Background: Anti-DEI Executive Orders and the Initial Injunction

In January 2025, President Trump issued Executive Orders (EO) 14151 and 14173 targeting federal diversity, equity, and inclusion (DEI) programs and DEI-based preferences in federal contracting. The EOs directed federal agencies to terminate equity-related contracts, required federal contractors and grantees to certify they do not operate illegal DEI programs under threat of False Claims Act (FCA) liability, and called for enforcement to deter unlawful DEI practices in the private sector.

A Maryland district court enjoined these provisions nationwide, citing vagueness and First Amendment concerns. The district court found undefined terms like “illegal DEI” chilled protected speech and encouraged overcompliance.

Fourth Circuit’s Decision: Injunction Lifted and EOs Back in Effect

On March 14, the Fourth Circuit lifted the injunction, allowing enforcement of the EOs to resume during appeal. The court accepted the Trump administration’s position that the EOs merely seek to enforce existing anti-discrimination laws as written and do not ban all forms of DEI. The three-judge panel unanimously decided the EOs are not clearly facially unconstitutional and held that the government showed a sufficient likelihood of success on the merits to warrant a stay.

Though not a final ruling, the decision allows agencies to begin implementing the EOs while litigation proceeds.

Implications for Federal Contractors and Grant Recipients

Immediate impact: Federal agencies may now require certification of compliance with anti-discrimination laws and begin reviewing or terminating DEI-related contracts and grants. False certifications may trigger FCA liability. Prior affirmative action obligations for contractors under EO 11246 have already been revoked, clearly signaling a broader pivot away from government-mandated DEI.

Long-term: If upheld, the EOs could usher in a new compliance regime under which federal contractors must avoid any DEI policy that might be seen as preferential or discriminatory.

Implications for Private Sector Employers

While not directly binding on private employers, the EOs instruct federal officials to develop plans to deter “illegal DEI” in the private sector. Expect heightened scrutiny, especially from the Department of Justice (DOJ) covering federal employers and the Equal Employment Opportunity Commission (EEOC) covering private employers (both agencies issued guidance for DEI-related workplace discrimination under the laws they respectively enforce just days after the Fourth Circuit’s decision), of corporate diversity practices that use protected traits in decision-making. Still, the Fourth Circuit emphasized that lawful DEI efforts remain permissible.

Key Compliance Considerations Going Forward

• Audit DEI efforts for legal risks or potential discrimination.
• Train leadership on current, and still-changing, anti-discrimination requirements.
• Prepare for certifications if receiving federal funds.
• Monitor enforcement and litigation developments closely.

With the injunction lifted, federal contractors and employers receiving federal grants should treat the EOs as enforceable for now and proceed with caution. The litigation continues, but enforcement is already in motion.