On March 14, 2025, the U.S. Court of Appeals for the Fourth Circuit granted the government’s request to stay a Maryland federal judge’s nationwide preliminary injunction that temporarily stopped three key provisions of President Trump’s Diversity, Equity and Inclusion (“DEI”) Executive Orders (“EOs”). The stay means that the provisions are again enforceable as the appellate court considers the lawfulness of the EOs.
As we previously covered in detail, the preliminary injunction stopped:
- (a) pausing, freezing, impeding, blocking, cancelling, or terminating any awards, contracts or obligations;
- (b) requiring any grantee or contractor to make any “certification” or other representation pursuant to a provision in Order 14173; and
- (c) bringing any False Claims Act enforcement action, or other enforcement action, pursuant to an enforcement provision in Order 14173, including but not limited to any False Claims Act enforcement action premised on any certification made pursuant to Exec. Order 14173.
The three judge panel for the Fourth Circuit granted the government’s request to stay the nationwide preliminary injunction that blocked the provisions of the DEI EOs. The government argued that the enjoined provisions only applied to conduct that violates existing federal anti-discrimination law. The panel found that the government met its burden to stay the preliminary injunction pending appeal. The three judges issued separate concurring opinions that raised questions about ripeness, standing, and whether the injunction violated the First and Fifth Amendments on their face – all issues that the court case will address.
This stay means that while the case is ongoing, the Trump administration may resume its actions in regards to termination, certification and enforcement surrounding DEI programs. Significantly, this means that the termination of “equity-related” grants and contracts will begin anew as will the inclusion of new certification provisions in federal contracts and grant awards.
Accordingly, it is essential that employers – whether federal contractors, federal grant recipients, or the private sector – take a close look at their internal practices, any existing contracts and/or grants, and all new certification clauses.
Employers should:
- Identify. Companies should begin and/or continue to identify policies, procedures, programs and practices that involve DEI. Further, they should identify any and all federal contracts and grants.
- Review and Assess.
- After identifying all pertinent policies, procedures, programs, and/or practices, companies need to assess whether they comply with federal and state anti-discrimination laws. These EOs do not change federal anti-discrimination law, preferences, quotas, or set aside programs based on race, gender, or other protected characteristics that violate federal antidiscrimination laws, except in very limited contexts. Employers need to take steps to ensure their policies, procedures, and practices comply with the law. These reviews need to be ongoing, as this stay emphasizes that the compliance landscape will continue to evolve in the months to come.
- Carefully review existing contracts and grant terms to understand existing obligations and determine whether they conflict in any way with the new EOs. Identify contracts and grants that are at “high risk” of termination.
- Carefully review new contracts, solicitations, grants, modifications, and other types of agreements for new certifications that federal contractors and grantees do not operate programs “promoting DEI” in contravention of non-discrimination laws and that such compliance with “all applicable Federal anti-discrimination” laws is material to the government’s payment decisions for purposes of the False Claims Act. Companies should not sign such certifications before completing the first step above – understanding existing DEI policies, procedures, practices, etc. – and reviewing with counsel.
- Prepare. Contractors and grantees should plan for the termination of “equity-related grants or contracts” to resume. Accordingly, it is essential that companies review and understand essential terms of their contracts and grants, e.g. termination, scope of work, and draw down provisions, to prepare for the potential termination of “high risk” contracts and grants. This includes having plans in place to wind-down activities and minimize cost exposures.
- Monitor. This is a quickly shifting and evolving area. Companies need to continue to monitor this and other litigations.
