New regulations on DEI programs in the United States and their impact on EU companies

The recent executive orders by the President of the United States, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” banned diversity, equity, and inclusion (DEI) programs and initiatives in the federal administration as well as in the private sector. ​The executive orders have reformed a long-standing DEI regulatory framework, imposing new limitations on race and gender conscious practices and now focuse solely on performance-based criteria. Companies that continue with their DEI programs face several financial and compliance risks e.g. exclusion from government contracts.

Consequences for EU companies

The above-mentioned executive orders don’t only affect U.S. companies but also have an impact on EU businesses that operate in the United States and the European Union. These companies will face new compliance challenges. Given that the EU has strong policies supporting diversity, non-discrimination and equality, the new executive orders are conflicting with existing EU anti-discrimination laws and values. United States embassies have sent letters to contractors in European countries asking them to certify that they will not support DEI programs that conflict with U.S. law, to implement the new U.S. regulations. These letters demand that decisions be made on the basis of performance alone, without consideration of DEI criteria. In particular, DEI initiatives that support preferences or benefits based on race or gender could be seen as violating the new US executive orders. Such outcome will create tensions with European legal frameworks where diversity, equality and inclusion are highly valued.

Indicative examples of provisions fostering gender balance across the EU may be found as follows: In Germany, the Zweites Führungspositionen-Gesetz (FüPoG II) from 2021 which modified § 76 (3a) AktG and § 96 (2) AktG, regulating gender quotas for supervisory and management boards. For publicly listed and equally co-determined companies, as well as joint-stock companies, in which the federal government holds a majority stake, a gender-specific minimum participation requirement also applies to the executive board. According to § 76 (3a) AktG, if the executive board of such a company consists of more than three members, it must include at least one woman and at least one man. § 96 (2) AktG stipulates that for publicly listed companies subject to the Co-Determination Act, the Montan Co-Determination Act, or the Co-Determination Supplementary Act, the supervisory board must consist of at least 30% women and at least 30% men.

Furthermore, in Greece the recently enacted law 5178/2025 transposed EU directive (EU) 2022/2381 which aims at ensuring the application of the principle of equal opportunities between women and men and achieving a gender-balanced representation in them by June 30^th, 2026. In this respect, women (referred to as the “underrepresented sex”) must hold either at least 40% of non-executive director positions or at least 33% of all director positions in large listed companies.

The above Law adds, among other provisions, Art. 3A to Law 4706/2020 which provides for equal representation of sexes in the Board of Directors setting the gender board quota to 33%, for large listed companies, i.e. companies with over 250 employees and either annual turnover exceeding 50 million euros or annual balance of more than 43 million euros and minimum 25% of representation for all listed companies. The above Law further mandates that if a large listed company’s Board of Directors has three or more executive members, at least one of these positions must be held by a female Board member.

Moreover, the EU places great value on anti-discrimination legislation, which will continue to support DEI efforts at national level. The EU Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose their policies on anti-discrimination, equal opportunities and diversity. Companies are also required to report on their compliance with diversity quotas (e.g. gender quotas) and their commitment to addressing the under-representation of marginalised groups.

The inquiry to confirm not to continue to support DEI programs is considered as a subsequent contract modification between the U.S. government agency and European contractor. Whether the modification is possible depends on the content of the contract. The applicable law for the subsequent contract modification depends on the specific content of the contract and needs to be checked on a case-by-case basis.

 Actions into consideration for EU companies

EU-based companies must carefully assess and adapt their strategies to mitigate legal risks and ensure compliance with both jurisdictions. Possible steps could include:

1. Risk Assessment

Companies should identify and analyze their exposure on both US and EU legal requirements. This assessment should include a review of current DEI policies, training programs and internal structures to determine whether any of these initiatives could be considered in violation of the US Executive Orders. For example, if a company operates a DEI program that includes race or gender preferences, it may need to adjust it to comply with the US government’s directive.

2. Global Compliance Strategy

EU companies operating across the Atlantic must develop a global compliance strategy that encompasses both U.S. and EU regulations. This strategy should combine region specific regulations that allow for adaptation of DEI policies while maintaining overall compliance. Companies should consider meeting legal expectations without undermining the broader goals of diversity and inclusion. In this regard, EU companies should bring together experts in the relevant fields e.g. legal experts, compliance officers, and DEI specialists, from both the United States and Europe to collaboratively address the regulatory risks. This cross-border coordination will help ensure that DEI programs are not only compliant with EU laws but also do not conflict with the new US policies, accommodating to the best extent possible the diverse interests.

3. Review of contracts with U.S. entities

Companies with U.S. government contracts and/or relationships with U.S. based contractors should evaluate whether the terms of their contracts require certifications regarding DEI policies. U.S. government agencies may ask contractors/companies to certify that they do not operate DEI programs which violate U.S. anti-discrimination laws. Thus, companies should carefully review their contracts to assess the scope and implications of these certifications and determine whether changes must be made, to ensure compliance with U.S. regulations.

4. Adapt DEI policies to local requirements

As a possible way to balance the provisions of the U.S. directive with applicable EU requirements, EU companies shall secure that their DEI policies respect statutory local requirements without extending their scope to e.g. support politically motivated policies that could conflict with U.S. regulations. Namely corporate policies could be rebranded to focus explicitly on the implementation of national anti-discrimination laws, rather than promoting broader DEI initiatives, which may be judged as controversial. This would allow companies to continue their commitment to diversity and inclusion in the workplace, while avoiding the promotion of contravening U.S. orders. Whether rebranding will be enough in the long run depends on the future decisions of the U.S.  government.