By Lynn Clements, David Cohen, and Victoria Lipnic
NOTE: This article was originally published in Law360
On Jan. 21, Executive Order 14173, titled "Ending Illegal Discrimination and Restoring Merit-Based Opportunity," revoked the requirement that federal contractors and subcontractors prepare affirmative action plans for women and minority groups.[1]
President Donald Trump's issuance of this executive order has some employers wondering whether they need to rethink their approach to workforce analytics, including the voluntary collection of applicants' and employees' demographic data, such as race, ethnicity and sex.
Employers should balance the benefits of collecting data to establish compliance with the new executive order's certification requirements and anti-discrimination laws, along with the risk of data collection running afoul of the new order's prohibition on "illegal DEI."
Moreover, absent demographic applicant flow data specific to the employer, the only statistics available may be the U.S. Census equal employment opportunity occupation data, or general labor market data by race, sex and occupation code, which would be used in place of specific data about the group of individuals who were considered when making an employment decision.
Given recent changes to census data reporting, this general labor market data may often be less favorable for employers than the demographic data voluntarily provided by applicants and employees.
Federal Anti-Discrimination Laws
Contractor Data Collection of Disability and Veteran Status
The president's recent actions did not revoke the statutory mandates under Section 503 of the Rehabilitation Act and the Vietnam Era Veterans' Readjustment Assistance Act for federal contractors to take affirmative action for individuals with disabilities and protected veterans.[6]
The U.S. Department of Labor's regulations implementing these requirements currently mandate that covered employers offer applicants the opportunity to voluntarily self-identify their disability and protected veteran status.[7] These same regulations require employers to give a second chance to voluntarily provide this information after an employment offer is made and prior to starting work.[8]
The regulations regarding workers with disabilities also require that employees are offered the opportunity to self-identify as an individual with a disability during the first year the contractor is subject to the requirements, and every five years thereafter.[9]
Executive Order 14173 does not change these obligations for federal contractors and subcontractors.
Collecting Applicants' and Employees' Race, Ethnicity and Sex Data
For employers in general — not just federal contractors and subcontractors — the U.S. Equal Employment Opportunity Commission has provided guidance about collecting applicant and employee demographic data under Title VII.
Title VII itself provides that covered employers "make and keep such records relevant to the determinations of whether unlawful employment practices have been or are being committed."[10]
Employers that are subject to Title VII, with at least 100 employees, must file with the commission a Standard Form 100, known as the Employer Information Report EEO-1.[11] This report provides summary workforce data by race, ethnicity, sex and EEO job category.
The same regulations instruct employers that they may obtain employees' race and ethnicity through visual identification[12] or by maintaining post-employment self-identification records, provided that the records are kept separate from the employee's other personnel information and that the employer does not make the information available to those responsible for employment decisions.[13]
Although not specifically outlined in the EEOC's regulations, employers follow similar practices for reporting each employee's sex on the EEO-1 report.
With respect to collecting applicants' demographic data, during President George W. Bush's administration, the EEOC's legal counsel issued an informal discussion letter in 2008 expressly stating that "the EEOC's regulations require companies to maintain, and have available for inspection, data by identifiable race, sex and ethnic group for all job applicants."[14] The letter explained that this data was "necessary for employers and the EEOC to determine if discrimination has occurred."[15]
The EEOC has outlined how employers should offer applicants an opportunity to voluntarily provide race, ethnicity and sex information — which employers have since relied on when collecting such data as part of their applicant tracking systems.
Following the below guidelines can guard against the assumption that requesting such information formed the basis for any selection decision:
Uniform Guidelines on Employee Selection Procedures
Since collecting race, ethnicity and sex information is not unlawful under Title VII, employers may want to consider the various reasons to collect such data.
Ensuring anti-discrimination, which Executive Order 14173 seeks to achieve, is typically the primary goal underlying employers' data collection and subsequent monitoring of their workforce policies and practices.
Since 1978, the Uniform Guidelines on Employee Selection Procedures, or UGESP, have served as a "single set of principles" that were created to "provide a framework for determining the proper use of tests and other selection procedures."[17]
The guidelines are intended to help employers comply with Title VII's anti-discrimination provisions, which prohibit employers from making employment decisions based on race, color, religion, sex and national origin.[18]
UGESP applies to tests and other selection procedures that are used as a basis for any employment decision, including hiring, promotion, demotion and termination. It expressly provides that employers should maintain records regarding the impact of selection procedures by "identifiable race, sex, or ethnic group."[19]
The guidelines also provide a road map for employers to ensure that selection procedures are anti-discriminatory and merit-based. These include monitoring overall selection rate differences by race, ethnicity and sex, reviewing individual components of the selection process to identify whether a specific practice may be causing any differences in overall selection rates, and validating components of the selection process to ensure tests or other procedures are job-related and consistent with business necessity.[20]
Executive Order 14173 does not change the guidance set forth in the UGESP. For years, the EEOC has obtained approval, pursuant to the Paperwork Reduction Act, to require the collection of race, ethnicity and sex information from applicants.[21]
The EEOC and employers use this information to evaluate whether selection practices are discriminatory and to ensure compliance with anti-discrimination laws, as suggested by Trump's new executive order.
