President Trump issued an executive order on 21 January 2025 entitled ‘Ending Illegal Discrimination and Restoring Merit-Based Opportunity”. This order aims to end certain hiring and funding practices relating to Diversity, Equity and Inclusion (DEI) initiatives.

There are three main provisions in this order.

  1. Reversal of Prior DEI Policies – the order terminates previous executive orders that promoted DEI in employee hiring, education and grant funding.
  2. Federal Contractor Restrictions – federal contracts must certify they do not use any gender- or race-based training programs, which could be viewed as discriminatory.
  3. Removal of Funding from Specific Nonprofit Initiatives – in order to receive federal grants, nonprofits must ensure their programs align with merit-based principles instead of prioritizing specific demographic groups.

This executive order impacts the practices of businesses. Employers should do the following activities as soon as possible.

  1. Review DEI Training Materials – determine if your current workplace diversity programs comply with the executive order. Adjust the policies as needed. The Davidson Group is working with clients to review their training materials.
  2. Ensure Legal Compliance – consult your legal representative to identify if your DEI policies have potential risks. Organizations the promote DEI initiatives may face legal challenges if an employee claims that their policies violate the executive order. Check that your DEI programs comply with state and federal requirements.
  3. Audit Hiring and Human Resources (HR) Practices – review and update hiring initiatives that favor specific demographics. Analyze if current practices are compliant with the new regulations.

Nonprofit organizations also need to review their policies. They need to update their program narratives to broad-based inclusion instead of identify-based equity. To replace federal funding, nonprofits should seek funding from philanthropic funding and grants from the private sector. They also need to comply with guidelines from federal funding sources.

We recommend that organizations focus on culture-building initiatives. Contact the Davidson Group for advice on DEI-related initiatives.

As this is a highly-debated topic, here is link to a blog post with additional viewpoints.