New Challenges For NJ Businesses As Trump DEI Directives Conflict With State Obligations
Written By:
Ann-Marie Luciano
Maria Colsey Heard
Cozen O’Connor
In January, President Trump signed Executive Orders opposing the use of policies designed to promote diversity, equity and inclusion (DEI) in the workplace. Despite subsequent guidance issued by New Jersey State Attorney General Matthew Platkin and other state attorneys general (AGs) arguing that DEI policies are consistent with state and federal anti-discrimination laws and touting the benefits of such policies, businesses, especially those that receive federal or state funds or contract with state agencies, face urgency to review their DEI policies and consider ways to mitigate against regulatory and litigation risk arising from the conflict between state and federal DEI obligations.
Two Executive Orders target DEI in both the public and private sectors: “Ending Radical and Wasteful Government DEI Programs and Preferencing” and “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (DEI EOs). Together, the DEI EOs require all federal agencies to terminate “equity-related” contracts and grants and charge the U.S. Attorney General and federal agency heads with combatting “illegal private-sector DEI preferences, mandates, policies, programs, and activities.” Lawsuits followed and, on February 21, 2025, the United States District Court for the District of Maryland issued a preliminary injunction enjoining enforcement of certain provisions of the DEI EOs. While this pending litigation unfolds, businesses across the country continue to grapple with how to address their own DEI policies in light of these new federal directives and existing state legal obligations.
New Jersey State AG Business Guidance on DEI Executive Orders
Dozens of AGs have since issued guidance to explain their views as to the legal effect of the DEI EOs. On January 31, New Jersey AG Platkin issued a joint statement with 12 other State AGs, “President Trump Is Misleading the American People on Purpose of Diversity, Equity, Inclusion, and Accessibility Initiatives,” arguing that DEI policies and programs are “consistent with state and federal anti-discrimination laws” and touting the benefits of such policies to prevent unlawful discrimination and ensure equal access to opportunities.
On February 13, 2025, AG Platkin, along with 15 other AGs, issued more detailed guidance, “Multi-State Guidance Concerning Diversity, Equity, Inclusion, and Accessibility Employment Initiatives,” which is aimed at providing businesses, nonprofits, and organizations with the legal rationale and practical recommendations as to how to create and maintain legal DEI policies following the recent DEI EOs. In the Guidance, the AGs take the position that the DEI EOs do not make DEI policies and practices generally unlawful, but instead only reaffirm existing law prohibiting discrimination. The AGs argue that “the federal government does not have the legal authority to issue an executive order that prohibits otherwise lawful activities in the private sector or mandates the wholesale removal of these policies and practices within private organizations, including those that receive federal contracts and grants.”
The AGs warn in their Guidance that organizations that eliminate their DEI programs in response to the federal action may expose themselves to state enforcement:
The absence of policies and procedures may be a factor considered by enforcement authorities and courts. For example, the fact that a company has failed to implement adequate non-discrimination and fair employment policies, procedures, and trainings may be used by our offices or courts to assess culpability and liability for discriminatory conduct.
(Guidance at 2) (emphasis added). Based on their views on the lawfulness and importance of DEI programs, the AGs provide detailed practical guidance as to how businesses can structure the recruitment, hiring, professional development, retention, assessment, and integration aspects of their DEI programs in order to promote compliance with state laws. Notably, for businesses with a footprint in multiple jurisdictions, however, the views expressed by these Democratic AGs conflict with the recent actions of certain Republican AGs. For example, 11 AGs issued a letter warning financial institutions that their DEI and environmental, social, and governance (ESG) commitments may violate state and federal laws and risk enforcement action. The Missouri AG recently sued Starbucks alleging violations of state and federal law over its DEI policies and the Florida AG sued Target alleging its maintenance of both DEI and ESG policies violates the SEC Act.
Considerations for Businesses and Organizations
The pending federal changes on DEI pose practical challenges for any business or organization with existing DEI programs and policies, and in particular for those organizations that are recipients of federal funding, such as public colleges and universities and agencies, as well as for New Jersey state contractors. State contractors should be mindful of existing state DEI requirements and their own contractual obligations. Pursuant to N.J. Admin. Code § 17:27-3.1, contracts can only be awarded to those contractors and subcontractors who have “agreed and guaranteed to afford equal employment opportunity in performance of the contract in accordance with an affirmative action program and, except with respect to affectional or sexual orientation, approved under the terms established in these rules.” Particular types of state contractors also may have additional, conflicting requirements. For example, under section 17:27-6.2, construction contractors and subcontractors must abide by specific requirements to evidence the existence of an applicable affirmative action program. Recipients of public funds in multiple states (or who manage state funds under ESG policies) also must consider applicable state law and each AG’s recent enforcement activity on DEI. While businesses await additional federal and state guidance, it is important that recipients of federal or state public funds not only consider a legal review and potential update of their DEI programs but also evaluate strategic options to mitigate against regulatory and litigation risk and avoid the impact of any conflicts in federal and state obligations.
If you would like to explore these issues further, please contact the authors Ann-Marie Luciano at aluciano@cozen.com and Maria Colsey Heard at mheard@cozen.com, who are partners in Cozen O’Connor’s State AG practice group. Nothing in this blog post should be construed as providing the reader with legal advice or a legal opinion. The authors would like to thank their colleague Grace Garver for her contributions to this blog post.