Employers that may be considering stopping the collection of voluntarily provided data should evaluate how to otherwise monitor employment practices for merit-based decision-making. Although some may believe not having this information creates less risk, ignorance is no defense to an employment discrimination claim.
Without the solicitation of applicants' race, ethnicity, and sex, employers will need to evaluate whether they are comfortable relying on general labor market availability data by occupational category — versus actual applicant demographic data — to defend their employment practices.
State and Other Laws
As if the changing federal landscape were not enough, employers also need to consider their obligations under state and local laws.[22]
For example, California requires the submission of employee demographic data as part of its pay reporting scheme.
Similarly, the regulations implementing New York City's Automated Employment Decision Tools Law, familiarly known as the NYC AI Bias Law, contemplate that employers will conduct a bias audit of any automated employment decision tools that includes calculations of the selection rate for each race, ethnicity and sex, as well as intersectional categories.[23]
The guidance makes clear that this analysis is premised on the availability of demographic information for both applicants and employees.
The Practicality of a Uniform Applicant Tracking System
Employers would be wise to audit their applicant tracking practices to ensure they are correctly managing the collection of race, ethnicity and sex, in accordance with EEOC guidelines.
Most applicant tracking systems are already built to request this information, so removing or modifying existing systems could be a time-consuming and costly exercise.
Additionally, multistate employers need to evaluate whether they can realistically configure their systems to seek voluntary self-identification information for applicants in some states but not others.
Before making sweeping changes to applicant tracking systems and data collection processes, employers should assess how they can ensure compliance with various state requirements, federal anti-discrimination laws and the UGESP requirements.
Conclusion
Rather than quickly adopting a head-in-the-sand approach, employers should carefully consider the information needed to best establish that their decision-making is merit-based.
They also must consider compliance with current federal and state laws on anti-discrimination and data reporting before changing any current applicant or employee data collection practices.
Demographic data collection may seem risky in light of Executive Order 14173, but employers nonetheless have reasons to do so that are aligned with Trump's executive order: ensuring that all individuals have the chance to succeed on their own merit, and safeguarding employment opportunities for everyone in this country, regardless of race, ethnicity or sex.
References
[1] See Executive Order 14173, available online at https://public-inspection.federalregister.gov/2025-02097.pdf.
[2] 42 U.S.C.§ 2000e et seq.
[3] 29 U.S.C.206(d).
[4] https://www.census.gov/topics/employment/equal-employment-opportunity-tabulation/guidance/2000-tabulation-data.html.
[5] In 2021, the United States Census Bureau released the 2014-2018 Equal Employment Opportunity Tabulation, available online at https://www.census.gov/acs/www/data/eeo-data/eeo-tables-2018/. The tabulation reduced the number of occupational codes from 488 to 237 and consolidated the number of available geographic regions for which this data was available. As a result, there is some concern that reliance on general availability data is not detailed enough to reflect the qualified pool for some specific occupations.
[6] 29 U.S.C. § 793; 38 U.S.C. § 4212.
[7] 41 C.F.R. § 60-300.42(a); 41 C.F.R. § 60-741.42(a). See also Letter from EEOC Legal Counsel Peggy Mastroianni to OFCCP Director Patricia Shiu, dated August 8, 2023 ("EEOC has from early in its ADA enforcement made explicit . . . that any employer may invite applicants or employees to voluntarily self-identify as individuals with disabilities for affirmative action purposes, whether pursuant to a federally-mandated affirmative action requirement such as Section 503 or a voluntarily adopted program.").
[8] 41 C.F.R. § 60-300.42(b); 41 C.F.R. § 60-741.42(b).
[9] 41 C.F.R. § 60-741.42(c).
[10] Title VII, §. 2000e-8(c).
[11] 29 C.F.R. § 1602.7.
[12] 29 CFR § 1614.601(b).
[13] 29 C.F.R. § 1602.13.
[14] EEOC Informal Discussion Letter dated November 18, 2008, available online at https://www.eeoc.gov/foia/eeoc-informal-discussion-letter-200 (emphasis added); see also Title VII, §. 2000e-8(c).
[15] Id; see also EEOC Pre-Employment Inquiries and Race, available online at https://www.eeoc.gov/pre-employment-inquiries-and-race (explaining that an employer may request information about an applicant's race where it has a legitimate business need, such as "to track applicant flow").
[16] EEOC Informal Discussion Letter dated November 18, 2008, available online at https://www.eeoc.gov/foia/eeoc-informal-discussion-letter-200.
[17] 29 C.F.R. Part 1607.1(B).
[18] Id.
[19] 29 C.F.R. Part 1607.4(A).
[20] 29 C.F.R. Part 1607.
[21] See EEOC Supporting Statement and Justification: Paperwork Reduction Act Submission, Recordkeeping Requirements of the Uniform Guidelines on Employee Selection Procedures, 29 C.F.R. Part 1607, available online at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=20241Paperwork Reduction Act2-3046-006.
[22] Employers must nonetheless consider and comply with state laws, including those related to data privacy.
[23] See, e.g. https://rules.cityofnewyork.us/wp-content/uploads/2023/04/DCWP-NOA-for-Use-of-Automated-Employment-Decisionmaking-Tools-2.pdf.