outsolve insights

This article is part of an ongoing legal series designed to provide insight and practical guidance on current and emerging workplace compliance issues. These insights shared by lawyers are based on their interpretation of existing regulations and proposed changes, and intended for informational purposes, not to be regarded as legal advice.  

This article provides strategic guidance for employers, as outlined by OutSolve and Roffman Horvitz.

On March 26, 2026, President Trump issued a new Executive Order 14398: “Addressing DEI Discrimination by Federal Contractors.”The EO addresses DEI activities that discriminate via disparate treatment by race or ethnicity. The EO does not cover disparate treatment for other categories such as sex, national identity, religion, age, and disability status.

In a landmark enforcement action, IBM has agreed to pay $17,077,043 to resolve allegations that it violated anti-discrimination laws related to their employment practices and DEI programs. This marks the first major False Claims Act violation penalized under the Civil Rights Fraud Initiative, which officially launched in May 2025.

Top Takeaways for HR

• Federal contractors who certify compliance with non-discrimination laws while maintaining DEI programs that include demographic preferences or targets may be held liable for fraud, resulting in severe financial penalties and potential contract debarment under the False Claims Act.
• The government specifically identified "diversity modifiers" in bonuses, "diverse interview slates," and restricted access to mentorship or training based on race or sex as illegal discriminatory practices that triggered the $17M settlement for IBM.
• Under the March 2026 Executive Order 14398, prime contractors are now legally responsible for monitoring their subcontractors for "racially discriminatory DEI activities" and must provide the government with full access to internal records upon demand to prove compliance.

Information in this blog is based on a webinar OutSolve hosted on March 11, 2026 titled DEI Developments in 2026: An Employer Update from OutSolve and Roffman Horvitz. You can download the recording here.

In January 2025, President Trump issued Executive Order (EO) 14173. The EO ordered government agencies, contractors, and other federally funded organizations to stop DEI programs that violate Federal civil rights laws. The General Services Administration (GSA) is proposing to add new certification language regarding unlawful DEI programs in the System for Award Management (SAM) for entities registering for eligibility for federal financial assistance (i.e., grants).

The recent letter from the EEOC to Fortune 500 leadership signals a renewed focus on ensuring Diversity, Equity, and Inclusion (DEI) initiatives align strictly with Title VII and other non-discrimination mandates. While the agency confirms that most inclusion efforts remain lawful, employers must now carefully distinguish between broad outreach programs and decision-making processes that could be viewed as using protected traits like race or sex as determining factors. 

After several years of litigation, the Office of Federal Contract Compliance Programs (OFCCP) will be posting federal contractor EEO-1 race/ethnicity and gender data from 2016-2020 in response to a Freedom of Information Act (FOIA) request from the Center for Investigative Reporting (CIR). The data will be posted on February 25, 2026.

For decades, HR compliance followed a predictable rhythm. Federal guidance set the baseline, state laws made some adjustments, and you audited your HR processes annually. If a gap appeared, you fixed it. 

Best Practices for Federal Contractor Employers in 2026