part 1: Actions Federal Contractors and Grantees Should Take Now to Certify Their Federal Contracts & Grants

OutSolve has invited John C. Fox, Esq. as a guest blogger providing legal insights on EEO and compliance issues. The views expressed in his posts are his and do not reflect the viewpoint of OutSolve or its employees.

Background

1. President Trump Issued Executive Order 14173 (titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”) on January 21, 2025. That Order, among many other things, directed all federal Executive Branch procurement agencies, and those awarding “grants” (technically known as “Federal Financial Assistance”) to include in every contract or grant award:
   
   
   1. A term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government's payment decisions for purposes of section 3729(b)(4) of title 31, United States Code; and
   2. A term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”
      See Section 3 (b)(iv) of the Executive Order. 
2. A federal Judge in Baltimore thereafter issued a Preliminary Injunction to stop this portion of EO 14173, among other things.  See related article here.
3. A three-judge panel of the Fourth Circuit Court of Appeals (Richmond) soon thereafter issued a “Stay” of the lower court’s Preliminary Injunction in a unanimous opinion led by two Obama appointees. See related article here.   

Both Trump Contract/Grant Certification Requirements are NOW LIVE!  

The Fourth Circuit’s opinion had the effect of “greenlighting” President Trump’s two contract and grant certification requirements. It is now only a matter of time before the FAR Council (Federal Acquisition Council) issues new contract clauses to appear in all federal contracts and grants requiring federal contractors and grant recipients to make the two “certifications” under penalty of civil and criminal law. 

The FAR Council is composed of NASA, DoD, and GSA (General Services Administration). These three federal procurement agencies typically award annually the largest dollar volumes of federal contracts. The Council is responsible for implementing procurement requirements when they affect all federal monetary award instruments, including “contracts” and “grants” across all federal procurement agencies.  

PUNCH LIST (Part 1): Actions Contractors/Grantees Should Undertake NOW 

As you can imagine, there is an extensive amount of preparatory work required for Contractors to align with the new administration's direction and executive orders. Recognizing the breadth of action items ahead, we've strategically split the Punch List, or actions contractors/grantees should take, into two parts to ensure the guidance remains manageable. Below you will find our first installment with the first set of action items for your organization: 

1. Document the “legitimate non-discriminatory reasons” for the implementation and operation of your Employee Resource Groups” (“ERGs”). Start with employee retention and recruitment. What else?
2. Do a “DEI Scrub” of your ERGs to make sure the writings concerning the ERG describe their nondiscriminatory purposes and implementation. OutSolve’s lawyer-backed DEI Scrub teams are finding that the running time start-to-finish on these projects is about two months given the amount of material to collect, review and revise.
3. Keep your Nondiscrimination Firewall Protections. “Don’t throw the baby out with the bathwater.“ Affirmative Action Teams parsing through their existing AAPs and related diversity and affirmative action initiatives in light of the revocation of Executive Order 11246, should be careful to NOT turnoff any “Nondiscrimination Firewall Protections” that Executive Order 11246 systems have lawfully and helpfully afforded your company likely for decades.  

Definitely keep: 

1. 1. 1. your Disposition Codes for Jobseekers, “Applicants” and Hires.
         
         
         1. Think about expanding your use of Disposition Codes to all competitive promotions. See your OutSolve Representative for details.
      2. your “Disparity Analyses” for at least Hiring, Promotion, Transfer (in light of the recent SCOTUS decision in Muldrow v. City of St. Louis lowering the legal proof an employee needs to show to prove transfer discrimination), involuntary termination, and compensation decisions.
      3. your “early-warning” recruitment and hiring systems. Continue to determine the reasons the employment percentages of African Americans, Whites, Hispanics, Asians, Native Americans, men, and women in similarly situated jobs are LOWER THAN your Applicant Flow percentages (if they are). Continue your data analytic systems to determine WHY your company has fewer African Americans, Whites, Hispanics, Asians, Native Americans, men, and/or women than your robust applicant flow reports:
         
         
         1. Is poor retention the reason?
         2. Is a failure to recruit sufficiently highly trained, educated, and/or experienced Applicants the reason?
         3. Is it a “historical baggage” problem that will cure itself over time as more openings occur and the company/institution makes selections on a nondiscriminatory basis?
            
