News

On September 22, 2020, President Trump issued an Executive Order (E.O.) titled, “Combating Race and Sex Stereotyping” prohibiting certain types of training for federal agency employees, federal contractor employees, employees of federal grant recipients, and the United States Uniformed Services. In short, the E.O. aims to ban the use of training materials that contain “divisive concepts,” specifically race or sex “stereotyping” or “scapegoating.”

The E.O. itself is somewhat unusual and was issued in an unusual way leaving more questions at this point than answers. Most importantly, the E.O. appears to be attempting to circumvent the usual process by which presidents order federal agencies to act, followed by a rulemaking process governed by the Administrative Procedures Act (APA) to formulate and enact regulations implementing the E.O. and making the requirements binding. Attorneys: see “Enforcement Madness” below for more detail.

As a result, although the E.O. appears to take effect immediately, it is unclear when any of its provisions actually become binding and enforceable on federal contractor employers. And, to a certain extent, it is unclear what form certain provisions will ultimately take. For example, the E.O. requires contractors to provide union representatives with a notice regarding the provisions and obligations of the E.O. and to post such notices on company bulletin boards, but it is unclear whether or not the OFCCP can cite a contractor for violating that requirement without implementing regulations on the books (not to mention they have to provide contractors with the notice first).

Unless and until the OFCCP weighs in with guidance, we are speculating to a certain extent, but BCGi members are asking questions, so below is an overview of what we know so far and what we think will happen next.

But before we dive into the details, let’s make one thing clear: nothing happens yet. There are currently no federal contracts binding the contractor to any provision prohibiting any type of employee training. Federal contracting agencies are not required to include the new contract provision barring certain types of training until November 21, 2020. New contracts and contract renewals entered into on or after that date should carry this new provision, but it is still unclear whether and to what extent there is a sufficient enforcement mechanism, much less what enforcement will “look” like.

What we know is that the E.O. provides a new clause for federal contracts and subcontracts prohibiting the contractor from including certain “divisive concepts” in employee training materials. The enforcement mechanism appears to be limited to the OFCCP investigating individual complaints. The only remedies provided for violations appear to be contract cancelation, termination, suspension, or contractor debarment, though such extreme measures will likely remain rare. And there will be some form of reporting required.

The Contract Clause

Beginning November 21, 2020, the E.O. orders all federal contracting agencies to include the following clause in all federal contracts subject to the existing Equal Opportunity Clause pursuant to E.O. 11246:

“During the performance of this contract, the contractor agrees as follows:

1. The contractor shall not use any workplace training that inculcates in its employees any form of race or sex stereotyping or any form of race or sex scapegoating, including the concepts that (a) one race or sex is inherently superior to another race or sex; (b) an individual, by virtue of his or her race or sex, is inherently racist, sexist, or oppressive, whether consciously or unconsciously; (c) an individual should be discriminated against or receive adverse treatment solely or partly because of his or her race or sex; (d) members of one race or sex cannot and should not attempt to treat others without respect to race or sex; (e) an individual’s moral character is necessarily determined by his or her race or sex; (f) an individual, by virtue of his or her race or sex, bears responsibility for actions committed in the past by other members of the same race or sex; (g) any individual should feel discomfort, guilt, anguish, or any other form of psychological distress on account of his or her race or sex; or (h) meritocracy or traits such as a hard work ethic are racist or sexist, or were created by a particular race to oppress another race. The term “race or sex stereotyping” means ascribing character traits, values, moral and ethical codes, privileges, status, or beliefs to a race or sex, or to an individual because of his or her race or sex, and the term “race or sex scapegoating” means assigning fault, blame, or bias to a race or sex, or to members of a race or sex because of their race or sex.

2. The contractor will send to each labor union or representative of workers with which he has a collective bargaining agreement or other contract or understanding, a notice, to be provided by the agency contracting officer, advising the labor union or workers’ representative of the contractor’s commitments under the Executive Order of September 22, 2020, entitled Combating Race and Sex Stereotyping, and shall post copies of the notice in conspicuous places available to employees and applicants for employment.

