anticipating greater scrutiny – but what exactly does “DEI” mean in this context? Many are confused about what programs and policies are in versus out of scope.
What the Trump administration considers DEI & what falls outside his definition
The Trump administration has made a distinction between DEI practices that it deems “illegal” and those that are considered outside the scope of DEI initiatives. Understanding this differentiation is crucial for organizations navigating the shifting regulatory landscape.
Practices that qualify as “DEI” according to the US administration:
- Quotas or Affirmative Action tied to identity – This includes race-based or gender-based quotas for hiring or promotions.
- Racial & gender-based bias & privilege training – Programs that focus on addressing privilege, bias, or systemic inequalities based on these characteristics (race and gender).
- Systemic racism or sexism messaging – Discussions framed around the existence of systemic inequality or oppression based on race or gender.
- Guilt-based language – Programs that use guilt to induce responsibility for systemic inequities.
- Identity-based, supplier diversity programs – Diversity efforts that emphasize race or gender over business-driven goals.
Practices that companies may consider “DEI”, but are likely safe from scrutiny:
- Broad cultural improvement initiatives – General efforts aimed at improving team dynamics, alignment of values, or organizational culture.
- Workforce optimization programs – Programs focused on improving productivity and employee engagement without a direct link to identity politics.
- Skills-building initiatives unrelated to identity politics – Training programs on areas such as leadership development or technical skills that do not focus on race or gender.
- Metrics-driven analysis of workforce trends – Tracking and analyzing workforce demographics and trends, without specific DEI framing.
Understanding which initiatives fall under this narrow DEI definition is essential for companies that need to navigate these changes and avoid conflicts with the new executive orders.
Congressionally-approved laws requiring data collection, reporting, & workplace safety
Despite the political shifts, there remain strong, Congressionally-approved laws that require companies to maintain DEI-related data collection and reporting. These laws are still enforced, and failure to comply can result in penalties.
- EEO Reporting: Employers with 100+ employees and federal contractors with 50+ employees are required to submit demographic workforce data through the EEO-1 Report. This report includes data on race, ethnicity, gender, and job categories, providing transparency and ensuring fair treatment across diverse employee groups.
- Federal Laws Mandating Fair Treatment: Title VII of the Civil Rights Act, ADA, GINA, and ADEA continue to mandate fair treatment and reasonable accommodations for diverse employees. These laws prohibit discrimination on the basis of race, color, religion, sex, national origin, age, disability, and genetic information.
- State and Local Regulations: States such as California, New York, and Illinois enforce additional laws that require pay transparency, board diversity reporting, and anti-harassment training. Companies must ensure compliance with both federal and local mandates to avoid legal risks.
Even with the Trump administration’s actions, these federally approved requirements remain in place – at least for now. This means that diversity & inclusion data collection and reporting are still crucial for compliance, regardless of changes to federal DEI policies.
Likely judicial challenges to the executive orders
The Trump administration’s executive orders, while impactful, are likely to face legal challenges that could delay or completely alter their implementation. Several constitutional concerns have been raised about the legality of these orders, particularly in relation to the 14th Amendment and Title VII of the Civil Rights Act, both of which prohibit discrimination.
- Constitutional concerns: Critics argue that the executive orders may violate equal protection laws by potentially discriminating against employees based on their identity. The American Civil Liberties Union (ACLU) has already indicated its intent to challenge these orders, claiming that they infringe upon civil rights protections.
- State vs. federal tensions: The orders could also create tension between state and federal governments, particularly in states where DEI initiatives are firmly entrenched in local policies. For example, states like California and New York have already implemented robust diversity measures at the state level, and federal mandates could interfere with these programs, raising issues of federal overreach.
- Opposition from legal advocacy groups: Organizations like Lambda Legal, the Human Rights Campaign, and various state bar associations have voiced strong opposition to the orders. They argue that these restrictions undermine diversity efforts and violate constitutional protections. Judicial reviews will likely delay the full enforcement of these orders, giving companies some breathing room to adjust.
As these challenges unfold, businesses must stay informed of potential changes that could affect their DEI strategies and compliance efforts.
What does this mean for you? Your pending decision.
As you navigate these legal changes, it’s important to take stock of your company’s DEI strategy and prepare for the potential impact. The decision you face is whether to double down on DEI or reframe your approach in light of the new political landscape.
Two strategic paths:
- Commit to DEI: For organizations that are fully aligned with DEI principles and have stakeholder support, staying the course might be the best decision. This involves reinforcing your company’s commitment to diversity and inclusion through strong messaging, both internally and externally. Emphasizing the business case for DEI—such as its role in innovation, employee retention, and improved performance metrics, can help mitigate political risks. Microsoft and JP Morgan, for example, have publicly committed to continuing their diversity efforts despite political pressures.
- Reframe for compliance: If you’re facing resistance from stakeholders or operating in politically conservative regions, you might consider refocusing your DEI initiatives within a broader culture-first framework. This approach shifts the conversation from identity-based programs to a more universal focus on team alignment, employee engagement, and overall workforce optimization. For example, Bank of America has increasingly framed its DEI initiatives around the idea of “inclusive leadership,” which focuses more on values like respect and empathy than on quotas or identity-based measures.
What to Consider:
- Political & legal risk: What is your company’s risk tolerance in the current political climate? If you decide to double down on DEI, you must be prepared for potential legal challenges and scrutiny.
- Stakeholder support: Do key stakeholders, including board members and senior leadership, support your DEI strategy? If not, a reframing may be necessary to align with their interests.
- Employee retention & brand reputation: A failure to commit to DEI can lead to talent loss, particularly among underrepresented groups, and can harm your employer brand in the eyes of potential recruits.
Ultimately, the decision will depend on a balance of these factors. While there are risks associated with both options, aligning your DEI strategy with both the political climate and your company’s long-term goals will be crucial for sustaining success.
How Diversio can help:
With shifting legal risks, companies need data-driven DEI strategies more than ever. Diversio provides compliance-ready insights, risk analysis, and tailored strategies to help your business navigate this changing landscape—without losing momentum on DEI.
Whether you’re doubling down on DEI or adapting to a new approach, we can help ensure that your organization remains compliant, engaged, and on track for long-term success.