A DEI Conundrum: We Employ U.S and Non-U.S. Workers. How Can We Straddle Diverging DEI Requirements?

Introduction 

On March 4, 2025, standing before the U.S. Congress, President Trump proclaimed that his administration had “ended the tyranny of so-called diversity, equity and inclusion policies all across the entire federal government and indeed the private sector and our military.”¹ He was referring to the multiple executive orders on diversity, equity and inclusion (DEI) he issued in his first two days in office²—including the order instructing all government agencies to “enforce our longstanding civil rights laws and to combat illegal private sector DEI preferences, mandates, policies, programs, and activities.”³ As a result, spring 2025 saw a flurry of activity as U.S. employers reviewed and, in some cases, recalibrated their DEI practices. 

But what does this recalibration mean for U.S. employers with workers outside the United States? This is a particularly thorny issue because, while U.S. government policy is pulling employers away from DEI, governmental policies in non-U.S. jurisdictions—including in Europe—are pushing employers towards DEI in the form of certain pay transparency and hiring requirements. The question then arises, how do employers with U.S. and non-U.S. workers straddle these push-pull factors across global jurisdictions? 

Where Does U.S. Policy Currently Stand on DEI? 

Executive Orders

The second Trump administration issued a series of executive orders aimed at dismantling federal DEI infrastructure across the government, federally funded entities, as well as private employers. Among these, the January 2025 orders—Ending Illegal Discrimination and Restoring Merit-Based Opportunity⁴ and Defending Women from Gender Ideology Extremism⁵—are especially consequential. They revoke a 50-year-old executive order that prohibited employment discrimination by the government and government contractors and subcontractors, seek to redefine sex-based rights using binary biological terms, and direct agencies to eliminate DEI-related mandates, guidance, and enforcement actions.

Importantly, these are not the only executive orders targeting DEI. The April 2025 executive order entitled, Restoring Equality of Opportunity and Meritocracy⁶ instructs all federal agencies to deprioritize enforcement of disparate-impact liability, arguing that it promotes race-conscious policies inconsistent with equal treatment mandates. It revokes prior presidential approvals of Title VI regulations protecting beneficiaries of federal programs from disparate impact and directs agencies to reevaluate investigations, litigation, and consent decrees relying on such frameworks.⁷

Additional directives have addressed federal contracting, education, environmental justice, and agency oversight—collectively signaling a systemic rollback of identity-based programming. 

Another executive order directs the federal agencies to require federal contractors and grant recipients to certify that they do not operate “any programs promoting DEI that violate any applicable Federal anti-discrimination laws” and to agree that their compliance in all respects with all applicable federal anti-discrimination laws is material to the government’s payment decisions for purposes of the Federal False Claims Act (FCA). With very limited exceptions, the federal government has not yet taken steps to implement this directive with regard to federal contracts. The government has included these types of provisions in some grant agreements resulting in several legal challenges and a number of court orders either enjoining or vacating certain agency actions.⁸

Government Agency Actions

U.S. Equal Employment Opportunity Commission (EEOC) Acting Chair Andrea Lucas has prioritized rooting out DEI-motivated race and sex discrimination, defending binary sex-based rights,⁹ and protecting American workers from anti-American national origin bias. Under her leadership, the EEOC—alongside the U.S. Department of Justice (DOJ)—has issued technical guidance clarifying that DEI initiatives may violate Title VII if they involve employment actions motivated in whole or in part by protected characteristics.¹⁰ The agencies emphasize that longstanding civil rights laws apply equally to all workers, and that popular DEI practices based on prohibited protected characteristics (e.g., race and gender) like mentorships, selective access to employee resource groups (ERGs), diverse candidate slates, and demographic hiring goals, may trigger enforcement scrutiny. 

