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

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.

What do you lose if you no longer support your “Employment Discrimination Firewall”?

What’s Happening

“Ensure.” “Firewall.” “Patience.” These are the three most important concepts in the now unfolding national discussion about what responsible corporations in the U.S. should do in the wake of President Trump’s revocation of President Johnson’s 1965 Executive Order 11246 (EO 11246). Want to know what your business should do? Click here now. 

Johnson’s Executive Order had two sides: an affirmative action component that required the calculation of recruitment goals and a Title VII-like non-discrimination component, but with the added requirement that federal contractors “evaluate” their employment decisions to “ensure” no unlawful discrimination could occur. The Office of Federal Contract Compliance Programs (OFCCP) built out the “evaluation” component early in its history. However, highlighting the importance of this component of the Order, OFCCP ramped it up even further in 2000 via rulemaking 35 years after Johnson first penned EO 11246, which had turned out to be one of the most famous Presidential Executive Orders of any president.

Specifically, OFCCP’s 2000 Rules gave much more focused and detailed meaning to the second sentence of Section 202 of EO 11246, as amended. That section mandated two different things from covered federal Government contractors:

• a nondiscrimination prohibition (like Title VII)
• a novel and concept-shattering notion that covered federal Government contractors and subcontractors must, as a condition of federal contracting, undertake continuous proactive self-diagnostic evaluations of their employment decisions (unlike Title VII and unique only to EO 11246):
  • “the contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. The contractor will take affirmative action to ensure (emphasis added) that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, or national origin.”

NOTE: While the proactive evaluation mandated in the second sentence quoted above from EO 11246 uses the term “affirmative action,” that term does NOT compel or even imply the utility of unlawful preferential employment decisions based on race, sex, color, or national origin. Rather, the first sentence enacted a nondiscrimination “prohibition” on contractor action based on a Protected Status, just like Title VII. But the Executive Order added to Title VII the new notion that contractors must also do something affirmative, something positive and active, to evaluate corporate employment decision making on an ongoing basis to “ensure” that unlawful discrimination does not occur and stop it before it starts.

The Hidden Cost of Walking Away from EO 11246 Requirements

So, What Is That Word “Ensure”?

This is what a company loses if it simply walks away from the revocation of EO 11246 with a sigh of relief. The contractor’s self evaluation of its employment decisions to “ensure” they are not unlawfully discriminatory is the “magic sauce” that has kept contractors out of comparatively worse employment trouble for the last 60 years. The “proof of that pudding” is that federal government contractors have successfully:

• hired a greater percentage of minorities and women than employers without the federal contract mandate.
• promoted more minorities and women than employers without the federal contract mandate.
• have suffered far fewer and less costly back pay awards than employers that are not federal contractors.

OFCCP discovered the first two above-listed phenomena in 1984, during the first Reagan term, when the agency sought to answer this fundamental business question: Does OFCCP and its Executive Order 11246 enforcement program make a difference?

To that end, OFCCP commissioned Labor Economist Jonathon Leonard from the Hahn Business School at the University of California to review the employment and promotion results of covered federal “Government contractors” compared to “employers” covered by Title VII but which were not federal contractors. Apart from the better hiring and promotion results Dr. Leonard found in his published National Bureau of Economic Research Working Paper No. w1310 between “Government contractors” and “employers,” the only two things that were different were:

• federal contractors knew the availability of minorities, whites, and women available in the marketplace to find and attract for interviews.
• federal contractors undertook mandated ongoing self-evaluations of their employment decisions to “ensure” that they were NOT engaging in unlawful employment discrimination.

“Ensure” is a little-used word in the English language. It is a verb. Thus, it is a lively word, a call to action. The word “ensure” demanded that federal contractors had to affirmatively do something rather than just play “defense” in response to Title VII charges of unlawful discrimination filed against a company. Rather, federal contractors had to actively go out on “offense” and:

• behave like a scout combing the horizon for signs of trouble and looking affirmatively for potentially problematic employment decisions in basic HR decision-making like hiring, promotions, involuntary terminations, and compensation, and then
• voluntarily and privately design a cure or remedy for the trouble found and then
• monitor its private cure or remedy to make sure the former corporate habit that led to the trouble was vanquished and replaced by perhaps a better practice and/or more employee training to address and prevent similar problematic issues in the future. Stop it before it starts.

Executive Order 11246 had spawned, for the first time in HR circles, the notion of “quality control” for HR. While manufacturing and operations managers in every other part of the business took quality control reviews and evaluations for granted in their corporate worlds, quality control evaluations for HR started in 1965 only by virtue of EO 11246.

