The harassment began in November 2006. On a daily basis, a co-worker directed derogatory anti-gay epithets at James Friso, a structural mechanic employed by military contractor DynCorp International. Friso was repeatedly called a "faggot," "queer" and accused of engaging in homosexual acts. Even after discovering the harassment, management at DynCorp, which has received over $2 billion in federal contracts, did nothing.

Why are American taxpayers financing this hateful prejudice and harassment? The time has come for President Obama to sign an executive order banning sexual orientation and gender identity discrimination by federal contractors.

There is a long history of presidents of both parties issuing executive orders to prohibit unfair discrimination. In the 1940s, President Franklin Roosevelt issued executive orders barring federal agencies from discriminating on the basis of race and requiring all contracts with defense contractors to include "a provision obligating the contractor not to discriminate against any employee or applicant for employment because of race, creed, color, or national origin."

President Harry Truman adopted an executive order desegregating the military. President Dwight Eisenhower issued an executive order requiring all federal contractors -- not just those in defense industries -- to have a policy against discrimination on the basis of race. President Lyndon Johnson added protections against sex discrimination and subsequent administrations have expanded the anti-discrimination policy to include disability, age, and veteran status.

Sexual orientation and gender identity should be added to this list of prohibited forms of discrimination by federal contractors. Despite important gains in legal rights over the past two decades, LGBT employees still face extensive discrimination in the workplace. According to research by the Williams Institute at UCLA School of Law, where I work, up to 40 percent of gay people report having been the victim of harassment or other mistreatment in their jobs. Among transgendered employees, the situation is even worse: according to the National Transgender Discrimination Survey, an astounding 90 percent reported having suffered harassment at work.

Under federal law, the president can issue an executive order applicable to federal contractors so long as the order enhances the "economy and efficiency" of the procurement process. As courts that have examined previous executive orders dealing with discrimination explain, "it is in the interest of the United States in all procurement to see that its suppliers are not over the long run increasing its costs and delaying its programs by excluding from the labor pool available minority" workers.

Simply stated, ending discrimination against gays and transgendered Americans is good for business. The decision by a few top executives to look the other way while workers are harassed and denied equal job opportunities has a ripple effect across all the business's stakeholders -- from the employees who face mistreatment to the shareholders who lose the valuable human capital scared away by a hostile work environment. Just ask the DynCorp shareholders, who are now paying out $155,000 in a settlement with James Friso.

Insuring equality of all employees helps firms attract the best talent and makes the workforce more productive, which in turn benefits the taxpayers who pay for the goods and services provided by federal contractors. No wonder the five largest recipients of federal contracts -- Lockheed Martin, Boeing, Northrup Grumman, Raytheon, and General Dynamics -- each have strong diversity policies that prohibit discrimination on the basis of sexual orientation and gender identity.

Indeed, stopping anti-gay discrimination can fairly be considered a corporate "best practice." Today, a majority of Fortune 500 companies bar sexual orientation and gender identity discrimination.

Some might argue that an executive order by Obama extending the nondiscrimination policy would really be designed to achieve social and political goals, not improved efficiency. Yet courts have repeatedly held that executive orders regulating federal contractors are valid even if adopted for non-economic reasons. If the president can rationally conclude that one effect of the order will be to improve workplace conditions, then the existence of other objectives is irrelevant. Certainly, all of the previous executive orders on discrimination by federal contractors were adopted for social and political reasons too.

Rumors have begun circulating in Washington that both the Labor Department and the Justice Department have recently signed off on a proposal to extend protections against discrimination for LGBT people through an executive order. Now it's up to Obama to act. He should follow the lead of his many predecessors and put an end to taxpayer financed discrimination.