On Friday, March 14, a federal appeals court lifted the injunction against President Trump’s executive order targeting private sector DEI programs.
Why it matters: This action allows the Trump Administration to fully enforce its executive order while the litigation challenging the order continues.
Federal contractor certification requirement back in effect: The Executive Order requires that federal contractors certify that they do not have any DEI programs or other practices that violate anti-discrimination laws.
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While the certification requirement theoretically would only apply to prospective contracts, the administration may require it for contracts in progress despite the legal uncertainty.
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After the Order was issued, several companies with ongoing contracts received requests from procurement officials to provide such certifications, even though the term “unlawful DEI program” is not yet defined.
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A refusal to provide the certification could prevent the contractor from being awarded contracts and potentially result in termination of ongoing contracts.
The decision: A unanimous three-judge panel of the Fourth Circuit Court of Appeals found that because the Executive Order does not attempt to change the law but merely enforces existing anti-discrimination law, the injunction blocking it was unnecessary.
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Specifically, the Court found that the Executive Order is “of distinctly limited scope” and “do[es] not purport to establish the illegality of all efforts to advance diversity, equity, or inclusion, and…should not be so understood.”
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The decision warned, however, that the Order could be permanently blocked if the Trump Administration enforces it beyond its narrow scope – i.e., if the Administration uses it to require companies to end certain DEI practices that are currently lawful (by threatening the loss of federal contracts, for example).
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The panel included two judges appointed by Democratic presidents, and each judge wrote a separate concurring opinion, including Chief Judge Albert Diaz, who also included support for “true diversity”.
Risk and uncertainty remain for all employers: The Executive Order serves as notice of the Administration’s intent to use all available resources to target employers for perceived “illegal” DEI practices, whether they hold federal contracts or not.
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What the administration considers “illegal” remains unclear, leaving employers in an uncomfortable limbo. The full impact of the Order hinges on the eventual scope of that definition.
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That definition may be revealed in the forthcoming report from the Department of Justice, expected in May, that will list companies considered to be the worst offenders of “illegal” DEI practices and provide recommended enforcement and regulatory actions.
What’s next: The Executive Order will remain in effect until the appeals court issues a full decision on the merits of the lawsuit challenging the legality of the order, which may take several weeks or months.
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The decision on the merits– whether it upholds or blocks the order – is likely to be appealed to the Supreme Court.
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In the meantime, the upcoming report may provide greater clarity on the scope of the Administration’s attack on private sector DEI practices.
Employer Resources:
FAQs: Answers key questions about the Executive Order.
Sample DEI Audit Checklist: Provides a template for common areas of focus for audits.
Sample Risk Assessment Matrix for DEI Programs: Outlines a company's risk level for common DEI initiatives.
