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In her recent remarks, former OFCCP Director Catherine Eschbach emphasized that the compliance environment for federal contractors is undergoing a profound transformation under Executive Order 14173, "Ending Illegal Discrimination and Restoring Merit-Based Opportunity." She explained that this order establishes a "whole-of-government approach" to identifying and eliminating unlawful DEI practices, meaning that oversight will no longer rest solely with the OFCCP. Instead, agencies that award grants, approve mergers and licenses, or enforce the False Claims Act will also scrutinize employers' inclusion and diversity programs to ensure they do not cross into impermissible territory.
For decades, federal contractors operated under Executive Order 11246, which required affirmative action programs and race- or gender-based placement goals. EO 14173 rescinds that framework, shifting the government's focus toward a strictly merit-based system that prohibits preferential treatment on the basis of race, color, or sex. In its place, the OFCCP is refocusing its enforcement priorities toward other statutes, particularly Section 503 of the Rehabilitation Act, which covers individuals with disabilities, and the Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA), which governs employment of protected veterans.
Eschbach urged contractors to use this transitional moment to re-evaluate legacy programs that once blended affirmative action and DEI initiatives. She advised that employers should ask themselves whether such programs make sense legally, ethically, or strategically in today's environment, and to pay close attention to how demographic and employment data are collected and used. Demographic data can still be gathered for compliance monitoring, but she cautioned that using such information to influence hiring or promotion decisions could expose organizations to legal risk.
Finally, Eschbach recommended that organizations seek new compliance perspectives. She noted that the government is listening to critics of race- and sex-based employment practices and urged HR leaders to remain informed and adaptable, even when the feedback challenges established norms.
From a legal and regulatory standpoint, EO 14173 reshapes the foundation of contractor compliance:
- It revokes prior executive orders tied to federal contractor affirmative action mandates, including EO 11246.
- It requires certification that contractors comply with all federal nondiscrimination laws and do not operate DEI programs that violate them while making such compliance material to payment decisions under the False Claims Act (FCA).
- It preserves core nondiscrimination obligations under Title VII, the ADA, and the ADEA, ensuring that equal opportunity remains a legal requirement, even without affirmative-action plans.
- It is already facing litigation on constitutional grounds, as courts evaluate the scope and enforceability of its certification provisions.
- And finally, the OFCCP's guidance confirms the agency's pivot away from EO 11246's affirmative-action mandates toward the enforcement of Section 503 and VEVRAA.
Together, Eschbach's insights and these legal changes create a new compliance horizon, one focused on merit, data discipline, and proactive risk management rather than numeric goals or race- and gender-based targets.
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