The DOJ’s Civil Rights Fraud Initiative has introduced a bold new strategy. By threatening to invoke the FCA in situations in which a contractor or grant recipient has certified compliance with civil rights laws while maintaining DEI practices that the administration claims to be unlawful, the DOJ substantially raises the stakes for federal contractors and federal-fund recipients: a violation of the FCA can lead to treble damages, reputational fallout, and potential debarment. And while the FCA is primarily enforced through civil penalties, certain egregious violations—such as knowingly submitting fraudulent claims with intent to defraud—can trigger criminal liability, potentially resulting in up to five years of imprisonment, substantial fines, and restitution to the government. 

On July 29, 2025, U.S. Attorney General Pam Bondi reiterated through a memorandum to federal fund recipients¹¹—including universities, non-profit organizations, certain contractors, and local governments—that programs labeled as “DEI” or similar may violate federal antidiscrimination laws, and that knowingly supporting such initiatives could trigger liability under the FCA. Specifically, AG Bondi cited examples of potentially unlawful practices, including race-based scholarships, hiring preferences for underrepresented groups, and job applications requiring “cultural competence” or “lived experience”—all of which the administration may argue constitute proxies for race- or sex-based discrimination.

The Federal Communications Commission (FCC) has also begun reviewing DEI-related programming and public statements under its public interest standard.¹² Employers in media, tech, and telecommunications now face scrutiny of initiatives that intersect with licensing, advertising, or federal oversight—especially when tied to identity-based messaging.

Judicial Actions

In general, to date, the courts have not taken as dim a view of DEI as the Trump administration. However, the courts have strictly scrutinized any program that provides preferential treatment on the basis of sex, ethnicity, or race.

Thus, the Supreme Court in Students for Fair Admissions, Inc.¹³ invalidated race-conscious university admissions programs and catalyzed a wave of legal scrutiny against identity-based initiatives across sectors. In Muldrow,¹⁴ the Court lowered the threshold required to establish an adverse employment action under Title VII discrimination claims, holding that even minor employment harms may be actionable, expanding exposure for DEI-related personnel decisions. In Ames,¹⁵ the Court eliminated the “background circumstances” requirement, removing a key hurdle that previously blocked many discrimination claims brought by members of historically majority communities at the summary judgment stage in certain jurisdictions within the United States. In the same vein, the Eleventh Circuit’s ruling in Fearless Fund¹⁶ extended this logic to private grantmaking, finding that race-exclusive contests may violate 42 U.S.C. § 1981 if they involve contractual obligations. Together, these cases reflect a jurisprudential shift toward strict individual treatment under civil rights law and signal heightened risk for employers and funders operating identity-based programs. More recently, trending litigation has reinforced the reasoning laid out in the Fearless Fund litigation that race-conscious corporate programs—such as supplier diversity initiatives—may violate Section 1981 if they involve contractual relationships and exclude individuals based on race.

Thus, in the United States, the legal landscape for workplace DEI has clearly shifted and continues to be in flux.¹⁷ The message: even well-intentioned DEI efforts must not result in discrimination.

How Do Non-U.S. Jurisdictions Diverge from U.S. Policy? 

In contrast, jurisdictions outside the United States continue to develop workplace requirements that promote DEI practices, some of which may be considered “illegal DEI” under U.S. policy. 

European Union

In the EU, as a fundamental matter, DEI in the workplace is based on the EU Charter of Fundamental Rights, which contains the right of equality and non-discrimination, the right of equality between women and men, and the right of integration of persons with disabilities. As a result, several EU laws oblige employers as follows:

• EU Leadership Positions Directive (Directive (EU) 2022/2381)

This directive seeks a more balanced representation of women and men in corporate management bodies. Specifically, by June 30, 2026, at least 40% of non-executive management positions or supervisory board members in covered companies must be held by members of the underrepresented gender group. Critically, even members of the covered companies who are outside the EU – including in the U.S. – may need to be accounted for under this requirement. If companies decide to apply the target to both non-executive and executive directors, the target is only 33% of all director positions. To achieve these objectives, companies must, among other things, give priority to the underrepresented gender if they have the same skills, qualifications, and professional performance.

