How Trump’s DEI Rollback Affects Nonprofits and How to Protect Your Organization

Since taking office, President Trump has issued sweeping executive orders targeting Diversity, Equity, and Inclusion (DEI) initiatives across federal agencies and directing agencies to take action to encourage private organizations to follow suit. On January 20, 2025, President Trump signed executive orders (EOs) titled Ending Racial and Wasteful Government DEI Programs and Preferencing and Extremism and Restoring Biological Truth to the Federal Government. The following day, he issued another EO titled Ending Illegal Discrimination and Restoring Merit-Based Opportunity. On January 22, 2025, the White House published a Fact Sheet providing guidance related to these orders. Many states were early adopters of such initiatives—e.g., in 2023 Florida passed a bill banning DEI initiatives in public colleges—or are now following suit in dismantling these programs as well within state agencies and institutions (such as Indiana, Mississippi, West Virginia, among others).

There have been numerous lawsuits filed against these executive orders and agency actions, and the legal landscape changes rapidly, both because of agency actions and court orders. (Pillsbury has been reporting on these developments in its Trump 2.0 Resource Center.)

What is clear is that the new legal and political environment may have significant direct or indirect impacts on nonprofit organizations—especially those espousing or advocating for DEI and race or gender inclusivity and that hold federal contracts or grants—by altering funding opportunities, increasing legal scrutiny and reshaping the risks associated with operating DEI programs.

If your nonprofit has implemented initiatives on diversity, racial non-discrimination, gender inclusion or related issues, it’s critical to understand how these changes may affect your operations—and, importantly, steps you can take to assess and reduce risks.

Impacts of DEI Policy Changes on Nonprofits

Federal DEI Programs Are Being Shut Down
The administration has ordered agencies to the eliminate all DEI-related mandates, policies and roles in federal agencies, to the extent consistent with applicable law. What this means in practice remains to be seen, and a number of legal challenges to agency actions ending or freezing initiatives described as DEI-related have contended that these actions are inconsistent with statutory mandates or appropriations by Congress. Nonetheless, to the extent that the executive orders are implemented, (i) some federal grant programs supporting DEI or gender affirming/inclusivity efforts may be cut or restructured; (ii) nonprofits that previously partnered with government agencies for DEI and gender policy initiatives may see reduced funding or increased scrutiny; and (iii) organizations seeking new federal contracts or grants may wish to review their applications for alignment with the administration’s framework.

Affirmative Action Requirements for Federal Contractors Have Been Removed
President Trump has rescinded Executive Order 11246, which mandated affirmative action requirements for federal contractors in relation to sex, race, and ethnicity. As a result, nonprofits that contract with the government or have subcontracts with federal contractors will need to review their affirmative action programs and decide whether there are any elements they wish to retain, and also will need to evaluate whether any of the affirmative action programs they have engaged in are also necessary to comply with state or local affirmative action requirements.

There Is Likely to Be Heightened Federal Agency Scrutiny of DEI Practices
Federal agencies have stated that they will actively investigate and challenge what they consider to be “illegal” DEI preferences. Although the term “illegal DEI” is undefined, recent guidance from the Department of Justice, Department of Education, and Equal Employment Opportunity Commission (EEOC) indicates that federal agencies are especially focused on programs with race-based or sex-based preferences or exclusions and may be especially likely to investigate potential discrimination if it occurs under the rubric of a DEI initiative.

How Insurance Can Help Nonprofits Adapt and Reduce Risk
With these changes, nonprofits should consider taking proactive steps to safeguard their mission while protecting themselves from the range of potential legal, business and reputational risks arising from the Administration’s anti-DEI focus. Both overcompliance and undercompliance can create risks for nonprofits. Nonprofits should consult with experienced legal counsel and involve the organization’s Board in discussions of any potential significant changes that affect the organization’s existing strategic plan or priorities. Different nonprofits will reach different conclusions about the best path forward.

In a changing risk landscape, however, one often-overlooked area where organizations can take proactive steps to protect themselves is insurance. With the risk of legal challenges increasing, nonprofit organizations should carefully review their Directors and Officers (D&O) liability insurance and other policies to ensure adequate protection.

• D&O Insurance: This coverage protects leadership from personal liability in lawsuits, including discrimination claims. For nonprofits, the policies are often termed “Nonprofit Organization Liability Insurance” or “Association Liability Insurance.”