PUNCHLINE: Most mature and responsible companies in the United States today have seen the wisdom of the Executive Order’s continuous quality control evaluations prompting. Most U.S. companies have chosen long ago to extend to and ingrain into their human resources and talent acquisition teams quality control protocols to evaluate at least their HR systems driving their hiring, promotions, involuntary terminations, and compensation decisions. (Transfers and demotions are recent welcome additions to that list of things to check in on.)

The Importance of Building & Maintaining Strong HR Firewalls

HR Nondiscrimination Firewalls: Experienced corporate managers who have survived an OFCCP, EEOC or private plaintiff class action discrimination lawsuit challenging a corporate employment system like hiring, pay or promotion know that it is suicide to not continuously have had quality control teams evaluating HR decision-making. Quality control reviews typically and routinely operate in every other department in a large and successful corporation.

Success does not occur by accident on a production line or in a professional office, or by merely thinking good thoughts. Nor does success happen in HR on its own without quality control checking. There is a reason companies build firewalls to protect not only against those outside bad actors who would threaten harm to the company but also to protect against employees who fail at their duties for whatever good, bad, or indifferent reason.

Most U.S. companies which were federal Government contractors or subcontractors previously covered by EO 11246, are now realizing that the quality control check evaluations they have been undertaking for decades pursuant to EO 11246 to “ensure” against unlawful discrimination have indeed become ingrained as “good HR” …so they are keeping the continuous monitoring HR evaluations to keep their “HR Nondiscrimination Firewalls” tall and sturdy.

NOTE: The EEOC last year set a new record for private sector company and state employer back pay collections totaling nearly half a billion dollars. By contrast, OFCCP collected only about $8 million in backpay from government contractors ($11 million if you believe OFCCP’s numbers) during that same period of time (FY 2024). Even multiplying OFCCP’s backpay figure by five to account for the difference in head count sizes between the two agencies (almost 500 employees at OFCCP and just over 2,500 employees work at the EEOC), the federal government contracting universe is a far tougher environment for federal discrimination law enforcers to find unlawful discrimination than among the general population of “employers” which are not federal contractors. Federal contractors and subcontractors crouch confidently behind their “HR Nondiscrimination Firewalls” they had built to “ensure” against discriminatory decision-making even as federal investigators and plaintiff lawyers pressure-test in audits and in investigations the companies’ HR systems.

Why You Should Think Twice About Dismantling HR Nondiscrimination Firewalls

Fun With Words: The word “ensure” comes from the Latin word “insecuare.” That word is in turn made up in Latin from the combination of the pre-fix “in” with the Latin word “securus” which meant that one was secure, or safe. So, ensure means to guarantee the safety of something. (I always knew that five years of Latin in junior high and high school would come in handy for something someday and pay off big (like this moment) other than to become an Episcopal or Catholic Priest! Oh boy, gratification at long last!)

So, what you lose with the revocation of Executive Order 11246, without “saving the baby from the bathwater you are throwing out,” is the army of HR compliance specialists from among the 25,000 formerly covered federal contractors or subcontractors and their compliance vendors who “ensure” their government contractor employers, customers, or clients are safe from unlawful discrimination claims.

If a company now chooses to walk away from its HR Nondiscrimination Firewall OFCCP’s audit pressure previously helped them see the wisdom to first build, what the company may now well be sacrificing, also, is several decades of HR and talent acquisition training and corporate documentation protocols which have long served the company well. Dismantling “Firewalls” is a serious business and should be done only after much careful thought and calculation looking at the issue from 360 degrees around the at-issue policy or practice.

How Major Corporations Are Responding to the Revocation of EO 11246

SPOILER ALERT: In the national conversation going forward about the revocation of Executive Order 11246 and what to do now, most major corporations have thus far cautiously and tentatively decided to:

• keep all employment systems “hot” and active until the dust clears in Washington D.C. and the country knows whether there will be a pull back as to the revocation of EO 11246. A “wait and see” corporate strategy is now gaining momentum as federal government policy reversals of position on very significant policies like tariffs, Ukraine funding, sale of federal buildings valued at close to $100M, and federal government employee terminations have occurred. Adding to these major public policy reversals is a further caution driven by the advent of the now fast-paced and a growing number of Preliminary Injunctions federal courts are handing down (from ordering frozen USAID payments be made to ordering summarily cancelled federal grants and contracts to be continued to ordering fired federal employees back on the job). To say the environment in Washington D.C. is now “fluid” would be an understatement (like saying the ocean is full of wet water).
• carefully catalogue, one-by-one, all previous employment systems the company has operated. Companies are doing this to position themselves to then consciously determine which prior employment systems make up their “HR Nondiscrimination Firewall” and other employment systems which they might wish to keep hot indefinitely. Many companies are also preliminarily identifying other employment systems they may wish to either minimize, update, or to eventually discontinue.

