Managing Divergence in DEI Obligations Globally

The US position

Within the first week of his Presidency, President Trump fulfilled his campaign promise to dismantle DEI programs by issuing several Executive Orders.

On Day 1, the President issued Executive Order 14151: Ending Radical And Wasteful Government DEI Programs And Preferencing. The Order focuses on dismantling DEI initiatives within the federal government as well as “equity-related” federal grants and contracts.

On Day 2, the President issued Executive Order 14173: Ending Illegal Discrimination and Restoring Merit-Based Opportunity. The Order directs US enforcement agencies to combat “illegal private-sector DEI preferences, mandates policies, programs, and activities”. It required the Attorney General to issue a report within 120 days identifying the “most egregious and discriminatory DEI practitioners” in sectors deemed “of concern”, and to direct heads of US enforcement agencies each to identify “up to nine potential civil compliance investigations” within specific categories, including “publicly traded corporations”, “foundations with assets of 500 million dollars or more” and “institutions of higher education with endowments over 1 billion dollars”. (The report was not issued on May 21. It is unclear whether or not the report was completed but not published.) The Order also directs federal agencies to seek certification from any federal contractor or grant awardee that it “does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws”.

Although the Executive Orders take aim at “illegal DEI” and programs “promoting DEI”, it does not define those terms.  In the months following these Orders, several agencies have issued guidance providing more insight into the Administration’s views. Most relevant for the private sector, on March 19, 2025 the Equal Employment Opportunity Commission (“EEOC”) issued new guidance, “What You Should Know About DEI-Related Discrimination at Work.” The guidance puts forth a very aggressive interpretation of what constitutes actionable discrimination under Title VII, the federal law that prohibits employment discrimination on the basis of race, color, religion, sex, or national origin.

While the EEOC guidance acknowledges that a worker must show “some injury” or “some harm” to bring an action under US civil rights laws, its list of employment actions that, in the EEOC’s view, are actionable is extremely expansive. In addition to hiring, firing, promotion, demotion, compensation, and fringe benefits, the list also includes:

• “Access to or exclusion from training (including training characterized as leadership development programs)”
• “Access to mentoring, sponsorship or workplace networking/networks”
• “Internships (including internships labeled as ‘fellowships’ or ‘summer associate’ programs)”
• “Selection for interviews, including placement or exclusion from a candidate ‘slate’ or pool”
• “Job duties or work assignments.”

This creates risk of enforcement with respect to an incredibly range of workplace initiatives.

Most recently, on May 19, 2025 the US Deputy Attorney General published a memorandum announcing a new Civil Rights Fraud Initiative (the “Deputy Attorney General Memorandum”), to be co-led by the Department of Justice’s Civil Division’s Fraud Section and its Civil Rights Division. The intention of this initiative is to deploy the civil False Claims Act of 1863 (“FCA”) where “a federal contractor or recipient of federal funds knowingly violates civil rights laws […] and falsely certifies compliance with such laws”. The Civil Rights Fraud Initiative builds on the DEI Executive Orders which directed agencies to require federal contractors or grant awardees to affirmatively acknowledge that their compliance with federal civil rights laws is “material to the government’s payment decisions” under the FCA.

Sanctions under the FCA are significant and may include civil penalties, treble the damages the government has sustained, and liability for the costs of civil actions brought by the government to recover any penalty or damages. Importantly, private litigants can also bring FCA claims – expanding the universe of potential enforcement actions. In the memorandum, the Department of Justice “strongly encourages” private parties to use the mechanisms under the FCA to litigate claims (so-called “qui tam” actions). It also encourages “anyone with knowledge of discrimination by federal-funding recipients to report that information to the appropriate federal authorities”.

The EU and UK position

Across the pond in the EU and UK, there are multiple legal requirements, some of which are in tension with the Trump administration’s policies.

Of particular note for companies that are listed (or have subsidiaries listed) in Europe is the European Women on Boards Directive adopted in November 2022, which requires EU member states to pass national laws to ensure women are better represented on boards.

Many EU states have either implemented the Directive into their national laws or already had in place national legislation achieving (or even exceeding) its requirements. Two key examples are France and Germany, which both have in place legislation requiring quotas for gender balance on boards and in management positions of listed companies.

Under the French Rixain Act, from March 2026 large French companies (over 1,000 employees) are required to ensure a minimum 30% gender balance on their management boards and in senior management teams (increasing to 40% from 2029). Failure to meet the quotas can result in penalties of up to 1% of aggregate French payroll.

