Federal agencies to require clause banning DEI programs for federal contractors

President Trump has signed another Executive Order (EO) banning “racially discriminatory DEI activities.” Contractors will be required to acknowledge compliance with multiple obligations, including potential access to books, records, and accounts, as well as for oversight of their subcontractors. The new EO further defines “racially discriminatory DEI activities” and “program participation.” Based on the newly required obligations, contractors should review employment practices, policies, and program participation for potential risk.

What the new EO requires

On March 26, 2026, President Donald Trump “doubled down” on his administration’s focus and emphasis on federal contractor DEI programs by signing EO 14398 entitled “Addressing DEI Discrimination by Federal Contractors.” The new EO reinforces the president’s January 2025 EO 14173 entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The new EO requires federal agencies to incorporate a clause banning what it calls “racially discriminatory DEI activities” in government contracts, subcontracts, and grants.

For the purposes of the order:

• “Racially discriminatory DEI activities” means disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources; and