Good morning!
President Donald Trump’s second term started out with a bang on Monday when he began issuing dozens of executive orders on everything from birthright citizenship to RTO mandates for federal employees. In terms of the workplace specifically, however, one major issue stands out: DEI.
In an executive order, followed by a presidential action, Trump did away with DEI programs, policies, activities and mandates within the federal government, including terminating individual positions within agencies related to the practice.
But his edicts go far beyond just the federal government, and extend into the private sector as well. Government agencies have been asked to “combat illegal private sector DEI preferences, mandates, policies, programs, and activities.” Each agency has a limited amount of time to identify up to nine targets worthy of a government investigation, including publicly traded companies, nonprofits, professional associations, or institutions of higher learning.
As readers of this newsletter well know, many major U.S. companies have already rolled back their DEI policies this year, including Walmart, McDonald’s, and Meta, just to name a few. And the president’s moves will almost certainly be challenged by several lawsuits—the ACLU, for instance, says its lawyers are already carefully reviewing the executive order.
But legal experts I spoke with this week say that the executive moves will have a major chilling effect on DEI in the private sector, and pressure businesses to change or fully do away with their diversity and inclusion efforts.
“The order clearly throws down the gauntlet to bring pressure across the board in the private sector, particularly with respect to public companies, because what they do and how they do it is more visible,” says Anthony Haller, partner in Blank Rome’s labor and employment legal practice.
That said, many businesses have already changed their policies in anticipation of government pushback. And although the moves are designed to make a big splash, one top constitutional lawyer says their actual power on the private sector is negligible—it’s the spectacle that’s the point. DEI advocates have been quick to say that they were unsurprised by the turn of events, and that they had been expecting Trump to take swift action on a policy that he has long derided. They’re preparing for a marathon, not a sprint, and urge corporate America to keep a cool head, and rise to meet the moment.
“It’s really incumbent upon CEOs to take a beat,” says Sheryl Daija, the founder and CEO of BRIDGE, a trade group for marketing professionals that highlights DEI as a business practice for growth. “Let’s not get caught up in the craziness that’s kind of swirling. But just be pragmatic and understand again: Where is the opportunity first? Then let’s figure out how we’re going to mitigate the risk.”
Read more on the latest DEI executive order and what it means for the private sector here.
Brit Morse
brit.morse@fortune.com
Around the Table
A round-up of the most important HR headlines.
Plenty of companies, reading the writing on the wall, had begun to shift their approaches to DEI before Trump took office. But corporate leaders are still facing mass confusion due to his most recent executive actions. New York Times
The number of people who applied for U.S. unemployment benefits climbed to a six-week high this month due to the massive wildfires ravaging the Los Angeles area. MarketWatch
Many companies are deciding not to put a cap on vacation days, but that doesn’t necessarily mean employees can take additional time off. Wall Street Journal
Watercooler
Everything you need to know from Fortune.
Lackluster bonuses. With bonus season in full swing, employees at JPMorgan Chase are learning whether they will get a pay bump, and some workers are already voicing their displeasure over the amount. —Luisa Beltran
Giving up. Professors who teach Gen Z say many young professionals are holding back on their career dreams or abandoning them altogether due to a fear of failure. —Preston Fore
Remote work could prevail. Even with Trump’s mandate requiring federal workers to make a full return to the office, experts say the WFH debate will only end when Baby Boomers retire. —Emma Burleigh