Under the German FüPoG II, listed and parity co-determined companies are required to ensure a minimum 30% gender balance on their management boards (consisting of more than three members).  Companies in which the federal government holds a majority stake, are required to meet the quota regardless of whether they are listed on the stock exchange if there are more than two members on the management board.  Failure to meet the quota can result in the appointment or election of the board member being invalid and decisions nullified accordingly.

The law also includes an obligation for listed or co-determined companies to publish targets for the proportion of women in management positions and an obligation to provide reasons if the target is set at zero. A breach of either the obligation to publish the targets or to provide reasons for setting a target of zero are subject to administrative fines which can be up to 10 million euros or 5% of global sales.

There may also be risks arising in respect of government contracts. UK-government policy has increasingly encouraged contracting authorities to take account of “social value” when awarding government contracts. The “Social Value Model”, which government contracting authorities are instructed to follow, sets out examples of activities that demonstrate social value, e.g.

• having a “time-bound” action plan to ensure workforces reflect the diversity of the communities in which they operate;
• having numerical targets for the numbers of people from under-represented groups in the workforce and on particular training schemes;
• “positive action” schemes to address under-representation in certain pay grades; and
• ensuring people with protected characteristics are on shortlists for recruitment and promotion.

Put simply, the dismantling of an organization’s DEI programs may risk making its bids for government contracts in the UK less attractive to the contracting authority. It may also place those businesses in breach of existing obligations under contracts with the government, given that the social value requirements of a procurement process are typically incorporated within the terms of the final contract. Past contractual breaches of government contracts that result in termination, damages, or a settlement agreement are also grounds under the PA 2023 for discretionary exclusion of a supplier from a tender process.

The challenge for global businesses

The dissonance between competing obligations places those with transatlantic businesses in an invidious position.

This is particularly so for organizations that supply the US federal government, as well as governments in the UK and Europe, where compliance with DEI obligations from one side of the pond risks hamstringing their ability to win contracts on the other.

The risk is not hypothetical.  There have already been high-profile examples of the Trump administration putting pressure on corporates to drop their DEI programs in exchange for favorable treatment by government decision makers.

By the same token, we have seen UK contracting authorities excluding suppliers from tender processes where the press has reported that they have watered down DEI commitments. US embassies in Europe have also written to certain of their contractors requesting assurances that they do not operate DEI programs that violate US anti-discrimination laws. The French government has responded by saying that such letters are an attempt to impose a diktat on French businesses.

This scenario also presents a cultural challenge, given how decisive a particular course of action might prove for a company’s workforce, customers, or other stakeholders. Any decision to row back DEI programs risks disenchanting constituencies within a business, which risks a loss of talent.

But this is set against the whistleblower risks of not taking steps to rollback such initiatives. This may come in multiple forms, whether through leaks to the press or reports to the EEOC or other agencies, or through the involvement of other actors. High-profile influencer Robbie Starbuck has described how important the role of whistleblowers can be in instigating a public campaign against a company’s DEI programs. The DoJ’s Civil Rights Fraud Initiative, and its encouragement of whistleblowing or qui tam actions under the FCA adds further potency to such risks.

Addressing the conundrum

There is no one-size-fits all answer to this predicament.  Businesses will need to be develop bespoke strategies according to their own geographical footprint, as well as the make-up of its stakeholders (with any relationships with particular governments around the world being a key determiner of the appropriate approach). Risk mitigation is essential, but no easy task.With that in mind, we recommend companies take the following steps:

• Conduct a DEI audit and compliance assessment, involving jurisdiction-specific advice and analysis. Using this, it may be possible to put in place local adaptations to DEI programs that might previously have had global application.
• Companies need to consider both the substance of their initiatives and how they frame and describe them to mitigate risk.
• Particular consideration should be given to the dimension of any live government contracts or opportunities. Each business’s approach will need to take account of the strategic significance of such contracts, and how any changes to DEI programs might impact the ability to win those contracts or achieve compliant performance.
• Given the charged nature of the debate, any changes to a business’s approach to DEI will need to be communicated carefully and consistently with internal and external stakeholders.

Notwithstanding the challenges these issue raise, carrying out these actions can help craft a strategy to balance the legal, commercial, political, and reputational risks faced by each company in light of its specific circumstances.