This directive applies to all listed companies, with the exception of small and medium-sized companies. However, a Member State may suspend these requirements if its national law stipulates that the underrepresented gender must account for at least 30% of non-executive directors or at least 25% of all directors in listed companies and, at the same time, stipulates that all listed companies not covered by this national law must set individual qualitative targets for all director positions. Germany, for example, has made use of this exemption.

• EU Pay Transparency Directive (Directive (EU) 2023/970)

This directive, to be transposed into national law by June 7, 2026, requires covered employers to implement a variety of measures to promote pay transparency and to reduce existing gender pay gaps. Indeed, not only must an employer disclose gender pay gaps, but if there is a difference in the average pay level between female and male workers of at least 5% in any job category that cannot be justified on the basis of objective, gender-neutral criteria, the employer must remedy such a difference in the average pay level within six months. 

The directive applies to employers in public and private sectors and to all workers who have an employment relationship as defined under each Member State’s laws. That said, the details of the scope are to be defined by the Member States. It is possible that even U.S. employers are in scope if they employ workers to whom the law of an EU Member State applies because—for example—their place of work is permanently within the EU. 

• Corporate Sustainability Reporting Directive (CSRD) (Directive (EU) 2022/2464)

This directive represents a major shift in the EU’s approach to non-financial reporting, now obliging covered employers to report on various sustainability matters, including “equality, non-discrimination, diversity and inclusion ….” As of July 2025, the first wave of companies—listed EU entities and other public-interest undertakings with more than 500 employees in the EU—are already subject to the CSRD for financial year 2024, with sustainability reports due throughout 2025. While the EU has postponed reporting deadlines for subsequent waves of covered companies, the EU has made clear that it is not retreating from sustainability or equity reporting—only refining it to ensure feasibility. Companies must still prepare to meet high standards of transparency and accountability, including external assurance and integration with financial reporting cycles. Critically, this reporting obligation may cover U.S. workers of the relevant companies. 

United Kingdom

Employers in the UK are also under rising pressure from new laws and regulatory expectations to drive forward DEI in several areas. 

Multiple new requirements on pay gap reporting are proposed, which may apply to U.S. workers of covered companies. First, the existing gender pay gap reporting requirements (which mandate all employers with 250+ UK employees report on pay for men and women) will be supplemented with a requirement for employers to develop and publish equality action plans setting out the steps they are taking to address the gender pay gap and to support employees going through menopause. This is expected to start on a voluntary basis in April 2026 and become compulsory in 2027.

Second, employers will also be required to report on ethnicity and disability pay gaps. Employers are expected to report on how their pay differs between their white British workforce and all other employees, as well as between disabled and non-disabled employees. These requirements are expected to be effective in 2026, and it is currently unknown if U.S. workers of covered companies are covered under this proposed law.

Non-European Jurisdictions

Beyond Europe, jurisdictions as diverse as Japan, Australia and some Canadian provinces have enacted laws to promote DEI in the workplace. 

In Japan,¹⁸ strong gender diversity requirements have been driven by the government’s stated goal to achieve at least 30% female representation in managerial and executive positions in Japan by 2030. Under a law that took effect on July 8, 2022, employers with 300 or more employees in Japan are currently required to address gender wage disparities through public disclosure. Starting April 2026, this requirement will expand to include employers with 100 or more employees in Japan. Employers with 100 or more employees are also required to implement “general employer action plans,” which must include: (i) an analysis of the status of female employees and (ii) clearly defined goals and measures to promote gender equality. These action plans must be submitted to the relevant prefectural labor bureaus for review and made publicly accessible. 

In Australia, a 2012 law required private employers with 100 or more employees in Australia to report annually against six gender equality indicators.¹⁹ Employers with 500 or more employees must also have a policy for each of the indicators. Those with 500 or more direct employees also need to select and achieve or improve against gender equality targets. 2024 brought further requirements including mandatory reporting on previously voluntary data points, new requirements for larger employers, and the public release of gender pay gap data. 

