On January 21, 2025, President Trump signed Executive Order (EO) 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This sweeping measure reverses decades of affirmative action policy in federal contracting by rescinding Executive Order 11246, first enacted in 1965. For businesses and nonprofits in Virginia that hold or hope to secure federal contracts, this change represents a fundamental shift in compliance obligations and workplace policy. EO 14173 has immediate effects, including halting federal enforcement of diversity, equity, and inclusion (DEI) mandates, introducing new certification requirements, and reshaping how federal contracts are awarded and monitored.
Key Changes Under EO 14173
1. End of Affirmative Action Mandates: EO 14173 rescinds EO 11246, which required federal contractors to adopt affirmative action plans. The EO instructs agencies to cease investigations and enforcement actions based on DEI or affirmative action requirements.
2. 90-Day Grace Period: Contractors had until April 21, 2025 to transition from the old rules to the new requirements. Any contracts executed after that date must comply with EO 14173’s framework.
3. New Contract Clauses: Federal contracts now require a materiality clause, making civil rights compliance central to payment obligations. Contractors must certify that they do not operate DEI programs that violate federal anti-discrimination laws.
4. FAR Clause Revocations: On March 4, the Department of Defense issued Class Deviation 2025-O0003, which directs contracting officers to no longer use/remove from existing contracts, the Federal Acquisition Regulation (FAR) clauses related to affirmative action (FAR 52.222-21 through 52.222-27, among others), rendering them inoperative.
5. Ongoing Obligations: While the EO eliminates affirmative action for protected classes, obligations under VEVRAA (veterans) and Section 503 of the Rehabilitation Act (individuals with disabilities) remain in force.
What This Means for Virginia Contractors
For-Profit Businesses: Businesses with federal contracts should engage a Dunlap Law attorney to immediately review existing and pending contracts to confirm compliance with the new certification requirements. Hiring and training policies may need revisions, especially if structured around DEI language or goals that could be seen as inconsistent with EO 14173. Contractors face False Claims Act risks if they certify compliance but maintain non-compliant programs. The False Claims Act allows the federal government, and whistleblowers in an organization, to pursue penalties when a contractor knowingly makes false statements tied to federal funds. In this context, signing a certification while continuing to operate programs that conflict with EO 14173 could be treated as a “false claim,” possibly exposing contractors to severe financial penalties and reputational harm, discouraging agencies from awarding future contracts.
Nonprofit Organizations: Equally subject to EO 141732, nonprofits with federal contracts face similar risks. Many nonprofits provide educational, social service, or healthcare programs under federal contracts. While nonprofits often integrate DEI principles into their missions, programs that explicitly preference hiring or benefits based on race, gender, or other protected characteristics may need restructuring. Dunlap Law’s government contracting attorney, Heather Miller, can help nonprofits avoid risks related to EO14173.
Compliance Strategies
1. Audit Current Policies: Work with a Dunlap Law attorney to review internal policies, training, and hiring practices for alignment with EO 14173.
2. Revise Contract Language: Have one of our business attorneys identify DEI-oriented contract language that could be flagged as non-compliant and revise it to comply.
3. Document Compliance: Maintain clear records to demonstrate adherence to anti-discrimination laws and removal of DEI-related obligations.
4. Monitor OFCCP Updates: Comments on new DOL regulations issued July 1, 2025 are due by September 2, 2025.
EO 14173 marks one of the most significant shifts in federal contracting in decades. For Virginia businesses and nonprofits, the implications reach far beyond contract language. They require careful reevaluation of hiring practices, workplace culture initiatives, and compliance strategies. Organizations that fail to adapt risk losing federal contract opportunities and face potential legal exposure under the False Claims Act.
If your organization holds or is pursuing federal contracts, now is the time to have an attorney review and update your policies, legal documents, and compliance frameworks. An experienced business attorney at Dunlap Law can help you assess risks, update contracts, and position your organization to remain competitive in this new legal environment.
This material is for informational purposes only. It is not intended as legal advice and does not create an attorney-client relationship between its readers and Dunlap Law. Consult an attorney before taking action on issues outlined here. This is attorney ADVERTISING MATERIAL.
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