On Monday, January 27, 2025, the acting head of the Office of Management and Budget (“OMB”) issued a memo ordering the pause of all federal financial assistance “that may be implicated” by any of President Trump’s recent barrage of Executive Orders. According to the memo, the freeze encompasses funding for activities including, but not limited to, “foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.” The pause also blocks the issuance of new federal grants and specifies that Medicare and Social Security benefits will not be affected. The suspension goes into effect at 5:00 p.m. on Tuesday, January 28. Federal agencies will then have until February 10 to complete and submit to OMB a detailed report on any programs, projects, or activities impacted by the pause.
The breadth of the suspension leaves open many urgent questions for nonprofits, educational and research institutions, state and local governments, federal loan recipients, military aid recipients, and all other organizations that receive federal funding and who are now scrambling to understand the extent to which their activities will be impacted. The scope of the directive potentially implicates billions of dollars of federal funding. Legal challenges to the funding freeze have already been filed.
The move follows President Trump’s recent efforts to dismantle diversity, equity, and inclusion (“DEI”) programs in both the public and private sectors. As we previously reported, President Trump and the White House ordered the elimination of federal DEI policies and programs and placed federal DEI workers on leave, in addition to rescinding the 1965 Executive Order that required federal contractors and subcontractors to maintain affirmative action programs. The U.S. Department of Veterans Affairs (“the VA”) quickly complied with the President’s orders and placed 60 employees “who had been solely focused on [DEI] activities” on leave. The VA also announced its plan to cancel several contracts related to DEI training, materials, and consulting services, totaling more than $6.1 million in value.
Ballard Spahr’s Labor and Employment Group is monitoring new developments from the second Trump administration and regularly issuing alerts and advising employers across the nation on the far-reaching changes enacted by the administration.
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