            Ask your OutSolve representative about data analyses tools to support this effort. 
            
            
      4. Keep your “Self-Identification” Systems “hot.”
          
         • Pre-Hire: You “should” (not “must” but see below) maintain your Jobseeker self-identification systems based on race, sex, and national origin to fuel your nondiscrimination “Disparity Analyses.” Those Analyses are a key part of your company’s “Nondiscrimination Firewall.”

• • • • Practice Tip: Place your Disparity Analyses as of now and going forward under Attorney Client Privilege (in the proper way) since you now may do so. With the revocation of Executive Order 11246 and the resulting unenforceability of OFCCP’s Rules as a matter of law, including 41 CFR Section 60-2.17(b) (which had formerly mandated “Disparity Analyses”), companies may now put their nondiscrimination analyses under Privilege. Previously, that was not possible, as a matter of law, since no corporate analyses undertaken pursuant to legal requirement may enjoy Attorney Client Privilege status. 
        
        Also, you “must” maintain “Pre-Hire” self-identification systems if you believe that the Uniform Guidelines on Employee Selection Procedures (UGESP) require covered employers (those with 100 employees or more and affecting interstate commerce) to undertake “adverse impact” analyses on all employment systems, including hiring. (However, I do not believe the UGESP are mandatory. I think they are merely hortatory …suggestive …Helpful Hints from Heloise if you will. However, the law is far from settled on this issue and there are numerous case decisions holding that the UGESP are mandatory and bind covered employers to undertake “adverse impact” analyses of hiring. If so, those analyses require, as a predicate, that the employer catalogue the race, sex, and/or national origin of Jobseekers, Applicants and Hires.)
      • Post-Employment: You must collect and report race, sex, national origin, and “ethnic” data of employees to properly and accurately complete the EEO-1 Report pursuant to the EEOC’s Rules. Self-Identification remains a crucial and lawful HR tool to assist that filing. EEOC Rules at 29 CFR Section 1602.7 – “Requirement for filing of report.” remain in full legal force and effect. 
        
        Those Rules require, of course, that employers employing 100 or more employees must annually file with the EEOC an SF-100 Form (aka EEO-1 Form) reporting “…in conformity with the directions set forth in the form and accompanying instructions.” The “accompanying instructions” the EEOC’s Rule vaguely references is the EEOC’s annually published “EEO-1 Component 1 Data Collection Instruction Booklet”. The EEOC takes that Booklet down from on-line access each year when it closes the EEO-1 filing period. However, each year, an updated Instruction Booklet provides detailed instructions to employers requiring it to report five categories of race and national origin data in addition to the sex of each employee.  

For example, in an “Introductory Note,”  the EEOC explains on its website its EEO-1 Component 1 Report: “The EEO-1 Component 1 report is a mandatory annual data collection that requires all private sector employers with 100 or more employees, and federal contractors with 50 or more employees meeting certain criteria, [EDITORIAL NOTE: this yellow-highlighted passage is no longer valid since January 21, 2025] to submit workforce demographic data, including data by job category and sex and race or ethnicity, to the EEOC.” (emphases added) 

Stay tuned for Part 2 of this series. Be sure to subscribe to OutSolve’s blog to receive an alert when it is published. Part 2 will delve into additional practical measures and actionable strategies to further solidify your organization’s readiness for the coming certification requirements. 

Related Articles

• Legal Alert: Federal Court Greenlights Trump Anti-DEI Contract and Grant Certifications: This is Now Real!
• Federal Judge Halts key parts of Trump's Anti-DEI executive orders

• Where Do Corporate Decision Makers Go Now Following the Revocation of EO 11246?

• Executive Order 11246: Affirmative Action Changes

• Webinar: Key Takeaways on DEI, Affirmative Action & Non-Discrimination

• Legal Alert: National Urban League v. Trump – What Employers Should Watch

• IN & OutSolve: What's Happening Around Rescission of EO 11246