Category: Diversity, Equity, and Inclusion (“DEI”)

Federal Contractors Face Uncertainty as Multi-State Coalition Challenges Executive Order 14398’s Anti-DEI Contracting Provisions

Dominique L. Casimir and Christina Manfredi McKinley●

Overview

Federal contractors: take notice. A significant lawsuit recently filed in the U.S. District Court for the District of Maryland challenges Executive Order (“EO”) No. 14398, “Addressing DEI Discrimination by Federal Contractors,” which President Trump issued on March 26, 2026. State of Maryland v. Hegseth, Case No. 1:26-cv-02322, was filed on June 10, 2026, by a coalition of 19 state attorneys general and the District of Columbia under the Administrative Procedure Act (“APA”). This case presents administrative law challenges that could reshape the compliance landscape for every entity that does business with the federal government, whether directly or indirectly.

The EO and Its Requirements

As we have previously covered, EO No. 14398 declares that diversity, equity, and inclusion (“DEI”) activities are “unethical and often illegal” and directs all federal agencies to include new contract terms in their contracts, subcontracts, and “contract-like instruments” barring contractors from engaging in “racially discriminatory DEI activities.” The order defines that term as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”

Section 3 of the order directs federal agencies to insert a comprehensive clause into federal contracts that requires contractors to: (1) refrain from engaging in racially discriminatory DEI activities; (2) furnish all information and reports, including access to books, records, and accounts, as requested by the Contracting Officer to enable compliance reviews; (3) flow the clause down to subcontractors at every tier including to commercial item subcontracts; (4) report any subcontractor’s known or “reasonably knowable” conduct that “may violate” the clause; (5) inform the contracting agency if a subcontractor sues the contractor regarding the validity of the clause; and (6) recognize that compliance with the clause is “material to the Government’s payment decisions” for purposes of the False Claims Act (“FCA”).

The order threatens severe consequences for violations, including contract termination, suspension or debarment, and lawsuits under the FCA.

To read the full alert, please visit our website.

SBA Proposes to Eliminate the Rebuttable Presumption of Social Disadvantage for Individually Owned 8(a) Firms: What Contractors Need to Know

Elizabeth N. Jochum, Dominique L. Casimir, and Samarth Barot●

Samarth Barot headshot image


Summary

The U.S. Small Business Administration (“SBA”) published a proposed rule on June 11, 2026, that would reshape how individually owned small businesses establish social disadvantage for purposes of the 8(a) Business Development program. The proposed rule would eliminate the longstanding rebuttable presumption that members of certain designated racial and ethnic groups are socially disadvantaged. In its place, SBA proposes a single, race-neutral test requiring all applicants to show that a governmental or private entity discriminated against their clearly definable group and that the discrimination caused them “material harm.”

Critically, the proposed rule applies only to individually owned firms. Entity-owned 8(a) participants, including firms owned by Indian tribes, Alaska Native Corporations (“ANCs”), Native Hawaiian Organizations (“NHOs”), and Community Development Corporations (“CDCs”), are unaffected.

Comments on the proposed rule are due by July 13, 2026. Stakeholders may submit comments through regulations.gov under Docket No. SBA-2026-0133.

Key Takeaways

  • The rebuttable presumption of social disadvantage for designated racial and ethnic groups would be eliminated for individually owned applicants.
  • A new, uniform test would require all individual applicants to show that a governmental or private entity discriminated against or was biased against their clearly definable group and that this caused them “material harm” (defined as loss of access to or diminished opportunities for economic advancement).

To read the full alert, please visit our website.

Debarment or Suspension Based on a DEI Program? Let’s Think It Through

Dominique L. Casimir ●

Suspension and debarment are powerful administrative tools that the Government uses to exclude from federal contracting entities that are not “presently responsible.” These exclusions can be lengthy, effectively shutting debarred or suspended contractors out of the lucrative federal marketplace for years. Even after the period of exclusion ends, disclosure requirements in connection with proposal submissions and teaming arrangements make it difficult for a previously debarred or suspended contractor to shed the stain of a prior exclusion. Because of these severe consequences, contractors shape their compliance programs, organizational cultures, and conduct to minimize the risk of creating cause for debarment or suspension.

To read the full article, please click here.

“Debarment or Suspension Based on a DEI Program? Let’s Think It Through,” by Dominique Casimir, was published in The Government Contractor, Volume 68 Issue 21, on June 3, 2026.

