Since our April 6 blog, Why the New DEI Executive Order Matters for Federal Contractors—and Signals Broader Risk for All US Employers, where we highlighted how the latest Executive Order creates new contractual obligations for federal contractors and subcontractors, with potentially far reaching implications, there have been several significant developments that collectively signal a
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Why the New DEI Executive Order Matters for Federal Contractors—and Signals Broader Risk for All US Employers
Six months ago, our Back‑to‑School Guide on Recent Developments in Workplace DEI examined how the 2025 executive orders—and early guidance from the Equal Employment Opportunity Commission (EEOC) and the Department of Justice (DOJ)—led many US-based employers to recalibrate DEI-related risk, conduct DEI health checks, and fine-tune specific initiatives and practices.
In 2026, the risk is not coming from landmark court rulings declaring DEI unlawful. Instead, it is coming from enforcement tools: investigations, subpoenas, contract terms and leverage applied across multiple fronts—often before any litigation is filed.
That reality came into sharper focus on March 26, with the issuance of a new executive order further targeting “DEI discrimination” by federal contractors.
Workplace DEI remains lawful. But employers should expect heightened scrutiny of how programs are structured, incentivized, documented, and defended—through EEOC inquiries, administrative subpoenas, FCA theories tied to certifications, and discovery-driven litigation.
The New Executive Order Enhances DEI Risk for Federal Contractors
The White House’s new executive order—“Addressing DEI Discrimination by Federal Contractors”—creates new contractual obligations for federal contractors and subcontractors. Potential consequences include termination, debarment, and potential False Claims Act (FCA) exposure. The order (and the accompanying Fact Sheet) is operationally consequential: it ties compliance to federal contracting, expands agency access to contractor information, and more explicitly links compliance with these contractual obligations to FCA theories.
Continue Reading Why the New DEI Executive Order Matters for Federal Contractors—and Signals Broader Risk for All US EmployersArgentina’s Labor Modernization Bill: Shifting Risk, Flexibility, and Workforce Strategy
The Argentine Senate has given preliminary approval to an ambitious Labor Modernization Bill that would meaningfully recalibrate Argentina’s employment law framework. The proposal introduces sweeping amendments to the Employment Contract Law and related statutes, with a clear policy focus on reducing informality and litigation, improving predictability around employment status, and enabling greater operational flexibility—developments that…
What the March 20 ‘National AI Legislative Framework’ Means for US Employers Right Now
By Caroline Burnett & Susan F. Eandi on
On March 20, the White House published a “National AI Legislative Framework” outlining policy recommendations for Congress to develop a unified federal approach to AI legislation and regulation. While our cross‑disciplinary AI team prepared a more detailed analysis (copied below), here is the employment‑law tl;dr:
- No immediate legal change. The framework does not impose new obligations on employers, and it does not include draft legislation or an executive order directing federal agencies. Instead, it sets out legislative recommendations for Congress, reflecting the administration’s vision for a comprehensive federal AI statute.
- Preemption is the through‑line. The recommendations are consistent with the administration’s December 2025 Executive Order and July 2025 AI Action Plan, and they expressly support broad federal preemption of state AI laws that impose undue burdens. At the same time, the framework contemplates carve‑outs to preserve states’ traditional police powers—such as protecting children and preventing fraud.
Takeaway for Employers
Unless and until Congress enacts federal legislation with preemptive effect, state and local AI laws remain fully in force. That matters: a growing number of jurisdictions already regulate how employers use AI in hiring, promotion, performance management, and other employment decisions—including California, Colorado, Illinois, and New York City, among others. For now, compliance remains a decidedly multi‑jurisdictional exercise.
For support developing your AI adoption strategies, including compliance with regulations outside of the US like the EU AI Act, please contact your Baker McKenzie employment lawyer.
White House Outlines AI Legislative Agenda with National AI Legislative Framework
By Brian Hengesbaugh, Justine Phillips, Lothar Determann, Keo McKenzie, Cristina Messerschmidt, Susan Eandi, Caroline Burnett, Joshua Wolkoff, Alysha Preston, Stanislav (Stan) L. Sirot, Brian Zurawski and Avi Toltzis
On March 20, 2026, the White House published a four-page document with “Legislative Recommendations” in its National Policy Framework for Artificial Intelligence (the “AI Framework”). The AI Framework does not include specific draft legislation or an executive order, but instead contains recommendations for Congress, setting out the administration’s vision for a comprehensive federal AI legislative package. The AI Framework is not legally binding either for on Congress or on private sector companies. The AI Framework, building on Executive Order 14365, outlines eight key policy areas for federal AI legislation aimed at preempting restrictive state laws and bolstering AI innovation.
