President Trump’s executive orders (EOs) on artificial intelligence (AI) and LGBTQ+ issues are creating a complex legal landscape for employers, potentially creating a significant increase in wrongful termination claims.
While these EOs appear to address disparate topics, they both introduce new legal vulnerabilities that can be exploited in employment litigation. Keep reading to learn more about the nature of these EOs, their direct and indirect impacts on the workplace, and the corresponding shift in the Employment Practices Liability (EPL) insurance market.
EOs on AI and their impact
Companies have increasingly begun to use AI in hiring, performance management, and termination decisions for its efficiency and cost-saving potential. However, its use is a double-edged sword, as AI systems aren’t immune to bias. The data sets used to train these systems can reflect and even amplify existing human biases, leading to discriminatory outcomes. This bias is the core issue that new regulations and EOs are attempting to address, albeit from different perspectives.
On July 23, 2025, the Trump administration released its “AI Action Plan,” signing three EOs intended to advance AI development while also addressing what it terms “woke” or ideologically biased AI in federal procurement. Executive Order 14319, “Preventing Woke AI in the Federal Government,” specifically targets AI models that sacrifice “truthfulness and accuracy to ideological agendas,” directing federal agencies to procure only AI that is “truth-seeking” and “ideologically neutral.” The EO explicitly criticizes AI models that incorporate principles of “Diversity, Equity, and Inclusion” (DEI).
This shift in federal policy has impacted private employers. The new EOs have led the Equal Employment Opportunity Commission (EEOC) to re-evaluate its guidance on AI. The EEOC has removed previous technical assistance documents that cautioned against AI bias and suggested employers could be held liable under Title VII for using discriminatory AI. While private employers are still subject to anti-discrimination laws like Title VII and the Age Discrimination in Employment Act (ADEA), the change in federal enforcement priorities signals a more complex and potentially ambiguous legal environment.
This ambiguity is fertile ground for litigation. While these EOs are primarily directed at federal agencies, they establish a new, deregulatory tone that may encourage employers to use AI without the rigorous bias audits and human oversight previously recommended. Reduced oversight could lead to a surge in wrongful termination claims based on disparate impact discrimination. Plaintiffs can argue that an employer’s AI tool, while seemingly neutral, has a discriminatory effect on a protected class, such as older workers or a specific racial group.
Several high-profile cases illustrate this trend. In Mobley v. Workday, Inc., a federal court granted preliminary certification to a nationwide class action lawsuit alleging that the company’s AI hiring tool disproportionately disqualified applicants aged 40 and older. Another case involved a 2023 EEOC settlement where a company paid $365,000 to resolve claims that its AI software rejected women over 55 and men over 60, in a clear example of age discrimination. These cases, combined with a less-enforced regulatory landscape, suggest that private litigation will become the primary mechanism for challenging AI bias in the workplace, increasing the frequency of wrongful termination claims.
EOs on LGBTQ+ issues and their impact
Simultaneously, new Executive Orders on LGBTQ+ issues are also contributing to the rise in wrongful termination claims. On January 21, 2025, President Trump issued a new EO that, among other things, reversed protections for transgender federal government employees and LGBTQ+ employees of federal contractors. This EO specifically instructs federal agencies to recognize only two sexes, “male” and “female,” and removes policies that support gender identity. It also directs the U.S. Attorney General to issue guidance that limits the application of the Supreme Court’s landmark Bostock v. Clayton County decision to hiring and promotion decisions, effectively attempting to roll back protections against harassment and discrimination in other areas of employment. The EO further requires agencies to “end the Federal funding of gender ideology.”
The direct result of this EO is the dismissal of some claims by the EEOC and a more hostile environment for LGBTQ+ workers in federally funded sectors. The EEOC has already dismissed six of its own cases defending workers who alleged gender identity discrimination, citing that these cases now conflict with the new EO. This action leaves countless workers feeling vulnerable and without recourse, a situation that could lead them to pursue wrongful termination claims in state or federal court.
Even though the Bostock decision still stands, unequivocally stating that Title VII’s prohibition on sex discrimination includes sexual orientation and gender identity, the new EOs create confusion and legal uncertainty. These EOs signal to employers that it may be acceptable to discriminate against LGBTQ+ workers, particularly transgender and nonbinary individuals.
This discrimination could create more workplace harassment and discrimination, potentially leading to wrongful termination claims. Employers who adhere to the new federal guidelines but violate existing state or local laws protecting LGBTQ+ individuals could find themselves facing a complex legal battle with significant liability.
The EEOC’s decision to drop cases and the EOs’ directive to prioritize enforcement of “single-sex spaces” in the workplace could embolden employers to implement policies that discriminate against transgender employees. This decision, in turn, may generate more wrongful termination lawsuits filed by individuals fired by their companies for asserting their rights under state laws or who were subjected to a hostile work environment.
The rise of EPL claims and the insurance market outlook
The legal risks stemming from these EOs may have a direct and significant impact on the Employment Practices Liability (EPL) insurance market. EPL insurance protects employers against claims alleging wrongful acts such as discrimination, harassment, and wrongful termination. As the number and severity of these claims increase, so will the pressure on the insurance market.
In March, the market outlook for EPL insurance in 2025 was cautiously optimistic, with many experts predicting stable trends and price increases of 5% or less. Increased competition and an influx of new capacity in the market are driving this stability. However, the increased use of AI in employment decisions and the latest EEOC guidance on workplace harassment could create more volatility.
Using biased AI in hiring and termination (whether intentionally or unintentionally) could lead to large-scale, class-action lawsuits, which are far more costly than individual claims. The potential for mass-scale discrimination means that a single claim could expose a company to immense liability, driving up the cost of settlements and defense. Insurers are taking notice, and some are already tightening underwriting guidelines to mitigate this risk.
Similarly, the new EOs and the EEOC’s actions on LGBTQ+ issues create a scenario trapping employers between conflicting federal and state laws. This legal ambiguity increases the likelihood of claims, as employees seek to protect their rights through litigation. The dismissal of EEOC cases may force more individuals to file private lawsuits, increasing the frequency and cost of claims for insurers.
The deregulatory approach to AI and the rollback of LGBTQ+ protections in federally funded sectors create new vulnerabilities, driving increases in wrongful termination and discrimination claims. As a result, employers must be more diligent with compliance, as the EPL insurance market prepares for an increase in claim frequency and severity.
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