3. In the event of the contractor’s noncompliance with the requirements of paragraphs (1), (2), and (4), or with any rules, regulations, or orders that may be promulgated in accordance with the Executive Order of September 22, 2020, this contract may be canceled, terminated, or suspended in whole or in part and the contractor may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order 11246, and such other sanctions may be imposed and remedies invoked as provided by any rules, regulations, or orders the Secretary of Labor has issued or adopted pursuant to Executive Order 11246, including subpart D of that order.

4. The contractor will include the provisions of paragraphs (1) through (4) in every subcontract or purchase order unless exempted by rules, regulations, or orders of the Secretary of Labor, so that such provisions will be binding upon each subcontractor or vendor. The contractor will take such action with respect to any subcontract or purchase order as may be directed by the Secretary of Labor as a means of enforcing such provisions including sanctions for noncompliance: Provided, however, that in the event the contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction, the contractor may request the United States to enter into such litigation to protect the interests of the United States.”

This new contract clause is subject to the familiar “flow-down” requirement for subsequent federal subcontracts. As it stands, the entire four paragraph clause must be included in contracts and subcontracts verbatim. However, it is a fairly safe bet that the OFCCP will integrate these paragraphs into the existing EO Clause in the agency’s regulations implementing E.O. 11246, allowing contractors to include the clause by reference.

Effect on Training Materials

Many other commentators are sounding the alarm that the new E.O. could “severely limit” or “curtail” diversity training, harassment training, etc. that federal contractors are legally allowed to provide their employees, but this commentator is not so sure that is true. Most federal contractor training programs—whether legal compliance training or diversity training more broadly—are unlikely to be affected because the E.O. is concerned with more extreme or “fringe” concepts that are simply not that common to begin with and not likely to be approved by many employers.

The “divisive concepts” prohibited by the E.O. are already largely prohibited, either explicitly or implicitly by the federal non-discrimination laws themselves. For example, the E.O. prohibits training employees that “an individual should be discriminated against or receive adverse treatment solely or party because of his or her race or sex.” That is simply a somewhat clunky but nonetheless accurate restatement of Title VII.

Others might not be prohibited, per se, but are viewed by most legitimate diversity professionals as unproductive, such as shaming individuals for their race or sex, or teaching that one race or sex is inherently superior to another.

Most contractors are highly unlikely to find these “divisive concepts” in their existing training materials. If you are or have been considering more “cutting edge” diversity training, you might want to hit pause and review those materials, regardless of whether or not the E.O. is in play.

Take a close look at those prohibited concepts, though. Note, for example, that the E.O. does not prohibit unconscious bias training across the board. Rather, it prohibits teaching that only people of a particular race or sex are capable or “guilty” of unconscious bias. This author is not aware of any legitimate diversity training that would approach the subject that way.

Oddly, for federal grant recipients, federal agencies, and the military, there is a ninth prohibited concept: that the United States is fundamentally racist or sexist. For some reason, that was not included in the prohibited concepts for federal contractor training programs. That is not to say that BCGi recommends contractors include such a concept in their employee training; we are simply noting a potential oversight or unexplained inconsistency in the E.O.

Notice Requirement

The new contract clause requires federal contractor employers that hold collective bargaining agreements to provide union representatives with a notice regarding the contractor’s new obligations, and to post such notices on company bulletin boards. The notice itself is to be provided by the “agency contracting officer,” though it will likely be developed by the OFCCP and will likely take the form of a policy statement. The E.O. does not purport to create any new obligations for the unions themselves.

Oddly, there appears to be no provision for non-unionized employers to provide notice to employees of these new provisions. However, though the sentence construction is strained, the OFCCP will likely interpret the clause to require non-union employers to display a policy statement for employees and applicants. Otherwise, there is a giant hole in the E.O.’s enforcement mechanism for non-unionized federal contractor employers (see “Enforcement Madness” below).

