The ban is back for now, albeit with concerns
A federal district court in Maryland issued a preliminary nationwide injunction on February 21, 2025, that temporarily halted enforcement elements of the Trump administration’s DEI-related executive orders (EOs). Not surprisingly, the administration appealed the temporary ban to the U.S. Court of Appeals for the Fourth Circuit and sought a stay of the preliminary injunction. In a ruling just over a page long, with three separate short concurrences, a three-judge Fourth Circuit panel granted the administration’s request for a stay, temporarily reinstating the EOs while the court considers the merits of the matter. As outlined in our previous client alert, the preliminary injunction had covered provisions in:
- EO 14151: requiring federal agencies to terminate equity-related grants or contracts
- EO 14173: requiring federal contracts and grants to include certifications and other terms related to DEI and nondiscrimination practices and enforcing civil rights laws against DEI programs in the private sector
While one judge indicated concern about keeping the courts from becoming “continuing monitors” of the executive branch, two circuit judges noted that the EO provisions subject to the injunction likely did not violate the First and Fifth Amendments. The EOs are also being challenged in the Northern District of California and the Northern District of Illinois, both of which have motions for preliminary injunction pending.
As we noted previously, even if some or all three of the EO provisions at issue are enjoined again, in the Fourth Circuit or elsewhere, the decision does not necessarily prevent the Department of Justice, agencies, or state attorneys general from independently pursuing investigations targeting DEI initiatives or programming, and enforcement agencies can still investigate or take action against violations of Title VII or other civil rights laws on bases other than “illegal DEI.”
What are the current rules of the game?
Ongoing litigation and other developments will inevitably change the rules of the game for the foreseeable future, placing a premium on situational awareness and warranting even greater emphasis on regular reassessment – related and unrelated to this DEI ban – of organization and company-wide compliance. Specific to this DEI-ban, federal contractors and grantees will again be required to certify that they do not operate programs “promoting DEI” in contravention of nondiscrimination laws and to agree that their compliance with “all applicable Federal anti-discrimination laws” is material to the government’s payment decisions for purposes of the False Claims Act. Federal contractors and grantees should also plan for termination of “equity-related grants or contracts” and should therefore be prepared to wind down activities, minimize cost exposure, and submit termination settlement proposals promptly.
Enforcement actions should also be top of mind. In addition to federal contractors and grant recipients, publicly traded corporations, large non-profit corporations or associations, foundations with assets of $500 million or more, state and local bar and medical associations, and institutions of higher education with endowments over $1 billion remain squarely in the attorney general’s crosshairs, although executive agencies were instructed to issue guidance and reports that have yet to be released. Federal contractors, grant recipients, and private sector companies must continue with privileged assessments of their DEI programs, including company websites, compensation programs, hiring practices, and workplace training. As this litigation unfolds, and as we learn more about this administration and its priorities, all – including law firms – must remain prepared for potential investigations.
Now is the time to double down
To the extent federal contractors, grant recipients, and private sector companies are not already doing so, we recommend actively monitoring this litigation and investing time and resources in regular compliance assessments and training to remain compliant and to mitigate risk. Now is the time to double down.
We at Reed Smith will continue to monitor developments and provide clients with the strategic counsel necessary to navigate this evolving regulatory landscape.
Client Alert 2025-093
