Executive Order 14398, signed on March 26, 2026, represents a significant shift in federal contracting policy regarding diversity, equity, and inclusion (DEI) practices. The order is part of a broader policy direction emphasizing “merit-based” employment practices and stricter enforcement of federal civil rights laws in the contractor community.

EO 14398 aims to eliminate what it characterizes as discriminatory DEI practices within federal contracting. It requires federal agencies to ensure that contractors and subcontractors do not engage in DEI-related activities that involve preferential treatment or discrimination based on protected characteristics such as race or sex. The order builds on earlier policy developments that reframe DEI programs as potentially violating civil rights laws, emphasize race-neutral and sex-neutral employment practices, and increase scrutiny of contractor policies, training, and workforce decisions.

While implementing regulations and contract clauses will ultimately define the full scope, the order establishes several clear requirements. At its core, EO 14398 prohibits federal contractors from engaging in DEI programs that provide preferential treatment based on race, sex, or other protected characteristics (which have always been illegal), use quotas, targets, or workforce balancing tied to identity categories, or condition employment decisions on demographic factors.

The EO requires federal agencies to include provisions in contracts explicitly prohibiting discriminatory DEI practices are flowed through to subcontractors and vendors and make compliance a condition of receiving federal funds. The order continues a trend seen in earlier directives by scrutinizing training programs to ensure they not include content deemed discriminatory or preferential, evaluate supplier diversity programs, avoid concepts that assign blame or responsibility based on identity, and always remain consistent with equal employment opportunity principles.

Contractors should take this opportunity to review and update their policies as necessary and review any training materials to ensure consistency across HR, legal, and compliance documents. Contractors should be careful to avoid "overcorrection" which goes beyond what is necessary and create unintended discrimination liability for disabled individuals under Section 503 of the Rehabilitation Act, veterans under the Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA), and state or local requirements. The uncertainty created by this EO will certainly spawn litigation challenging different aspects of it and its anticipated enforcement which will help fill in some obvious gaps.  

If you need assistance in reviewing your policies and practices, RKW is here to help.