COMPLIANCE CORNER - APRIL 2026

On March 26, 2026, President Trump issued an Executive Order aimed at preventing “racially discriminatory DEI activities.” The EO target 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. Program participation is defined as “membership or participation in, or access or admission to: training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities that are sponsored or established by the contractor or subcontractor.”

For Federal Contractors, all executive departments and agencies have been directed to include the following clause in all contract and contract-like instruments: In connection with the performance of work, [the contractor/appropriate party (contractor)] agrees as follows:

1. The contractor will not engage in any racially discriminatory DEI activities, as defined in section 2 of the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors);
2. The contractor will furnish all information and reports, including providing access to books, records, and accounts, as required by the contracting agency pursuant to the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors), for purposes of ascertaining compliance with this clause;
3. In the event of the contractor’s or a subcontractor’s noncompliance with this clause, this contract may be canceled, terminated, or suspended in whole or in part, and the contractor or subcontractor may be declared ineligible for further Government contracts;
4. The contractor will report any subcontractor’s known or reasonably knowable conduct that may violate this clause to the contracting department or agency and take any appropriate remedial actions directed by the contracting department or agency;
5. The contractor will inform the contracting department or agency if a subcontractor sues the contractor and the suit puts at issue, in any way, the validity of this clause; and
6. The contractor recognizes that compliance with the requirements of this clause are material to the Government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code (False Claims Act).”

Guidance on this Executive Order is to be issued by the Office of Management and Budget. The EO outlines a notable shift from “unlawful DEI” to “racially discriminatory DEI activities.” This seems to address race and no other protected characteristics. Non-compliance with the terms of the Executive Order may result in contract termination, cancellation, suspension, suspension or debarment for failure to comply and liability under the Criminal or Civil Federal False Claims Act.

In summary, Contractors will need to agree (by contract) not to engage in discriminatory DEI activities. This EO reinforces anti-discriminations employers already have under the law. You should be ready to provide access to books, records and accounts to demonstrate compliance. There is a requirement to report known or reasonably knowable violations by subcontractors and to take remedial actions. As always, where obligations flow down to third parties it is a good idea to review contractual language to make sure it aligns with the current EO language.