By Lauren Weber

The Trump administration said it would review the civil-right plans previously submitted by federal contractors to assess whether the contractors should be investigated or penalized for discriminatory employment practices.

The move, announced by the new head of the Office of Federal Contract Compliance Programs, is the latest salvo in President Trump's effort to eradicate "illegal" diversity practices within the government and the corporate world. Shortly after taking office, Trump revoked a six-decade-old executive order that required federal contractors to proactively root out discrimination on the basis of race, sex and other characteristics.

What's unusual is that the office will look for evidence of unlawful practices in the plans that contractors had been required to submit before Trump took office to demonstrate they didn't discriminate in their hiring and promotions. Contractors submitted the plans to the OFCCP, which oversees employment policies at the roughly 40,000 companies holding federal contracts.

"The reality is, most of what OFCCP had been doing was out of step, if not flat out contradictory, to our country's laws, and all reform options are on the table," the OFCCP's new head, Catherine Eschbach, said in an email to the office's staff.

Consistent with antidiscrimination laws, companies doing business with the government hadn't been allowed to use quotas or preferences in their hiring even before Trump signed an executive order rescinding the prior rules. Instead, contractors were required to identify the gaps between their workforces and the labor pools they could draw from, then establish placement goals and plans for meeting them.

Most big American companies plus thousands of small ones, sell goods and services, such as toilet paper, jet fighters and website design, to the U.S. government. The government uses its clout to mandate policies on everything from their wages to workforce diversity practices.

In 2023, the federal government committed around $759 billion to contracts with private companies, including Microsoft, Google, Boeing and Booz Allen Hamilton. By some estimates, around 20% of the U.S. workforce is employed at suppliers to the federal government.

A complicating factor for employers now is that programs once deemed legal, such as mentorship programs for women or racial minorities, would likely be considered illegal since the Supreme Court's 2023 decision outlawing affirmative action in higher education. That decision has reverberated through the employer community even though employment and education are subject to different sections of the Civil Rights Act of 1964.

"What contractors really want right now is clear guidance," said David Cohen, a co-founder of the Institute for Workplace Equality, a trade association for federal contractors. At the moment, "nobody really knows what they can and cannot do in order to certify compliance."

Eschbach, a lawyer who represented Elon Musk's SpaceX in a 2024 lawsuit related to workers' rights, was named Monday to head the OFCCP. She was most recently an attorney with law firm Morgan, Lewis & Bockius, which represents employers in workplace disputes.

In her email, Eschbach also said the OFCCP would lay off staff and close offices. In 2024, the division had around 500 employees and a budget of $111 million. Eliminating the OFCCP was a recommendation of Project 2025, the conservative policy and personnel blueprint. Trump distanced himself from that document during the election and has since enacted many of its recommendations.

Eschbach's note reinforced the message that the Trump administration is pushing across multiple fronts. The president has said that diversity, equity and inclusion, or DEI, policies are to blame for a range of ills, including the airplane crash over the Potomac River in January.

Among his first executive orders, he shut down all federal offices doing DEI work and ordered their staff put on leave. His administration or its surrogates, including conservative legal groups, have sued or threatened to investigate companies for their DEI programs.

Write to Lauren Weber at Lauren.Weber@wsj.com

(END) Dow Jones Newswires

March 24, 2025 16:17 ET (20:17 GMT)

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