The notice developed by the OFCCP for contractor use is likely to include information regarding the new “hotline” for reporting violations as that appears to be the only explicit enforcement mechanism.

Reporting Requirement?

Perhaps the most cryptic provision in the E.O. directs the OFCCP to publish a “request for information” in the Federal Register regarding “the training, workshops, or similar programming provided to employees,” requesting “copies of any training, workshop, or similar programing having to do with diversity and inclusion as well as information about the duration, frequency, and expense of such activities.”

Exactly how this provision will be carried out remains to be seen. This portion of the E.O. clearly triggers provisions in the Paperwork Reduction Act that will require the OFCCP to first obtain approval from the White House Office of Management and Budget (OMB) for the information collection. Presumably, approval will be granted, but the process is not a quick one. Typically, the OFCCP would have to provide notice and an opportunity for public comment before submitting the proposed information collection to OMB, at which point the public should be provided with another opportunity for comment before OMB approves or denies the request. But until there is a valid OMB control number assigned to an approved information collection, private employers cannot be compelled to comply with the information request. That is why things like the OFCCP’s proscribed disability self-ID form has an OMB number and expiration date.

Realistically, the OFCCP cannot implement this reporting requirement until some time in 2021, and contractors will have ample notice and more specifics regarding what will actually be required.

Enforcement Madness

The E.O. seems to task the OFCCP with enforcement, but the specifics are maddeningly unclear. The only explicit enforcement mechanism appears to be the investigation of individual complaints that come in through the new “hotline” the OFCCP is directed to establish for that purpose. Any enforcement mechanism beyond that, such as reviewing compliance in routine audits, will depend on how the OFCCP proceeds.

This is speculation, but presumably the OFCCP will incorporate the new contract clause into the existing EO Clause in the regulations implementing E.O. 11246. Not only would that allow contractors to include the new contract clause by reference, it would also clarify the agency’s authority to review contractor’s compliance with these new provisions outside of a complaint investigation. Whether and to what extent the OFCCP does so should be left to the agency’s enforcement discretion.

The timing of the agency’s enforcement authority will take their attorneys some time to unwind. The Administrative Procedures Act (APA) applies to any OFCCP action. If you are one of the many attorneys currently scrambling to figure out what portions of the E.O. are enforceable on whom and when, etc., there are a few relatively recent reports from the Congressional Research Service that might be helpful. Specifically, “Can a President Amend Regulations by Executive Order?” a “legal sidebar” issued July 18, 2018 and available here, and “A Brief Overview of Rulemaking and Judicial Review” updated March 27, 2017 available here.

In short, it appears that the APA applies to any federal agency action to implement an Executive Order and should require implementing regulations. However, the timing of the effectiveness of the E.O. does not appear to allow for traditional notice-and-comment rulemaking under the APA. There is a serious question as to whether and how the E.O. can be enforced after the November 21, 2020 effective date but before implementing regulations can be promulgated. Absent implementing regulations, a violation of the new contract provision should be interpreted strictly under well-established contract law principles and is unlikely to be considered a material breach giving rise to the types of extreme remedies envisioned by the E.O. such as contract cancellation or contractor debarment. Could the President himself nonetheless order the cancellation of a specific federal contract based on information regarding this new provision? Probably. Would he? Your guess is as good as ours.

BCGi Training Materials Are Unaffected

BCGi is in the process of developing an entirely new slate of training modules for hiring managers, talent acquisition professionals, and compliance professionals, and there is a wealth of “legacy” training material available to BCGi members now. None of it runs afoul of this new Executive Order.

Our training has never and will never encourage the kind of finger-pointing, name-calling, or shaming described in the Order. At the risk of sounding high and mighty, it simply never occurred to us to do so.