In Canada, the province of British Columbia has enacted gender-based pay transparency requirements that are triggered by employee headcount thresholds. Other provinces are in the process of developing similar laws. 

While these reporting or other requirements may not cover those companies’ employees working in the United States, those companies with both U.S. and non-U.S. workers will still have to keep them in mind in charting their strategy on DEI, as set out below. 

How Do Employers with U.S. and Non-U.S. Workers Reconcile These Divergent Legal Regimes? 

Multinational employers are often tempted to implement one-size-fits-all workplace policies across their global operations for various reasons, including administrative ease, or the need for a “unified” corporate culture. This was true of many employers’ DEI policies as well. Indeed, in the recent years leading up to President Trump’s second term, many employers decided to not only comply with then-existing jurisdiction-specific “pro-DEI” legal requirements like gender-based pay transparency or hiring quotas, but also to voluntarily extend such measures globally to those jurisdictions without such legal requirements. Thus, at the start of 2025, many employers had a maximalist, “global” approach to DEI. 

While this global approach was always problematic for various reasons, the new Trump administration’s hostility towards DEI has made it almost impossible to have a one-size-fits-all approach to DEI in a global workforce that includes both U.S. and non-U.S. workers. As just one example, while employers in the E.U. or Japan will be legally compelled to affirmatively hire women into certain managerial positions, such affirmative sex-based hiring, if implemented in the United States, may be deemed “illegal DEI” by the EEOC or other government agencies and courts. So, how do employers with U.S. and non-U.S. workers reconcile such starkly divergent legal regimes? 

One approach has been to separate U.S. operations from any global DEI program that goes beyond any local DEI requirements. This means that U.S. workers will be cut out of certain corporate-wide measures that could be deemed “illegal DEI” under current U.S. law. This may entail excluding U.S. workers from company-wide gender equity corrective measures, or even from ERGs that are based purely on protected categories. 

Another approach has been to implement DEI based strictly and solely on compliance with local law. This minimalist approach leads to a much more fractured DEI program that is directed solely by the specific jurisdiction’s requirements or prohibitions on DEI. For instance, based on the laws discussed above, an employer’s Paris branch may adopt a gender equity correction program, while the Vancouver, B.C. branch may adopt a gender-based pay transparency program only, and the Nashville, TN branch will do nothing in this regard. In other words, this is a minimalist approach that adopts DEI measures only to the extent local law requires it.  

Global employers should be careful to consult with experienced counsel in adopting these or other approaches to DEI, as legal, operational, business, and reputational factors should all be considered and balanced. The sensitivity is particularly acute where employers have affirmatively granted DEI benefits and are now forced to roll back such benefits. 

Whichever approach is adopted, global employers must now also be careful in how their selected DEI strategy is communicated both internally and externally. Indeed, whereas many employers’ pre-2025 communications (including company websites) extolled a broad-based DEI program, now employers are revisiting such communications to ensure that no impression is given that U.S. workers are potentially subjected to arguably “illegal DEI.”

A Complication: Do U.S. DEI Prohibitions Apply Extra-Territorially?

U.S.-based multinational employers are faced with the additional complication of whether the current U.S. governmental policy may pose a barrier to DEI programs in their non-U.S. operations. This complication is based on the potential extraterritorial reach of U.S. anti-discrimination laws, including Title VII of the Civil Rights Act of 1964, which the EEOC asserts is one of the foundational texts supporting the U.S. government’s position on “illegal DEI.” 

Such extraterritorial reach is present when employees with U.S. citizenship, including dual citizens, work overseas for a U.S.-“controlled” employer.²⁰ Still, U.S. law should not be a barrier to implementing a DEI program in a non-U.S. jurisdiction for non-U.S. citizen workers. Having said that, if the employer has U.S. citizen expats seconded to a non-U.S. branch that implements a local DEI program, that employer—presuming that branch is U.S.-controlled—may have to consider “red-circling” those U.S. expats from such a program. 

