Financial Institutions Advised to Immediately End Affirmative Action Programs Based on Sex and Race

During his first few months in office, President Trump and his Administration have taken a number of steps to eliminate “illegal” Diversity, Equity, and Inclusion (“DEI”) programs. While “illegal” DEI programs are yet to be clearly defined, and the guidance is still evolving and deserving of its own article, the guidance related to Affirmative Action Programs (“AAPs”) recently became clearer.

President Trump issued Executive Order 14173 on January 21, 2025 entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” It rescinded Executive Order 11246 issued by President Lyndon B. Johnson in 1965 which required federal contractors to develop and implement AAPs with respect to sex and race.   

Under Johnson’s E.O. 11246, and its implementing federal regulations (40 CFR Part 60-2), federal government contractors, including financial institutions with 50 or more employees, were required to gather race and sex data on applicants and employees, engage in statistical analyses to evaluate the composition of their workforce and their employment decisions, identify specific steps to address underrepresentation of women and minorities in their workforce, report certain data to the Office of Federal Contract Compliance (“OFCCP”) on an annual basis, and annually prepare AAPs that were subject to compliance reviews. 

While the AAPs of financial institutions were only required to set workforce participation goals, not quotas, the purpose of AAPs was to achieve a workforce reflecting the sex, racial and ethnic profile of the relevant labor market.  The process of establishing and maintaining AAPs was often times costly and time consuming. And, if a financial institution did not comply with its obligations, it could be penalized. 

Trump’s E.O. 14173 instructed the OFCCP to stop holding federal contractors and subcontractors, including financial institutions, responsible for taking affirmative action based on race and sex, and it provided a 90-day grace period during which they may continue to comply with affirmative action obligations—a deadline which is quickly approaching. More recent messaging from the Trump Administration and the new Director of the OFCCP has been even stronger. 

On March 24, 2025, the U.S. Department of Labor announced Catherin Eschbach as the new director of the OFCCP. On the same day, she directed her staff, in an email, to “verify” if contractors have “wound down” use of AAPs for race and sex, and to evaluate previously submitted programs to see if they “indicate the presence of longstanding unlawful discrimination.” 

All of this, coupled with the Trump Administration aggressively targeting private sector businesses with DEI programs, leads to the conclusion that financial institutions should immediately end all AAPs tied to sex and race. In addition, financial institutions of all sizes should remove all references to affirmative action or “AA” with respect to sex and race in handbooks, personnel policies, websites, and job postings. Anti-discrimination policies and statements, however, should remain intact. 

Because President Trump’s Executive Order could not rescind statutory affirmative action requirements of financial institutions related to veterans and individuals with disabilities, those obligations remain in place. Voluntary self-identification and AAPs for veterans and persons with disabilities must be maintained. References to affirmative action with respect to veterans and disabled individuals must not be removed from handbooks, personnel policies, websites, or job postings.