New Suit Seeks to Enjoin EO 14398: Implications for Government Contractors

Dominique L. Casimir and Shane M. Hannon ●

Less than one month after the issuance of Executive Order 14398 (“EO 14398”), “Addressing DEI Discrimination by Federal Contractors,” a coalition of academic and contractor organizations has filed a lawsuit in federal court seeking to have it enjoined. See National Association of Diversity Officers in Higher Education v. Trump, No. 8:26-cv-01532 (D. Md. filed Apr. 20, 2026). Here is what government contractors need to know.

As we have previously covered, EO 14398 is a critical new development for government contractors. It introduces a new concept of “racially discriminatory DEI activities,” defined as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”

The plaintiff organizations are challenging EO 14398 on three grounds.

Continue reading “New Suit Seeks to Enjoin EO 14398: Implications for Government Contractors”

What Does IBM’s $17 Million FCA Settlement Portend for Government Contractors Wrestling with Compliance?

Jennifer A. Short, Dominique L. Casimir, Brooke T. Iley ●

Jennifer A. Short headshot image

On Friday, April 10, 2026, the Department of Justice (“DOJ”) announced a $17 million False Claims Act (“FCA”) settlement with International Business Machines (“IBM”), based on the company’s alleged violations of federal anti-discrimination laws. The settlement is the first under the DOJ’s Civil Rights Fraud Initiative, created last May with the objective of investigating and prosecuting “illegal DEI” practices, primarily through an FCA lens. Coupled with a new Executive Order—issued on March 26—that imposes contract prohibitions on “racially discriminatory DEI activities” in federal government contracts and subcontracts, the IBM settlement signals an escalation in the government’s focus on DEI programs and employment policies.

The DOJ Press Release and Settlement Agreement

The Alleged “Covered Conduct” Identifies Specific Problematic Practices. 

DOJ alleged that IBM improperly made employment decisions based on protected characteristics through specific programs and actions, described as the “Covered Conduct” for purposes of the settlement agreement:

  • Compensation Incentives: A “diversity modifier” linking bonus compensation to demographic targets
  • Hiring and Promotion Criteria: Basing interview eligibility or prioritization on race, sex, or national origin
  • Demographic Goals for Business Units: Developing race and gender targets tied to employment decisions
  • Limited-Access Programs: Limiting training, mentoring, and leadership development to employees meeting specific demographic criteria, such as minorities.

To read the full alert, please visit our website.

An Overview of the New DEI Executive Order: Scope and Limitations

Dominique L. Casimir ●

On March 26, 2026, President Trump signed Executive Order 14398 (“EO 14398”) titled Addressing DEI Discrimination by Federal Contractors, taking aim at the diversity, equity, and inclusion (“DEI”) practices of federal contractors. EO 14398 ventures into territory already covered by the President’s prior DEI-related executive orders (“EOs”), in particular EO 14173, which requires a contractor certification regarding “illegal DEI,” but goes further. It directs federal agencies to include a mandatory contract clause prohibiting “racially discriminatory DEI activities” in all covered contracts and subcontracts, requires prime contractors to police the DEI practices of subcontractors at every tier, imposes new reporting requirements, and threatens a panoply of consequences for noncompliance, including contract termination, False Claims Act (“FCA”) exposure, and suspension and debarment. Like EO 14173, it also requires the government to “identify economic sectors that pose a particular risk of entities engaging in racially discriminatory DEI,” signaling the Administration’s ongoing desire to stamp out DEI. The accompanying White House Fact Sheet declares that the EO will ensure “merit-based and efficient contracting and employment.”

EO 14398 is likely to be challenged in court on a variety of theories, similar to the ongoing wave of EO 14173 litigation. Contractors will almost certainly question the EO’s scope and the ambiguity in its key terminology, as well as its enforcement assumptions.

To read the full alert, please visit our website.

Top 10 Points for Contractors from DOJ’s February 19 Comments on “DEI” Enforcement

Luke W. Meier ●

Yesterday, Brenna Jenny, Deputy Assistant Attorney General, Commercial Litigation Branch, Department of Justice (“DOJ”) Civil Division, offered remarks on False Claims Act enforcement related to so-called “illegal DEI.” Other outlets have broadly recapped these remarks, a rare opportunity for direct insight into DOJ’s thinking on these issues.

Below are 10 key points for government contractors from the remarks of Ms. Jenny (who spoke for herself, and not officially for the DOJ).

