Foreign Contractors Face New U.S. DEI Certification Requirements

Foreign companies with U.S. government contracts are facing new scrutiny. Media outlets are reporting that the U.S. Embassy in Paris has ordered dozens of French companies with U.S. government contracts to certify, pursuant to Executive Order 14173, that they are not operating any programs promoting diversity, equity and inclusion (“DEI”) that violate any applicable U.S. federal anti-discrimination laws. Accompanying the certification form is a cover letter that states “If you do not agree to sign this document, we would appreciate it if you could provide detailed reasons, which we will forward to our legal services.” The U.S. Embassy in Spain issued a similar certification request, and there are reports that other U.S. Embassies in Europe have issued letters. Companies are being told they must respond to the U.S. government’s request within five days.

Although foreign-based companies that receive a request for certification can object on jurisdictional grounds, doing so may result in the U.S. government canceling their contracts. In the event the certification is made but is challenged by the federal government as being untrue, the notices provide that the contractor will be subject to False Claims Act liability.

According to the U.S. Equal Employment Opportunity Commission’s (EEOC) recent guidance on this issue, DEI policies, programs or practices may be unlawful if they involve an employer taking an employment action motivated — in whole or in part — by an employee’s race, sex or another trait or characteristic protected under federal U.S. law (a “protected characteristic”). In addition to actions such as using quotas or otherwise “balancing” a workforce by race, sex or other protected characteristics, the EEOC advised that DEI-related discrimination might include, but is not limited to, the following:

• Limiting membership in workplace groups, such as Employee Resource Groups (ERG) or other employee affinity groups, to certain protected groups.
• Separating employees into groups based on race, sex or another protected characteristic when administering DEI or other trainings, or other privileges of employment, even if the separate groups receive the same programming content or amount of employer resources.
• Excluding employees from training, mentorship, sponsorship or fellowship programs based on race, sex or another protected characteristic.  

If a company receives a certification request, it should quickly but carefully assess whether and how to respond in light of its existing DEI programs and any national statutory or regulatory obligations to which they are subject.

Best practices are emerging to help employers sustain culturally important employee programs in ways that remain compliant, durable and reduce risk. If a company has not received a certification request, but has U.S. government contracts, we recommend they undergo a balanced reviewed of their DEI programs to identify whether any modifications should be made to mitigate U.S. employment law risk and scrutiny from the U.S. government.

Orrick’s employment team has been working extensively on the changing DEI rules in the U.S. and would be happy to work with you and your clients to navigate these orders and ensure compliance in the U.S. for any U.S. operations. Our global team can also advise with respect to certification demands being issued by U.S. Embassies outside the United States. Please feel free to reach out to your Orrick contact or any of the authors of this article.