Background
The AI Framework represents the latest significant step in the Trump administration’s technology agenda and is consistent with, and builds on, its past actions regarding the national AI strategy going back to the very first days of President Trump’s second term. Within the first week of returning to the presidency, President Trump revoked the Biden-era Executive Order 14110 on “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence”, which he swiftly replaced with Executive Order 14179 on “Removing Barriers to American Leadership in Artificial Intelligence”. Executive Order 14179 established the national AI policy to “sustain and enhance America’s global AI dominance in order to promote human flourishing, economic competitiveness, and national security,” but provided few specifics.
Continue Reading What the March 20 ‘National AI Legislative Framework’ Means for US Employers Right NowA TRAP for the Unwary Employer: California’s AB 692 Cracks Down on “Stay-or-Pay” Agreements (Video Chat)
As of January 1, 2026, California’s AB 692 drastically limits the use of “Stay-or-Pay” or Training Repayment Assistance Programs (TRAP) agreements—contracts that require employees to reimburse expenses like training or relocation upon early departure. Employers need to act now to understand the law and adjust their strategies.
Watch this episode from our Employer Rapport for…
Putting Founders on the Payroll: 5 Post‑Acquisition Employment Law Challenges
When a company acquires a startup, the founder often comes with the deal—bringing vision, energy, and deep product expertise. But hiring a founder post-transaction is rarely seamless, and companies should plan from deal inception for the possibility of a rocky breakup down the road. From cultural clashes to misaligned expectations, the risks of a turbulent split are real—and often overlooked amid the urgency of LOI negotiations. Below are five key employment law challenges companies face when bringing a founder into the fold—and ways to navigate the challenges before-and after-the relationship goes south.
1. Bringing the Founder on Board: Transitioning from Entrepreneur to Employee
When a company acquires a startup, retaining the founder as an employee can be a strategic necessity. Founders are frequently integral to getting the deal over the finish line. Their buy-in can make or break negotiations, and offering the founder a post-acquisition role signals respect for their vision while easing resistance. Founders bring invaluable institutional knowledge and serve as a cultural bridge, which reassures investors, helps retain key talent, and drives smooth integration and early-stage success.
However, shifting a founder from entrepreneur to employee often brings legal and operational challenges for all parties—along with psychological hurdles for founders, whose identities are deeply tied to the business.
- Personal meets transactional: Founders may struggle to navigate the emotional weight of handing over control while also grasping the ramifications of the transaction—making it harder to align expectations with the acquirer. Even the most detailed LOI may fall short in practice, especially when working with founders who approach the deal differently than seasoned acquirers. Acquiring companies can help avoid potential issues by ensuring the founder is supported with strong legal and financial guidance, making it more likely the parties will be able to bridge any differences in priorities and move the deal forward smoothly.
- Employment status: Founders may have previously operated as owners, consultants, or contractors, so stepping into a formal employee role can be unfamiliar, and can bring new (and sometimes unwelcome) requirements around reporting structure, accountability, and compliance. To avoid confusion by the founder-employee about their employment relationship with the company, avoid dangers of misclassification, and ensure the proper handling of tax, benefits, and compliance obligations, the acquirer should clearly explain and define the founder’s new role as an employee in employment contracts, onboarding materials, and all related HR documentation.
- Role transition: Transitioning into a structured employee role can feel restrictive for founders:
- Founders are used to autonomy and broad decision-making authority and may struggle with operating in a structured corporate environment.
- Founders often thrive in fast-moving, risk-tolerant environments where quick decisions drive progress. Transitioning to a larger organization’s more structured processes can be difficult, stymieing smooth integration.
- The founder’s distinct vision and deep commitment to their product or company may not always align with the strategic direction of the acquiring firm, leading to hesitation by the founder around changes the acquirer seeks to implement.
To reduce the risk of founder friction during role transitioning, companies should align early on strategic goals, document all commitments clearly, and design an onboarding plan that respects the founder’s background while setting realistic expectations. Establishing clear guardrails from the outset can help to prevent misalignment and future disputes.
