Donald Trump’s first few days in office have been characterized by a flurry of executive orders, and a huge hit for diversity, equity, and inclusion (DEI) as we know it.
On Monday, the president signed an executive order putting an end to all federal DEI initiatives, calling them “illegal,” “immoral,” and “discriminatory.” Within 60 days of the announcement, agencies must “coordinate the termination” of all programs. Federal employees and their leaders who work on DEI initiatives were also placed on paid administrative leave as of Wednesday at 5 p.m., with many set to be either reassigned or terminated.
On Tuesday, Trump released a separate executive action directing federal agencies to target the business world, and take “appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” As part of this plan, each agency must identify up to nine potential investigations at large publicly traded corporations, nonprofits, or education institutions, among other groups. The order also says that litigation may be “potentially appropriate” to push forward with these endeavors.
Pushback against diversity efforts has been picking up steam since the Supreme Court overturned affirmative action in 2023, and several major companies have already rolled back their DEI initiatives. But Trump’s executive actions this week mark a major escalation when it comes to attacks on DEI policies both inside and outside the government. Lawyers that Fortune spoke with say that moves will undeniably bring tremendous pressure on the businesses world when it comes to their DEI practices, large companies should expect to be targeted, and they anticipate it will have a major chilling effect on the private sector.
"President Trump’s executive orders represent one of the most sweeping rollbacks of diversity, equity, and inclusion (DEI) initiatives in modern history,” says Seth J. Chandler, a professor at the University of Houston Law Center. “By targeting not only federal operations but also private contractors and federally funded institutions, these orders reshape the legal and operational landscape for corporations and universities.”
A ‘chilling effect’ for the private sector
Following the Supreme Court decision to overturn affirmative action in 2023, several major companies, like John Deere, Ford and Lowe’s, have already voluntarily rolled back their DEI initiatives over the past year. Several more have done the same over the past few months, including Meta, Walmart and McDonald’s.
But Trump’s latest presidential moves mandate government agencies to specifically target companies in the private sector engaged in what it describes as “illegal DEI discrimination and preferences."
"The executive order is likely intended to have a chilling effect on corporate DEI, and it may encourage some companies to scale back their DEI practices,” says Andrew Turnbull, partner at law firm Morrison Foerster. “There have already been numerous reports of businesses pulling back on certain DEI programs given the mounting attacks on DEI programs. This will likely further fuel some companies to take a hard look at rolling back certain DEI programs."
Anthony Haller, partner in Blank Rome’s labor and employment legal practice, adds that companies with DEI programs that discuss them on SEC filings are “obviously at risk for investigation.”
“The order clearly throws down the gauntlet to bring pressure across the board in the private sector, particularly with respect to public companies, because what they do and how they do it is more visible,” he says.
Federal contracts will be a major point of leverage
Many experts predict that the government may use federal contracts as a particular point of leverage for the private sector, holding off on awarding them until companies revise their DEI plans.
“The government could use the denial of contracts as a means of changing those policies,” Haller says.
Others add that government contractors and grantees will want to take special care to review their anti‑discrimination and DEI policies and programs.
“Of course, the devil is in the details,” says Turnbull, who adds that it will likely take months before any regulations or contract clause is established to implement this requirement. Inaccurate or false certifications could also subject contractors to potential liabilities under the False Claims Act, a law that imposes liability on companies (typically federal contractors) who defraud governmental programs.
The law is still the same
Despite the intended chilling effect of these executive moves, multiple legal sources point out that Trump’s order and action do not constitute a change in the law. Rather, the language used in the order simply “enforces longstanding federal civil rights laws,” says Britney N.D. Torres, senior counsel at employment law firm Littler.
Trump’s executive moves just mean that companies will have to continue to carefully review their DEI-related policies, practices and initiatives based on longstanding anti-discrimination laws, and make sure they can't be interpreted in a way that is different from what they intended, she says.
But many companies in the private sector have already been carefully reviewing their DEI policies over the past yeas. For example, Apple’s board recently made headlines when it recommended shareholders vote against an ant-DEI policy. “Apple has a well-established compliance program and the proposal inappropriately attempts to restrict Apple’s ability to manage its own ordinary business operations, people and teams, and business strategies,” the company wrote in an SEC filing.
“In-house counsel are well aware that complying with the law is a fundamental part of their job, and that Trump’s reelection would increase this kind of scrutiny from the government,” says Jason Solomon, director of the National Institute for Workers’ Rights, a non-profit think tank.
Companies standing by their policies
Despite a dramatic week, many experts that Fortune spoke with pointed out that companies have been expecting some kind of federal push against DEI since Trump won the election in November. Many have spent that time preparing for this pushback by ensuring that their programs won’t be considered illegal.
Prior to Trump’s executive missives, Costco, Apple, and Microsoft have notably stood by their initiatives. And this week in Davos, Jamie Dimon reaffirmed JPMorgan's DEI commitments after the National Legal and Policy Center, a conservative nonprofit, proposed the bank revisit how compensation is tied to the company's racial-equity goal.
“Bring them on," said Dimon referring to the efforts from right-leaning groups. "We are going to continue to reach out to the Black community, the Hispanic community, the LGBT community, the veterans community."
Legal experts anticipate more lawsuits over the next few weeks, months, and years that will pop up due to additional support from the new administration. “Bottom line, I see more litigation overall,” says Timothy J. Ford, a political law attorney at Dilworth Paxson, adding that this executive order “opens up all kinds of public and private litigation.”
Moving forward, companies may shift their approach to DEI away from focusing on supporting specific groups of people, and towards fostering a “belonging for all” ethos, says CV Viverito, director analyst of the diversity, equity, and inclusion practice for HR consulting firm Gartner.
This doesn’t mean workforce diversity becomes unimportant, they note, just that it will be seen as part of a larger strategy around balanced growth in hiring, promotions and retention across demographic groups.
“Ultimately, how committed companies stay to their efforts will depend on their leadership’s commitment to DEI and whether the organization links it to real business outcomes,” they say.