The specter of the extraterritorial application of U.S. law was also raised when, in early 2025, federal agencies started issuing compliance demand letters to foreign entities that have government contracts with the United States for projects outside the United States These letters required affirmations under the U.S. False Claims Act that these entities’ non-U.S. operations “comply” with “U.S. federal anti-discrimination laws.”²¹ While these letters raised fears of an aggressive extraterritorial application of U.S. law,²² the letters appear to have merely sought assurance that companies doing work for the U.S. government outside the United States comply with “U.S. federal anti-discrimination laws” and with new executive orders that expressly invoke existing U.S. discrimination statutes. This likely means that, at most, a non-U.S. company receiving a compliance letter must follow new interpretations of U.S. discrimination statutes only as to any U.S. citizens it might happen to employ outside the United States—not as to everyone else it employs outside the United States.  

Another Complication: State and Local “pro-DEI” Requirements

In the process of excluding U.S. workers from global DEI measures, employers may not be able to treat those U.S. workers as a monolith. This is because some of the U.S. workers may live in states or cities in the United States with “pro-DEI” requirements. As federal policy scales back DEI enforcement, many U.S. states and cities are actively moving in the opposite direction, creating a complex patchwork of U.S. laws for employers to navigate.

For example, while the instructions for the 2024 federal EEO-1 form stated that the data collection “provides only binary options (i.e. male or female) for reporting employee counts,” many state and local governments require employers to respect their employees’ self-reported gender markers creating a conflict between the federal instructions and state or local laws. 

As another example, although federal requirements for race-, ethnicity-, and gender-based affirmative action plans have been dismantled, many state and local governments continue to enforce their own mandates. States like Connecticut, Kentucky, New Jersey, Minnesota, and Wisconsin require state contractors to maintain affirmative action programs including maintaining data and, in some cases, filing reports with the state. Other states like California, Illinois, and Massachusetts require employers to periodically report on the demographic characteristics of their workforce. 

However, a substantive legal conflict will arise if a state or local government contracting program incorporates preferences based on protected characteristics such as race or gender. If these preferences lead to exclusionary or preferential treatment based on prohibited protected categories, they may violate federal (and, indeed state) anti-discrimination laws—including Title VII of the Civil Rights Act. Moreover, even when a state is not requiring preferences, employers must still be careful about agreeing to adopt state-mandated language that creates an impression of preferential treatment as such language may invite scrutiny from the Department of Justice or other federal actors. Employers facing this tension should consult legal counsel to ensure compliance with the law and to align contracting strategies with sound business judgment.

Thus, in determining how to treat U.S. workers within their DEI strategy, employers must be sensitive to any state or local requirements that may have an impact on this strategy. 

Conclusion

The divergence in DEI requirements in the United States versus the rest of the world will likely continue, at least through the end of the Trump presidency. In fact, global employers will likely increasingly feel the discomfort of this divergence as the E.U. directives and U.K. bill discussed here become effective in the coming few months and years. 

There is no one solution to successfully straddling this divergence, but global employers may engage in the following broadbrush steps, which should be followed with experienced counsel under attorney-client privilege, where applicable:

• Audit current DEI practices across jurisdictions in light of current and upcoming DEI local law requirements;
• Engage in multi-stakeholder consultations to chart a strategic approach to DEI measures going forward, including any changes to current DEI measures;
• Pay special attention to any government contracts that may impact this strategic approach;
• In implementing this approach, ensure that internal and external communications on DEI measures are consistent and sensitive to legal risks; and,

• Unless local law requires otherwise, ensure that day-to-day employment decisions are backed by clear, objective justifications that are not based on protected categories, and that such decisions are documented with precision. 

   

*Thank you also to the contributions of Littler attorneys David Goldstein, Naomi Seddon, Monty Verlint, Aki Tanaka, Maria Luisa Riu Cobo, Dr. Lukas Heber, Dr. Sabine Vianden, and Natasha Adom, and summer associate Gabriela de la Llana.