Continue reading “Top 10 Points for Contractors from DOJ’s February 19 Comments on “DEI” Enforcement”

Supreme Court Weighs in for a Second Time on Jurisdiction over Grant Termination Cases

Dominique L. Casimir and Sara N. Gerber ●

The Supreme Court recently ruled for the second time that federal district courts likely lack jurisdiction under the Administrative Procedure Act (“APA”) to hear challenges to terminations of federal grants. The first such ruling came in April of this year, when the Court granted an emergency stay in California v. Department of Education. On August 21, 2025, the Supreme Court issued another emergency stay, in NIH v. American Public Health Association, reaffirming the view that challenges to grant terminations are, in substance, breach of contract actions for money damages that belong in the Court of Federal Claims under the Tucker Act.

Since California, several lower courts have nevertheless asserted jurisdiction over grantee lawsuits seeking reinstatement of terminated grants, often distinguishing California on procedural or factual grounds. We have previously written about some of those cases (including Massachusetts v. Kennedy, which was later consolidated with NIH). Although the Supreme Court’s decision in NIH is an interim order, the jurisdictional question may now be functionally settled, particularly given Justice Gorsuch’s admonishment to lower courts that even if they “sometimes disagree with this Court’s decisions…they are never free to defy them. When this court issues a decision, it constitutes a precedent that commands respect in lower courts.” Following NIH, we expect terminated grantees will largely be forced into the Court of Federal Claims, which generally does not have authority under the Tucker Act to grant the equitable relief—reinstatement of grants—that many of them are seeking.

Continue reading “Supreme Court Weighs in for a Second Time on Jurisdiction over Grant Termination Cases”

DOJ Issues July 2025 Guidance on Unlawful Discrimination: Navigating Diversity, Equity, and Inclusion in a New Legal Landscape

Dominique L. Casimir, Brooke T. Iley, and Jennifer A. Short ●

From the outset of his current term in office, President Trump has made it a signature policy objective to target and dismantle diversity, equity, and inclusion (“DEI”) and so-called “gender ideology” in both the public and the private sectors. Blank Rome has covered these policy initiatives extensively, along with the various lawsuits challenging them. In the courts and elsewhere, the government has been questioned about what the phrase “illegal DEI” actually means.

Perhaps in response to those queries, on July 29, 2025, the Department of Justice (“DOJ”) issued a memorandum titled “Guidance for Recipients of Federal Funding.” The memo’s stated objective is to offer “non-binding suggestions to help entities comply with federal antidiscrimination laws and avoid legal pitfalls,” thereby aiming to “minimize the risk of violations.” 

This memo provides the most comprehensive insight about DOJ’s perspective on DEI and gender ideology practices to date, and thus serves as a valuable resource for recipients of federal funding as they review their current policies. Private employers, too, may find the memo a useful framework to evaluate potential risks associated with DEI initiatives and to discern what actions the Administration considers to violate civil rights laws. That said, the DOJ memo does not address certain practical questions that entities will face in trying to adhere to its guidance. Below, we summarize the memo and provide our analysis of its most significant aspects for federally funded entities and companies. 

Read the full client alert on our website.

This alert was published in The Government Contractor, Volume 67 Issue 30, on August 13, 2025.

Webinar: Impacts on Government Contractors: 180 Days of the Trump Administration—Quick Hits on Executive Orders, Actions, and Policies

Blank Rome-Hosted Live Webinar
July 29, 2025
12:00–1:00 p.m. EDT | 9:00–10:00 a.m. PDT


Please join Blank Rome Government Contracts attorneys Justin A. Chiarodo, Dominique L. Casimir, Robyn N. Burrows, and Sara N. Gerber for this timely webinar with key updates for government contractors navigating the first 180 days of the Trump Administration, and the days ahead.

Topics include:

  • Civil rights enforcement / diversity, equity, and inclusion
  • Federal Acquisition Regulation update
  • Contract and grant terminations 

This session is part of Blank Rome’s summer live webinar series 180 Days of the Trump Administration—Quick Hits on Executive Orders, Actions, and Policies (ending on Wednesday, August, 13, 2025), where our interdisciplinary Trump Administration Resource Team is unpacking the most pressing legal, regulatory, and policy developments from the Trump administration’s first 180 days.

Click here to register for the July 29 government contractor session and for any future sessions: Summer 2025- Trump 180 Day Webinar Series | RSVP Blank.

You may also view any past sessions on demand here: On-Demand Webinar Series: 180 Days of the Trump Administration.