2. Negotiating Compensation: Motivating the Founder in Line with Company Strategy
The negotiation of compensation for a founder post-transaction is inherently complex. While acquiring companies are keen to ensure the founder remains engaged and incentivized post-transaction, the structure of compensation and benefits must also align with the acquirer’s broader compensation philosophy, governance standards, and budget limitations.
- Equity and vesting: Founders usually want to stay engaged in the business they grew and developed. To keep founders engaged and aligned with the acquirer’s goals, companies need to offer incentives that truly resonate. A mix of rollover equity and a customized equity incentive package often does the trick, with many founders seeking stock options or restricted stock units in connection with the deal. But revisiting prior equity grants can raise sensitive issues around dilution and valuation. Navigating this terrain requires careful attention to securities laws, tax implications, and the structure of company equity plans.
- Severance and retention: Founders may push for severance terms that go beyond market norms—especially around “good reason” and “change of control” clauses—which can trigger payouts if the founder resigns due to significant changes in role, compensation, or company ownership. While these provisions can help attract and retain top talent, companies must strike a careful balance between offering competitive incentives and preserving the company’s need for flexibility.
- Non-standard benefits: Founders might negotiate for unique perks—like continued use of company assets, office space, or other non-cash benefits—that fall outside typical executive packages. Each request should be carefully vetted not only for legal compliance but also to ensure the perk is comparable to what other similarly situated leaders receive. Overly generous or inconsistent terms can create tension within leadership teams and raise concerns about governance.
- Anticipating the exit: Companies should begin planning for a potential separation with the founder as early as compensation negotiations—if not sooner. Assume that if the relationship does not work out, termination will occur without cause, and recognize that such terminations typically carry significant costs in these transactions. Internally, companies should evaluate (i) whether they are comfortable with the financial obligations associated with a without-cause termination, (ii) how equity will be treated, and (iii) whether existing post-employment restrictions provide sufficient protection. Finally, document all decisions clearly to avoid misunderstandings later.
From New York City to the European Union: Pay Equity Developments Multinational Employers Need to Know in 2026
On December 4, the New York City Council voted to override Mayor Eric Adams’ vetoes of two bills requiring annual pay reporting and pay analyses. These bills—requiring private employers to report pay data by race and gender and mandating a city-led pay equity study—are emblematic of a nationwide trend toward greater scrutiny of compensation practices.
As we dive into the new year, here’s what employers need to know about the new NYC reporting requirements, recent changes to pay data reporting requirements in California, Illinois and Massachusetts, and the upcoming EU Pay Transparency Directive.
While pay reporting laws focus on accountability and seek to enable regulatory oversight and systemic analysis of pay equity across organizations, pay transparency regulations emphasize visibility, aiming to enable applicants and employees to make informed decisions and reduce information asymmetry. A round-up of recent pay transparency developments is included.
New NYC Pay Data Reporting Requirements
New law (Int 0982-A) requires employers with 200 or more employees inclusive of full-time, part-time and temporary employees) in the city to file annual reports detailing employee race or ethnicity and gender information across certain job categories and different pay ranges. Although the pay-reporting requirements take effect immediately, employers are not required to submit information until the city creates a process for doing so, which we may not see until as late as 2028.
- Reporting Details: The new reporting requirements are similar to requirements imposed by the Equal Employment Opportunity Commission (and similar to reporting requirements in California and Illinois). In 2017 and 2018, the EEOC previously called for employers to submit employees’ W-2 income information broken down by gender, race/ethnicity and job category (i.e., component 2 EEO-1 data), though the rules were rescinded during the first Trump administration. The new law requires the city agency overseeing this new initiative to include this component 2 EEO-1 data in the reporting requirements, but may also request additional data, such as information about employee gender identity or other demographics. Employers will not need to provide an employee’s personal information as part of the reports, but they will have the option to submit written remarks to provide explanations or context for the data in their submission. Additionally, employers may furnish data anonymously, but will required to submit a signed statement confirming that they provided accurate pay data.
An Employer’s Back-to-School Guide on Recent Developments in Workplace DEI
The diversity, equity, and inclusion (DEI) landscape in the United States has undergone major shifts this year, driven by new executive actions, heightened regulatory scrutiny, deepening cultural and political divisions and emerging litigation trends. For legal practitioners advising employers, the past nine months have been marked by uncertainty, risk recalibration, and strategic decision-making.
