EO 14398, signed March 26, 2026, prohibits federal contractors from engaging in “racially discriminatory DEI activities,” a category that explicitly includes program participation, not just employment decisions. Whether any given ERG creates compliance risk depends entirely on how it’s structured and documented.
Employee resource groups (sometimes called affinity groups) are employer-sponsored, employee-led groups organized around shared identities, experiences, or interests. They typically offer community, mentorship, networking, and professional development to members.
Prior DOJ guidance under EO 14173 flagged structured programs that deliver career development, networking, or advancement opportunities on a racially differentiated basis. ERGs that restrict membership or meaningful participation by race or ethnicity are squarely within the category those orders address.
This analysis is distinct from the hiring question. A contractor can be compliant on job posting and outreach while still running an ERG structure that creates exposure. Treating these as separate compliance tracks is the right approach.
ERGs vary widely in how membership and participation are defined, and that variation is where the compliance analysis begins.
An ERG open to all employees, where membership isn’t gated by race, ethnicity, or any protected characteristic, carries materially lower risk under EO 14398. Employees who share an identity may drive the group’s programming and culture, but the structure doesn’t exclude anyone. Employment law firms have consistently pointed to open participation as the structural marker that separates lower-risk ERGs from higher-risk ones.
ERGs with race or ethnicity restricted membership are in different territory. If joining or meaningfully participating requires belonging to a specific racial or ethnic group, the program applies race and ethnicity based criteria to a benefit of employment, which is the conduct EO 14398 is designed to reach.
The clearest path forward for most organizations is to audit membership criteria, review whether leadership roles carry eligibility requirements tied to identity, and document that programming is accessible across the workforce.
A structured review of your ERG portfolio doesn’t require eliminating programs. Most can be retained with targeted adjustments.
The areas to examine:
Membership criteria: Are they open to all employees?
Leadership eligibility: Are ERG officer or board roles restricted by identity
Programming access: Are events, mentorship, and development opportunities available to employees who don’t share the targeted identity?
Budget documentation: Is the rationale for resource allocation recorded and identity-neutral?
EO 14398’s enforcement posture adds weight to getting this right. Compliance with the order’s contract clause is “material to the Government’s payment decisions,” the precise trigger for False Claims Act liability. In 2025, DOJ recovered $6.8 billion through FCA enforcement, $5.3 billion from whistleblower-initiated cases. A former employee who believes a race-based ERG program affected their career opportunities can bring an FCA action.
A review done well protects the programs your employees value, by ensuring they’re structured in a way that doesn’t create contract termination, debarment, or False Claims Act exposure going forward.
For a full walkthrough of EO 14398’s enforcement mechanics and the questions compliance teams are navigating right now, watch our recent webinar on the executive order, led by a Jackson Lewis attorney with direct experience advising federal contractors through this transition.