On July 21, 2014, President Barack Obama issued an Executive Order (the Order) prohibiting employment discrimination based on sexual orientation and gender identity by federal contractors and agencies. Prior to signing the Order, Obama said in a statement “America’s federal contracts should not subsidize discrimination against the American people.”

Currently, federal law does not prohibit private employers from discriminating against applicants and employees on the basis of sexual orientation or gender identity. However, numerous states, counties, and cities, including the District of Columbia, already prohibit discrimination based on one or both of these characteristics. Thus, the Order is likely to have the biggest impact on federal contractors who operate in jurisdictions that currently do not ban discrimination based on sexual orientation and gender identity.

The Order goes into effect immediately for federal agencies, amending existing Executive Order 11478 to add gender identity. Executive Order 11478 bars discrimination against federal employees on the basis of race, color, religion, sex, national origin, disability, and age, and was amended by Executive Order 13087 — issued by President Bill Clinton — to include sexual orientation. For federal contractors, the Order amends Executive Order 11246, adding both sexual orientation and gender identity to the list of protected classes. It directs the Secretary of Labor to issue implementing regulations within 90 days of the date of the Order. This portion of the Order will apply to contracts entered into on or after the effective date of the implementing regulations.

The Order applies to federal contractors and subcontractors and federally-assisted construction contractors and subcontractors that generally have contracts that exceed $10,000 with the federal government. Enforcement of the Order will be handled by the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP).

Notably, the Order does not include an exemption that would permit religious-affiliated employers to make employment decisions based on sexual orientation and gender identity. However, the Order is still subject to an exemption created by President George W. Bush in 2002 that allows religious-affiliated entities to make certain decisions based on a worker’s religious beliefs.