In the first two days of his second term, President Donald Trump issued two executive orders relating to diversity, equity and inclusion, or DEI.
Shortly after the executive orders were issued, recipients of federal grants brought National Association of Diversity Officers in Higher Education v. Trump in the U.S. District Court for the District of Maryland. On Feb. 21, 2025, a federal judge issued a preliminary injunction with regard to three provisions in the executive orders.
Pending appeal, the U.S. Court of Appeals for the Fourth Circuit stayed the preliminary injunction on March 14, 2025. On Feb. 6, 2026, the appellate court vacated the preliminary injunction
Background: The Executive Orders
By way of background, the first executive order contains the so-called termination provision, which directs all federal agencies, departments and commissions to terminate, to the maximum extent allowed by law, all equity-related contracts and grants.
The second executive order contains the so-called certification provision and the so-called enforcement threat provision.
The certification provision instructs the head of each federal agency to include in every contract or grant award a certification that the contractor or grantee does not have any DEI programs that violate federal antidiscrimination laws.
The enforcement threat provision orders the heads of federal agencies to prepare for the president, with the assistance of the attorney general, enforcement plans regarding private organizations that have illegal discrimination in the context of their DEI programs.
Analysis of Appellate Opinion
As noted above, the Fourth Circuit vacated the district court's preliminary injunction. The panel included two judges appointed by President Barack Obama and one judge appointed by Trump in his first term.
The appellate court held that the plaintiffs were unlikely to succeed on their Fifth Amendment due process challenge that the termination provision is unconstitutionally vague. In so holding, the court emphasized that the termination provision does not regulate private conduct. Rather, it was an instruction by the president to his subordinates to implement his policy priorities and that, in this context, while the instruction was vague, it was not so vague as to be unconstitutional.
The appellate court also found the plaintiffs were unlikely to succeed on their First Amendment challenge that the certification provision interfered with their free speech rights. In so holding, the court emphasized that the provision requires only that the plaintiffs certify compliance with federal antidiscrimination law, and that the plaintiffs have no constitutional right to operate DEI programs that violate federal antidiscrimination law.
Finally, the appellate court held that the plaintiffs did not have standing to challenge the enforcement threat provision. In so holding, the court stated that "it is difficult to see how [the plaintiffs] can be in imminent danger of an injury based on a provision that simply requires a cabinet official to issue a report at a future date."
While the court vacated the preliminary injunction based on facial challenges to the executive orders, the court made clear that its opinion did not preclude challenges to the executive orders as applied to individual contractors or grantees. Such a challenge will have to be based on specific allegations that the executive order has been implemented unlawfully as to a particular contractor or grantee.
What This Means for Recipients of Federal Money and Other Employers
The certification provision is now the provision most directly relevant to private sector actors. And the risks of an inaccurate certification may be great.
By way of reminder, on May 19, 2025, Deputy Attorney General Todd Blanche issued a memorandum announcing the Civil Rights Fraud Initiative, which would "utilize the False Claims Act to investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws."
The Blanche memo encourages use of the False Claims Act against federal contractors or grant recipients that "defraud the United States by taking its money while knowingly violating civil rights laws." According to the memo, a federal contractor or grant recipient may implicate the FCA if it "knowingly violates civil rights laws … and falsely certifies compliance with such laws."
The FCA affords the government broad powers that can result in lengthy and wide-ranging investigations and enormous potential liabilities, which can include treble damages and significant per-claim penalties.
To minimize their legal exposure in general, and with regard to the FCA in particular, federal contractors and grantees may benefit from auditing their DEI practices and eliminating or modifying any practices that are or may be illegal under the federal antidiscrimination laws. There are benefits to having these audits conducted under privilege, at least initially. If the audit is not conducted under privilege, then the evidence the employer uncovers in its good faith efforts to comply with the law may be used against it in litigation.
Employers that do not have federal contracts or grants also should consider auditing their DEI programs to eliminate any illegal discrimination that may exist within their programs.
U.S. Equal Employment Opportunity Commission Chair Andrea Lucas has made clear that one of the top priorities for the EEOC is to investigate unlawful discrimination in the context of a DEI program, whether the program is referred to as DEI or by some other name. Now that the EEOC has a quorum, such investigations have begun with the Feb. 4 announcement of an investigation into Nike Inc.[1]
At bottom, two things are true: (1) There is no DEI exception to unlawful discrimination; and (2) DEI programs can be structured without unlawful discrimination. In determining what is unlawful discrimination, there is a continuum.
Some practices are clearly unlawful, such as considering race as a plus factor in deciding whom to promote. Other practices are or should be lawful, such as casting a wide net in recruiting to help ensure an applicant pool rich with talent. In between, there are practices that may pose some legal risk, such as diverse slate requirements, but the level of the risk is not entirely clear because the law with regard to such practices is still in its nascent stage.
In auditing their DEI practices along the continuum, organizations are well advised to consider guidance from the EEOC[2] and the U.S. Department of Justice.[3] In weighing this guidance, organizations are well advised to distinguish between what is illegal per se — e.g., quotas — versus practices that include legal risk, e.g., aspirational goals. When evaluating legal risk, organizations will need to consider their own priorities and risk tolerance.
[1] EEOC Files Subpoena Enforcement Action Against NIKE | U.S. Equal Employment Opportunity Commission. https://www.eeoc.gov/newsroom/eeoc-files-subpoena-enforcement-action-against-nike.
[2] https://www.eeoc.gov/wysk/what-you-should-know-about-dei-related-discrimination-work.
[3] https://www.justice.gov/ag/media/1409486/dl.
Reprinted with permission of Law360.