What Should My Business Do?

Here are a few recommendations on things your business can do today while we wait for further clarification and guidance from the federal government:

• “Pump the brakes” on major corporate employment policy changes until the White House and the US Department of Labor get “rudder control” and set a clear and defined course for U.S. employment policy. Only just last week, the Senate confirmed the president’s nominations of his top two managers to run USDOL. As a result, Secretary of Labor Lori Chavez-DeRemer and her Deputy Secretary of Labor Keith Sonderling are now moving into their new offices at USDOL (where attendance is now required five days a week, by the way). So, the USDOL employment team is just getting its feet on deck. The Secretary has not filled dozens of the lower-level political appointee positions at USDOL. That will take months under the best of circumstances. It is simply too early at this time to see which way the ship is going to sail.
• Use this time well to build a catalogue of all your company’s DEI practices and policies (by whatever name specific to your company: you know which ones they are). Do not forget to include your company’s or institution’s vendor and supplier contracts. Then, assemble a legal team to go through each DEI practice and policy to “ensure” it is compliant with state and federal nondiscrimination laws.
• Review your Affirmative Action compliance activities with your AAP development team. Go through each AAP development activity to preliminarily decide which to keep, which to modify and which to (eventually) abandon, if any.

What’s Next?

• Keep your head on a swivel. Watch this space for further updates as to the direction of USDOL, including as to OFCCP, ODEP (Office of Disability Employment Policy) and VETS (Veterans Employment and Training Service).
• Prepare to file your VETS-4212 form with VETS on time and on schedule later this year. The Congress specifically embedded a requirement within VEVRAA directing the Secretary of Labor to make provision for covered federal contractors/subcontractors to annually file a form like the VETS-4212 seeking and collecting the data VETS has historically sought on the VETS-4212 form. Thus, this is a “Congressionally mandated” data collection and NOT subject to the discretion of the Secretary of Labor or the president as to whether USDOL may order the collection of the at-issue data and information.
• Be ready to file an EEO-1 form this year if you have to do so, but also prepare for the possibility that:
  • the Office of Management and Budget, the administrative arm of The White House, will simply decline to authorize the EEOC to collect EEO-1 data pursuant to the restrictions of the Paperwork Reduction Act.
  • the EEOC may fail to be ready on time to start the lengthy launch sequence to activate the annual EEO-1 filing season.

Conclusion

Patience is currently the third most important word as to U.S. employment policy at this time, joining “ensure” and “firewall.” Once Congress and the president successfully set the federal discretionary budget for FY2026 (starting October 1, 2026), including as to USDOL’s budget, if they do, policy direction will come into plain view.

In the meantime, look for USDOL’s “Semi-Annual Regulatory Agenda.” Each Regulatory Agenda sets out each subcomponent agency’s scheduled upcoming (for the next 6-months)regulatory proposals and final regulatory actions. USDOL usually publishes its “Spring Regulatory Agenda” between April and June. It would not surprise me if the USDOL Spring Regulatory Agenda published somewhere later in the date range this year. USDOL managers have yet to onboard, as noted above, and will have much to do, even apart from managing deep RIFs of unhappy federal employees.

Also, look for the coming “Budget Justifications” for their FY 2026 budgets each subcomponent agency within USDOL will soon develop. This is an annual sport with good entertainment value for taxpayers. The Secretary of Labor will publish her Budget Justifications for each subcomponent agency within USDOL all on the same day, probably by late Spring, TBD given that these are new kids on the block and the federal workforce is in transition and in a huff at this time. The Budget Justifications seek to justify the agency’s budget request by describing what programs and initiatives they will use the money to undertake in the upcoming Fiscal Year. Note: Fiscal Year FY 2026 will begin October 1, 2025.

Movie Tip: I highly recommend you condition and harden yourself for the coming FY2026 Budget Battles by streaming Russell Crow in his Academy Award winning role as Maximus in the 2001 movie Gladiator. The movie scenes captured in the Gladiator pits will give you exactly the right deep immersion into the last sport of Kings: federal budget battles

No need for a sextant: With the USDOL Spring Semi-Annual Regulatory Agenda and the agency Budget Justifications of interest in hand, the current mystery of USDOL’s compass heading will reveal itself.