This blog will bring you up-to-date on material developments and outline key takeaways for federal contractors and private companies from U.S. Attorney General Pam Bondi’s July 29 memorandum titled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.”
Level Set: The Executive Orders and Federal Retrenchment
In January 2025, President Trump signed a series of executive orders (EOs) aimed at unlawful DEI programs, revoking race, ethnicity and gender-based affirmative action requirements for federal contractors, and directing public and private entities to end policies that constitute “illegal DEI discrimination.”
The EOs do not change existing federal discrimination laws, such as the bedrock prohibitions on discrimination in employment in Title VII of the Civil Rights Act of 1964 (Title VII). The EOs do not categorically ban any private employer DEI programs. Rather, the EOs direct federal agencies and deputize private citizens to root out (through investigations, enforcement actions, or False Claims Act (FCA) litigation) “illegal discrimination and preferences” and, for government agencies, to take particular actions. They reflect the policy view that many DEI policies violate federal anti-discrimination laws because these laws prohibit employment decisions based on certain demographic characteristics, while DEI may promote employment decisions on this basis. For more on the specific details of the EOs, read our blog, A Roadmap to Trump’s DEI Executive Orders for US Employers.
Catching Up: Legal Challenges to the Orders and Their Current Status
The EOs have faced multiple legal challenges, with various organizations and entities suing the Trump administration. In one of the most significant cases, a federal district court in Maryland issued a nationwide preliminary injunction blocking enforcement of three key provisions from Executive Orders 14151 and 14173 in February. Then, in March, the Fourth Circuit Court of Appeals stayed the injunction, allowing the Trump administration to enforce the executive orders while litigation continues. This week, oral arguments are being heard before a panel of Fourth Circuit judges.
As of September 22, 2025, several courts have issued contradictory rulings on the constitutionality of the EOs. The Supreme Court also determined that federal courts generally lack authority to issue nationwide injunctions, in its June 27, 2025 decision in the Trump v. CASA. Accordingly, the path for the Trump administration to enforce the EOs remains open. Federal agencies’ main enforcement mechanism under the EOs is terminating federal contracts and requiring federal contractors to certify that they do not operate any DEI programs that violate federal anti-discrimination law.
Following the Timeline: Breaking Down the Guidance from Federal Agencies and Recent Enforcement Activity
Over the last several months, federal agencies have been taking action to combat illegal DEI practices. Several agencies have sent companies requests to certify that they are not in violation of federal anti-discrimination law, and that this is material to the government’s funding decision, per the EO’s certification requirement.
Federal agencies, including the Equal Employment Opportunity Commission (EEOC) and the Federal Communications Commission (FCC), have also issued requests for information to certain companies (usually based on publicly available information) expressing concerns about their DEI practices. Requests have asked for information about various DEI-related topics, including hiring and promotion processes, diversity goals, application and selection criteria for fellowship programs, and participation in diversity internship programs.
In March, the FCC Chairman stated that the agency would use its “public interest” review of mergers and acquisitions to target companies with certain DEI programs. In response, several large telecommunications and media companies with pending mergers scaled back their DEI initiatives.
Also in March, the EEOC and the Department of Justice (DOJ) issued published a joint one-page technical assistance document entitled “What To Do If You Experience Discrimination Related to DEI at Work,” which provides examples of potential DEI-related discrimination under Title VII and directs employees who suspect they have experienced DEI-related discrimination to promptly notify the EEOC. Simultaneously, the EEOC also published a longer technical assistance document (“What You Should Know About DEI-Related Discrimination at Work”) with eleven questions and answers addressing the process for asserting a discrimination claim and the scope of protections under Title VII as they relate to DEI programs.
The joint guidance makes clear that any employment action motivated—in whole or in part—by an employee’s or applicant’s race, sex, or another protected characteristic, is unlawful discrimination, and the law does not distinguish between “reverse” discrimination against historically privileged groups and discrimination against minority or historically disadvantaged groups.[1] This guidance, while not binding, sets forth the agencies’ interpretation of the law, and as a result has influenced employer risk assessments and prompted internal reviews of hiring and promotion practices. (More here in our blog, EEOC and DOJ Issue Joint Guidance on DEI-Related Discrimination.)
