Executive Order 14173 Revokes Contractor Affirmative Action

Executive Order 14173, signed January 21, 2025, revoked Executive Order 11246 and ended the federal contractor affirmative action program that had operated for six decades. Race- and gender-based workforce goals, targeted recruitment mandates, and the written affirmative action plans contractors filed with the Office of Federal Contract Compliance Programs are no longer required. What replaces them is not a blank slate: federal anti-discrimination laws still apply, disability and veteran hiring obligations under separate statutes are untouched, and a follow-up executive order signed in March 2026 added a new contract clause that puts contractors at risk under the False Claims Act if their internal DEI programs cross certain lines.¹

What the Order Removes

EO 14173’s core action is the revocation of EO 11246, the 1965 order that required federal contractors to take affirmative action on the basis of race, color, religion, sex, and national origin. With that revocation, the entire regulatory machinery built on top of EO 11246 comes down: the statistical workforce comparisons against local labor pools, the utilization goals, the outreach mandates, the annual internal audits, and the written affirmative action programs.

The order also directs the OFCCP to stop three things immediately: promoting “diversity” as a goal, holding contractors responsible for taking “affirmative action,” and allowing or encouraging workforce balancing based on race, color, sex, sexual preference, religion, or national origin.² The old jurisdictional thresholds that once triggered these obligations, $10,000 for the equal opportunity clause and 50 employees plus a $50,000 contract for a written AAP, no longer trigger anything. Subcontractors are relieved of EO 11246 obligations regardless of tier or contract size.

When It Took Effect

Section 3(b)(i) of the order gave contractors a 90-day window to keep operating under the pre-existing regulatory framework as it stood on January 20, 2025. That grace period expired on April 21, 2025.³ Since then, contractors are no longer expected to maintain or develop affirmative action programs under the old EO 11246 rules. Older contracts that contain the standard EO 11246 equal opportunity clause are not grandfathered indefinitely; the clause is effectively unenforceable because the underlying authority is gone.

The New DEI Certification Clause

The order does not just take obligations away. It also directs every agency head to require contractors to certify that they do not “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” A follow-up executive order signed in March 2026 established a specific contract clause that covered agreements must now include.⁴

Under that clause, a contractor agrees not to engage in DEI activities the order defines as racially discriminatory. The contractor also agrees to furnish records the contracting agency requests to verify compliance, and to report subcontractors it believes may be in violation. Most consequentially, the clause states that compliance is “material to the Government’s payment decisions” under the False Claims Act. A contractor that certifies compliance while knowingly running prohibited programs faces treble damages and per-claim penalties under 31 U.S.C. § 3729.⁴

A violation can also result in contract cancellation, termination, or suspension, and the Attorney General is directed to consider bringing False Claims Act suits. The compliance question for most contractors has flipped. It used to be whether the company was doing enough outreach. Now it is whether existing internal programs could be characterized as prohibited DEI activity under the order’s definitions.

What Still Applies

The revocation of EO 11246 does not touch the underlying civil rights laws that prohibit intentional discrimination. Title VII of the Civil Rights Act of 1964 still makes it illegal to base hiring, firing, promotions, or other employment decisions on race, color, religion, sex, or national origin. Violations can result in back pay, compensatory damages, and injunctive relief. The Department of Labor and the Equal Employment Opportunity Commission both retain authority to investigate complaints.

Companies that treated affirmative action compliance and non-discrimination compliance as a single program need to be careful here. Dismantling the entire compliance apparatus because the AAP requirement went away can leave a contractor more exposed to disparate treatment claims, not less. The obligation not to discriminate did not change.

Section 503 and VEVRAA

This is where contractors most often get tripped up. EO 14173 revoked EO 11246, but it did not repeal Section 503 of the Rehabilitation Act or the Vietnam Era Veterans’ Readjustment Assistance Act. Both statutes impose their own affirmative action obligations, and both remain in force.⁵⁶

Section 503 requires contractors with 50 or more employees and a contract of $50,000 or more to maintain an affirmative action program for individuals with disabilities. Its basic non-discrimination threshold was recently adjusted from $15,000 to $20,000. VEVRAA imposes parallel obligations for protected veterans, with its threshold adjusted from $150,000 to $200,000.⁷

There is a wrinkle. The Section 503 regulations cross-referenced enforcement procedures from EO 11246, and the OFCCP is revising those references. Proposed modifications were published in the Federal Register.⁸ While that work is pending, the OFCCP’s contractor portal for AAP certification remains closed.⁹

The EEO-1 Report

The written AAP submission for EO 11246 is gone, but the EEO-1 report is a separate obligation and remains fully in force. Private employers with 100 or more employees, and federal contractors with 50 or more employees meeting certain criteria, must still file this annual demographic report with the EEOC.¹⁰ Failure to file can result in court orders compelling disclosure or the loss of federal contracts. Payroll and personnel records should be kept for at least two years; if the EEOC or OFCCP opens an inquiry, those records carry the burden of showing decisions were legitimate.

