Beginning April 24, 2026, Federal contractors and subcontractors should expect new contract requirements prohibiting “DEI discrimination.” The Federal Acquisition Regulatory Council has taken its next step directed by Executive Order (EO) 14398 by issuing a memo announcing FAR Clause 52.222.90 and establishing a timeline for adding it to contracts.
FAR 52.222-90 Addressing DEI Discrimination by Federal Contractors is intended to prevent contractors from engaging in racially discriminatory DEI activities by:
- Obligating contractors to refrain from engaging in disparate treatment based on race or ethnicity in the following activities:
- recruiting;
- employing, including hiring and promoting;
- subcontracting, including supplier diversity programs;
- training, mentoring, developing, and educating employees;
- inviting or admitting employees to clubs, associations, or resource groups; and,
- allocating or deploying resources.
- Requiring contractors to furnish books, records, and accounts, allowing Federal agencies to assess their compliance with this Clause.
- Allowing for contract termination, suspension, cancellation, or debarment for any contractor deemed noncompliant.
- Establishing contractor responsibility to report any violations of this Clause by its subcontractors, as well as knowledge of any subcontractor-driven legal challenges to the validity of this Clause.
- Subjecting compliance with this Clause to the provisions of the False Claims Act, opening the opportunity for financial gain to whistleblowers.
- Requiring FAR 52.222-90 to flow down to subcontracts, at any tier.
Contractors and subcontractors should expect to see FAR 52.222-90 soon:
- Starting April 24, 2026: Federal agencies insert the clause in new solicitations and contracts of $15,000 or more
- By July 24, 2026: Federal agencies “must make every effort” to modify existing contracts of $15,000 or more
- Impacted contracts include definitive contracts and indefinite-delivery contracts
- Place of delivery or performance must be in the United States for the Clause to apply
- Contracting agencies may use their discretion whether to modify a contract that expires on or before December 31, 2026
- Contracts may be terminated for convenience if a contractor refuses the Clause
It’s important for HR professionals to consider that this change will have cross-functional impact and to communicate accordingly within their company. HR and I&D functions will have compliance obligations related to applicant and employee processes. Sales, legal, and contract functions will need to be alert to the inclusion of FAR 52.222-90 in new or modified contracts. Procurement, legal, and contract functions will need to develop procedures for subcontractor flow down, reporting subcontractor lawsuits challenging FAR 52.222-90, and ensuring purchasing processes are compliant. All of these functions will need to be vigilant for and report subcontractor noncompliance.
Steps can be taken now to prepare your company for this change:
- Cross-function communication: Open a cross-function dialogue to ensure all impacted teams are aware of FAR 52.222-90 and the new obligations it will place on the company. Determine how you will handle subcontractor flow downs, monitoring, and reporting.
- Process review: Carefully review all HR and procurement processes to ensure that there is no disparate treatment based on race or ethnicity.
- Content review: Review external and internal communication materials – including websites, marketing materials, and employee communications – to ensure there are no race- or ethnicity-based preferences or restrictions. See further guidance on this from HR Works.
- Monitoring: Ensure procedures are in place to monitor for disparate treatment. In addition to effective employee reporting or grievance mechanisms, collect data and perform statistical testing to monitor for racial disparities in employment outcomes like hiring, promoting, compensating, and training employees.
- Recordkeeping: Identify which records exist or should be created to establish a record of merit-based processes. Decide how any Federal requests to review records will be communicated and handled by the company.
In late April, a lawsuit was filed in the District of Maryland US District Court seeking to block EO 14398. No stay has been issued, so FAR 52.222-90 is currently proceeding and employers are advised to prepare for its impact. HR Works will keep you apprised of updates and current clients can contact their AA/EEO consultant with questions. Updates will also be posted on the HR Works Executive Order Navigator.
For employers seeking additional support, HR Works provides workforce analytics including disparate impact analyses, bias testing, DEI risk assessments, pay equity analysis, recruiting process reviews, and more. Contact us to learn more about our services.