In April, President Trump issued Executive Order 14281 directing federal agencies like the EEOC and the DOJ to deprioritize enforcement of anti-discrimination laws using the “disparate impact” theory of legal liability. Disparate impact is legal doctrine in US anti-discrimination law that allows plaintiffs to bring discrimination claims with respect to facially neutral practices that have a disproportionately adverse effect on members of protected groups—such as racial minorities or women—even if there is no intent to discriminate. It was recently reported that the EEOC plans to close by the end of month all pending worker charges based solely on unintentional discrimination claims and issue “right to sue” notices allowing plaintiffs to pursue those claims in court. This would mark another significant enforcement shift for the agency in recent months. The EEOC has already curtailed litigating and processing claims of discrimination based on transgender status under Title VII.
In May, the DOJ launched the Civil Rights Fraud Initiative, which uses the FCA to target entities that misrepresent compliance with federal anti-discrimination laws to receive federal funds. The FCA’s qui tam mechanism allows private citizens (relators) to sue on behalf of the federal government and share in any recovery. The DOJ has encouraged whistleblowers to come forward, and in recent weeks the DOJ has issued civil investigative demands (CIDs) to federal contractors and grantees seeking documents and information related to their DEI practices.
Most recently, on July 29, Attorney General Pam Bondi issued a memorandum to federal agencies entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination” (DOJ Memo). The memo signals a substantial shift in how the DOJ intends to interpret and enforce federal anti-discrimination laws—particularly in relation to DEI initiatives. The memo itself does not have the force of law, instead it reflects how the DOJ interprets and intends to apply federal anti-discrimination law. While the memo is directed at educational institutions and private entities receiving federal funding, its examples of unlawful discrimination are relevant to all employers.
Continue Reading An Employer’s Back-to-School Guide on Recent Developments in Workplace DEIA Roadmap to Trump’s DEI Executive Orders for US Employers
In the first two days of his presidency, President Trump signed a series of executive orders aimed at dismantling diversity programs across the federal government, revoking longstanding DEI and affirmative action requirements for federal contractors, and directing public and private entities to end policies that constitute “illegal DEI discrimination.”
Suffice it to say the orders have left federal contractors, corporations, nonprofits, and other employers in the private sector grappling with what to do next. While the EOs reverberations will be felt for some time and the DEI journey for federal agencies and the private sector is likely to be a circuitous one as challenges are raised in the courts, before Congress and in the court of public opinion, employers do need to gain some traction and start the trip. In this article, we present a roadmap to consider as employers work through the impacts of the EOs on their organizations.
At the starting line: what the EOs do and don’t do
Executive orders are a powerful tool through which the President issues formal directions to the executive branch, agencies and officials on how to carry out the work of the federal government. Historically, EOs mostly addressed administrative matters, but some sought to drive substantial policy changes. While congressional approval is not required for an EO to be effective, judicial review is commonplace and also, EOs can be reversed by later administrations.
President Trump’s EOs addressing DEI do not change existing discrimination statutes, such as the bedrock prohibitions on discrimination in employment in Title VII of the Civil Rights Act of 1964. The orders do not ban or prohibit any or all private employer DEI programs. Rather, the orders direct federal agencies and deputized private citizens to root out (through investigations, enforcement actions, or False Claims Act litigation) “illegal discrimination and preferences” and, for government agencies, to take particular actions.
Similar to the situation following the US Supreme Court SFFA decision in June 2023, if your DEI programs were lawful before Trump’s inauguration – they still are. What is “illegal” under federal law today is the same as it was before Trump’s presidency. But what’s clearly different is the ferocity of the federal government’s intent and resources dedicated to scrutinizing alleged race- or sex-based preferences in the workplace, and the resulting level of scrutiny applied to DEI programs.
Continue Reading A Roadmap to Trump’s DEI Executive Orders for US EmployersCalifornia Employer 2025 Checklist: Top 10 Changes to Know this January
As you plan your to-dos for the year ahead, our “2025 Top 10” will guide you through the material employment law changes ahead in the Golden State. While we have not included all new California employment laws effective 2025, we’ve highlighted the major changes our clients need to know.
| Key California Change | Employer To-Dos | |
| (1) | Minimum |