Uncertainty for companies when making business decisions is a new norm. Tariffs aren’t going to be the only thing that is on again and off again. The same is happening with directives governing diversity, equity, and inclusion (“DEI”) initiatives. In the first two days of President Trump’s second term, he signed two DEI-related executive orders (“EOs”), EO 14151 (Ending Radical And Wasteful Government DEI Programs And Preferencing) and EO 14173 (Ending Illegal Discrimination And Restoring Merit-Based Opportunity). While they were in effect, these EOs caused widespread concern throughout the public and private sector as entities scrambled to understand the implications for their businesses. Approximately a month later, a federal judge in Maryland issued a preliminary injunction that stopped the government from implementing key provisions of the two EOs. However, the tide turned on Friday, March 14, 2025, when a three-judge panel from the U.S. Court of Appeals for the Fourth Circuit granted the government’s motion to stay the injunction pending appeal. This ruling empowers the government to resume the implementation of EO 14151 and EO 14173.

While the preliminary injunction was in effect, the government was precluded from (1) terminating “equity-related” contracts and grants pursuant to EO 14151, (2) requiring that government contractors and grantees sign a DEI certification pursuant to EO 14173, and (3) bringing any False Claims Act (“FCA”) or other enforcement action premised on the DEI certification. (As we have previously explained, the certification requirement in EO 14173 is intended to deter contractor and grantee DEI-programs by invoking the specter of FCA liability.)

Now that the injunction is stayed, an emboldened government will likely move swiftly to terminate contracts and grants that it views as being “equity-related” and to require contractors and grantees to execute the DEI certification. We have previously recommended general steps that contractors and grantees can take as they navigate a rapidly changing environment in which the president signs new EOs almost daily. Below, we offer recommendations specific to the government’s renewed ability to implement the previously enjoined provisions of the DEI-related EOs.

Recommendations for Federal Contractors and Grantees

1. If not already completed, it is critical to undertake a privileged assessment of your company’s DEI program, including any public-facing content and recently revised program elements that have not yet been reviewed with counsel.
2. Confer with counsel immediately in the event of an actual or threatened termination. Although the stayed preliminary injunction allows the government to terminate “equity-related” contracts as directed by EO 14151, it remains the case that the government may not terminate contracts in bad faith. In this regard, terminating contracts based on contractor or grantee speech outside of the government-funded scope of work could be subject to legal challenge. (It is also important to avoid signing any documents containing waiver or release language that might preclude recovery of costs in the future.)
3. Develop a plan for responding to the DEI certification. This includes ensuring that no one in your organization signs the certification without the prior knowledge and approval of relevant company leadership. We have previously recommended potential contractor and grantee responses to the DEI certification.
4. Understand the legal landscape. First, there are several other lawsuits pending that challenge EO 14151 and EO 14173, and these could bring new preliminary injunctions. These cases include Shapiro et al. v. U.S. Department of the Interior et al., E.D. Pa., Case No. 25-cv-763; National Urban League et al. v. Trump et al., D.D.C., Case No. 25-cv-00471; San Francisco AIDS Foundation et al. v. Trump et al., D.D.C., Case No. 25-cv-1824; and Chicago Women in Trades v. Trump et al., N.D. Ill., Case No. 25-cv-02005. Additionally, two of the three appellate judges who ruled that the government may implement the DEI-related EOs said they consider the EOs to be “of limited scope” because the EOs “do not purport to establish the illegality of all efforts to advance diversity, equity, or inclusion, and they should not be so understood.” Notably, these judges also distanced themselves from the president’s apparent view of DEI, stating that “while history may be static, its effects remain” and that “people of good faith who work to promote diversity, equity, and inclusion deserve praise, not opprobrium.” This signals that having a DEI program is not per se illegal.
5. Continue to comply with applicable contract and grant requirements arising under state and local government contracts, seeking the advice of counsel for any perceived conflicts between these requirements and the DEI-related EOs.