Shifts in federal or state enforcement policies—or confusion about what initiatives are legal—could expose leaders to potential claims if stakeholders or employees believe decisions were legally noncompliant with the federal anti-DEI mandates or, conversely, with affirmative state or local DEI requirements or existing antidiscrimination laws; or that the organization otherwise acted in a manner inconsistent with its stated policies or commitments.

Steps to protect against exposure for such claims and to limit liability should they occur include:

1. Educate directors, officers and senior staff to be sure they understand their fiduciary duties and the nonprofit’s approach to implementing or adjusting DEI measures.
2. Be sure to explain D&O coverage details so that internal and external leadership knows the existence and scope of protection—and any conditions or exclusions. D&O insurance is designed principally to protect directors and officers from personal liability exposure when they act or approve of actions taken by the organization—as long as their actions are not willfully criminal or fraudulent.
3. Ensure your policy covers legal defense costs for claims related to DEI programs. There are a few key questions you should ask with regard to your programs:
   • Does your policy provide a full defense to the directors and officers of your organization against civil or criminal enforcement?
   • What coverage applies in the event of a civil investigation?
   • If there is a conviction, does your policy state that there is no right to recoupment from the individuals or the organization unless the conviction was based on a final adjudication of intentional criminal or fraudulent violation of laws?

• Employment Practices Liability Insurance (EPLI): This insurance covers claims related to hiring, termination, and workplace discrimination. This is crucial if your organization has diversity-focused hiring or training initiatives that potentially run afoul of EEOC guidance. If a nonprofit modifies its training programs due to government directives or internal decisions, staff could perceive these changes as inadequate or discriminatory.

This may increase the likelihood of: (i) discrimination claims if employees believe new or altered training fosters an unfair work environment; or (ii) retaliation claims if employees who raise concerns about changes in DEI policies feel they are penalized.

Carriers providing EPLI coverage pay close attention to an organization’s policies on diversity and anti-harassment. Significant changes to these policies—especially in response to external mandates—may prompt insurers to reassess premiums, terms or coverage limits.

• Commercial General Liability Insurance (CGL): While standard CGL policies focus on bodily injury and property damage and thus may not cover DEI-related legal issues, they should be reviewed to determine if additional endorsements are needed. For nonprofits, these policies are sometimes called “Nonprofit Office Insurance.” Some CGL policies may provide coverage for certain personal injury claims (e.g., defamation), which could be relevant if any DEI-related controversies arise from public statements or training content.
• Professional Liability (Errors & Omissions): This coverage protects the organization (and sometimes volunteers) if they engage in self-regulation (e.g., certification, standards, or accreditation) or provide professional services (e.g., counseling, training) and are accused of negligence or substandard care. If your nonprofit offers diversity or inclusion training services, E&O coverage could come into play if claimants allege that the content violated State or Federal anti-DEI executive orders or failed to meet legal standards.
• Legal Defense Fund: Some insurers offer policies that help cover the cost of legal challenges related to compliance and regulatory investigations. Given the heightened scrutiny on DEI, this may be a valuable coverage enhancement.
• Volunteer Coverage and Indemnification: Many nonprofits rely on volunteers whose actions could expose the organization to vicarious liability. Indemnification provisions in Bylaws or agreements, as well as comprehensive insurance coverage, can be critical in protecting both staff and volunteers when liability issues arise.

Work with a knowledgeable broker and coverage counsel to confirm that your organization’s policies align with evolving organizational risks.

When reviewing insurance policies for this purpose, ask:

• Do our current insurance policies cover discrimination claims related to DEI initiatives?
• Are board members and executives protected from personal liability in the event of a lawsuit or agency action?
• Are volunteers covered as “insureds” in policies protecting individuals?
• Do our insurance policies include coverage for regulatory investigations by federal agencies?
• Should we increase our coverage limits to reflect new risks?

By conducting regular insurance reviews and seeking guidance from legal and insurance professionals, nonprofits can continue their missions while reducing the likelihood of uninsured or underinsured liability exposures. A proactive, well-documented approach not only safeguards your organization’s finances and reputation but also ensures that board members, staff, and volunteers remain protected as they serve the public good. We are here to help you navigate these challenges.

Disclaimer: This blog post is for general informational purposes only and does not constitute legal or insurance advice. For guidance tailored to your nonprofit’s unique circumstances, please reach out directly to Pillsbury counsel.