Ongoing Executive Order 13950 Controversy Demonstrates Why Government Contractors May Want to Closely Monitor the Presidential Transition

By Brett W. Johnson, John F. Lomax, Jr., Michael Calvanico, and Y. Rubi Bujanda

As with any presidential (or governor) transition, significant changes occur in regard to the executive offices’ regulatory enforcement priorities and changes from the previous administration.  Because the majority of rules affecting government contractors can be created or amended through executive orders or regulatory actions, they do not require Congressional approval and can be expeditiously implemented by an incoming administration. Government contractors should be aware of the incoming administration’s ability to affect their contract performance requirements immediately.

One example of the potential implications to these contractors is highlighted by the continuing saga of Executive Order 13950.  On September 22, 2020, President Donald J. Trump issued Executive Order 13950, “Combating Race and Sex Stereotyping” (the “Order”).¹ On its face, the Order prohibits federal contractors, federal agencies and certain federal grant recipients, as well as the military, from utilizing workplace training that “inculcates in its employees any form of race or sex stereotyping or any form of race or sex scapegoating.” Starting just two weeks ago, the Order required the inclusion (or flowdown) of this language in all new federal contracts and task orders. 

In addition to making the above commitment regarding training programs, government contractors subject to this clause are required to (1) post copies of a notice establishing this commitment in conspicuous places available to employees and applicants for employment, and (2) advise its labor unions of such policies. Moreover, the Order directs contractors to flow down the clause in their subcontracts and purchase orders so that these directives will be binding on each subcontractor and vendor.

Furthermore, the Department of Labor's Office of Federal Contract Compliance Programs (“OFCCP”) set up a hotline for reporting race and sex stereotyping and scapegoating complaints. The OFCCP will immediately investigate these complaints “following the agency’s standard procedures.” Potential penalties for noncompliance include default termination, suspension, debarment and an array of other penalties and remedies available.

In light of these available penalties, government contractors should consider reviewing their diversity and inclusion training material for content that could violate the Order. Although OFCCP did provide some guidance to help explain the Order to contractors, the language is muddled and leaves significant uncertainty as to how OFCCP will address contractors providing implicit and unconscious bias trainings.²

The fate of this Order is unclear at this point.  Some commentators believe  that President-Elect Joe Biden’s administration will move quickly to rescind the Order and nullify the corresponding training requirements. Although there is uncertainty as to enforcement, government contractors should consider review and implementation of training programs, as they could still be liable for violations while the Order is in place.  In addition to government auditors, one of the main issues will likely be whistleblowers who may take the opportunity in light of any failure to comply to report the violation.  Thus, regardless of whether the regulation remains, the contractor can still be subject to scrutiny and added costs associated with any failures to comply.

Rescinding this Order is only one of many potential changes that the new administration will consider. As such, all government contractors and subcontractors may want to remain vigilant, monitor the regulatory guidance of the new administration, make necessary changes to government contracting compliance programs, understand new government clauses, and consult with legal counsel regarding the resulting implications and corresponding best practices as they continue to do business with the government.