A federal judge has rejected a request to block Executive Order (EO) 14398, which prohibits federal contractors from engaging in “racially discriminatory DEI activities”. A group of five organizations led by the National Association of Diversity Officers in Higher Education challenged the order in April, claiming that it violates the First Amendment by chilling free speech with the threat of losing federal funding and is overly broad and vague. The plaintiffs had asked the judge to declare EO 14398 unconstitutional and block federal enforcement of the order.
In his ruling, Judge Adam B. Abelson of the US District Court for the District of Maryland denied the plaintiffs’ request for a preliminary injunction. The plaintiffs subsequently filed a notice of voluntary dismissal, ending their lawsuit.
In denying the request for a preliminary injunction, the judge noted that EO 14398 requires government contracts to prohibit contractors from engaging in “disparate treatment based on race or ethnicity” in employment practices. Because federal law defines “disparate treatment” as intentional discrimination, which is already illegal, the judge found that this part of the order is unlikely to be unconstitutional.
The judge also found that EO 14398 is not overly vague in its proposed application, because the phrase “in connection with the performance of work under this contract” applies to activities connected to the relevant federal contract and does not automatically extend to a contractor’s unrelated activities. Judge Abelson noted that if the government attempts to enforce the terms of EO 14398 for speech or activities conducted outside the scope of the government’s contract, that might be considered unconstitutional and could be challenged in court.
For federal contractors and subcontractors, this ruling means they should stay the course when it comes to complying with EO 14398. By accepting the terms of a federal contract with this language included, contractors are certifying compliance with EO 14398 and agreeing that they are not engaging in “racially discriminatory DEI activities”. Contractors should keep in mind that this Administration has used the False Claims Act (FCA) if it believes that a contractor has falsely certified compliance. The FCA is enforced by the Department of Justice and claims can also be triggered by a whistleblower filing a qui tam lawsuit. The Administration has already settled three such claims involving federal contractor DEI practices, recovering more than $63 million under the FCA.
Contractors should continue to review any existing diversity-related programs, policies, or processes to ensure that they are not at risk of violating EO 14398. This includes conducting privileged workforce analyses of employment transactions now so that your organization is ready for any audit requests by contracting agencies. Remarks by DOJ officials and recent enforcement activity make clear that systemically analyzing your employment transactions is key to understanding whether any DEI programs – or other employment-related practices – have been implemented in a manner that cause disparate treatment based on race or ethnicity. That is the standard by which your compliance will be judged – not by whether you simply removed references to DEI in your written policies.