The New DEI Executive Order: Risks and Requirements-On-Demand Recording

Video Transcription

Video Summary

The webinar featured Keeley McCarty discussing the new DEI Executive Order 14398, its risks, and compliance requirements for federal contractors. She began with legal fundamentals, explaining the False Claims Act, which the administration is using as an enforcement tool, and federal anti-discrimination laws such as Title VII of the Civil Rights Act. McCarty noted that the government is treating certain DEI-related practices as potentially discriminatory and material to payment decisions under federal contracts.<br /><br />She reviewed earlier executive orders from 2025 that eliminated prior affirmative action requirements for women and minorities in federal contracting, while still allowing obligations related to veterans and individuals with disabilities. The newest order, signed March 26, 2026, requires a new FAR clause, 52.222-90, to be included in federal contracts, subcontracts, and some contract-like instruments. The clause prohibits “racially discriminatory DEI activities,” including race-based preferences in hiring, contracting, program participation, and resource allocation.<br /><br />McCarty emphasized that the clause is limited to federal contract performance, but it must be flowed down to subcontractors. Contractors may face termination, suspension, debarment, and False Claims Act exposure for noncompliance. She recommended reviewing DEI policies, employee resource groups, recruiting practices, supplier diversity efforts, and subcontractor agreements; updating training; and documenting compliance decisions carefully.<br /><br />During Q&A, she clarified that the order likely does not apply to grants, but state or mixed-funding contracts may raise issues depending on whether the clause is included. She also stressed that broader employer obligations under federal anti-discrimination law still apply beyond federal contracting.

Keywords

DEI Executive Order 14398

federal contractors

False Claims Act

Title VII

FAR clause 52.222-90

racially discriminatory DEI activities

federal contract compliance

subcontractor flowdown

affirmative action requirements

anti-discrimination laws