You may have heard media reports of President Trump’s Executive Order regarding “critical race theory” and diversity training that dominated the news a couple of weeks ago.  The media focused on the racial and sex stereotyping aspects of the Executive Order, but since has moved on to other issues in this politically-charged season.

However, if your business: (1) holds any government contracts; (2) subcontracts from a government contractor; or (3) provides goods or services that are used by a government contractor, you do not have the luxury to move on to other matters.  That’s because the Executive Order can have a severe impact on your business.

The Executive Order covers a lot of ground, much of it unrelated to businesses and government contracts.  But, among the items directly affecting businesses providing services under a government contract is a prohibition on the use of any workplace training “that inculcates in its employees any form of race or sex-stereotyping or any form of race or sex scapegoating.”  This language is somewhat vague, but the Executive Order has the potential to affect any type of diversity training that your business conducts – even if the diversity training is required by other regulations or laws.

And the penalties of not complying with the Executive Order can be great: the government contract can be canceled, terminated, or suspended, and the contractor can be declared ineligible for future government contracts.

As could be expected, legal challenges are already underway. But, at least at this time, the Executive Order is in force. Here are some points you need to know:

• All government contracts issued on and after November 21, 2020, must include a clause containing the Executive Order’s restrictions. The Order could also apply to all options and renewals of existing contracts. So, while your current contracts should avoid the dictates of the Order, that can change at their first renewals.
• The Executive Order flows down to subcontractors and vendors. So, it can apply to your business even if you don’t hold the contract.
• Employees, subcontractors, and others can report if diversity trainings in violation of the Executive Order are taking place. A hotline will be established for the reporting of complaints, and the government is expected to investigate the complaints.

So, it is probably a good idea to review all of the training programs that your business provides, either under a government contract or in support of one.  Also, if you are expecting to get a new government contract after November 21^st, or an option renewal, it is a good idea to read up on and understand how the Executive Order can affect your business.

We are here to help.