What OFCCP Audits Now Look At

The OFCCP has not gone away. Its mission narrowed, but audit activity has reportedly grown, with reviews now focused entirely on Section 503 and VEVRAA. Reviewers look at:

Applicant flow data tracked by disability status and veteran status.
Outreach documentation for the preceding two years, including job postings, distribution channels, and contact records for recruitment directed at individuals with disabilities and veterans.
State job bank listings, since VEVRAA requires contractors to list openings with the appropriate state employment service delivery system.
Reasonable accommodation records for recruitment and employment.
Written policies documenting good-faith recruitment efforts under both statutes.

Contractors who assumed the end of EO 11246 meant the end of OFCCP oversight will find that assumption incorrect during an audit.

Voluntary Diversity Programs

Nothing in EO 14173 forbids contractors from pursuing a diverse workforce through lawful means. A company can recruit broadly, partner with community organizations, and set internal goals. What changed is that the federal government no longer requires any of it as a condition of doing business.

The line to watch is the one the new DEI certification clause draws. A voluntary program that broadens the applicant pool through outreach is different from a program that gives preferential treatment based on race in hiring or promotion. The first is generally lawful. The second risks triggering the certification clause and False Claims Act exposure. Contractors that keep voluntary programs should document that those programs comply with Title VII and do not involve the race-based preferences the clause targets.

For disability-related programs, the Section 503 regulations explicitly permit voluntary training and employment programs for employees with disabilities, calling them “permissible, though not required.”¹¹ Contractors that run these must describe them in their written Section 503 affirmative action program and may not use them to segregate or limit opportunities for participants.

Debarment and Enforcement Risk

Contractors that violate federal non-discrimination law or the new DEI certification clause face debarment, which bars a company from bidding on or receiving federal contracts for a set period. Under the Federal Acquisition Regulation, debarment can follow from fraud, criminal offenses connected to a public contract, false statements, or “any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor.”¹² The March 2026 order makes debarment an explicit enforcement pathway for DEI certification violations, alongside contract termination and False Claims Act suits.⁴

For contractors whose revenue depends on government work, debarment is an existential risk. Compliance under the new regime is not simpler, only different. The exposure now runs toward programs the government considers discriminatory rather than toward doing too little outreach, and reviewing existing internal programs against the certification clause is where most compliance attention belongs.

1
The White House. Executive Order 14173 – Ending Illegal Discrimination and Restoring Merit-Based Opportunity
2
Federal Register. Executive Order 14173 – Ending Illegal Discrimination and Restoring Merit-Based Opportunity
3
Federal Register. Ending Illegal Discrimination and Restoring Merit-Based Opportunity
4
The White House. Addressing DEI Discrimination by Federal Contractors
5
U.S. Department of Labor. Section 503 of the Rehabilitation Act
6
eCFR. 41 CFR Part 60-300 – Affirmative Action and Nondiscrimination Obligations of Federal Contractors and Subcontractors Regarding Disabled Veterans, Recently Separated Veterans, Active Duty Wartime or Campaign Badge Veterans, and Armed Forces Service Medal Veterans
7
U.S. Department of Labor. Jurisdiction Thresholds and Inflationary Adjustments
8
Federal Register. Modifications to the Regulations Implementing Section 503 of the Rehabilitation Act of 1973, as Amended
9
U.S. Department of Labor. Office of Federal Contract Compliance Programs
10
U.S. Equal Employment Opportunity Commission. EEO-1 (Employer Information Report) Statistics
11
eCFR. 41 CFR Part 60-741 – Affirmative Action and Nondiscrimination Obligations of Federal Contractors and Subcontractors Regarding Individuals with Disabilities
12
Acquisition.gov. Federal Acquisition Regulation Subpart 9.4 – Debarment, Suspension, and Ineligibility