DEI Injunction Terminated by Federal Court of Appeals Reinstating DEI Certification Requirement and Civil False Claims Act Risk

As previously reported, one of the first executive orders (EO 14173) issued by President Trump was to rescind Executive Order 11246, issued by President Lyndon B. Johnson, which required federal contractors and subcontractors to engage in affirmative action with respect to women and minorities. In EO 14173, President Trump also directed those federal agencies contracting with all entities to cause the end of all “illegal” DEI and DEIA programs by — among other things — requiring federal contractors and subcontractors to “certify” that they do “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” As also reported, this “certification” requirement gives rise to potentially significant exposure for contractors under the civil False Claims Act if a contractor was later found to have “falsely” submitted its certification — i.e., that it was maintaining an “illegal” DEI or DEIA program.

Not long after issuance of EO 14173, litigation was initiated, challenging the executive order as unconstitutionally vague and a violation of the First Amendment, among other arguments: The DEI-related provisions, including the certification requirement, based on the failure of the executive order to define or provide any guidance as to what would be considered an “illegal” DEI or DEIA program. In essence, the plaintiffs asserted that, without some defining guidance, the executive order was overly broad and could lead to significant exposure for contractors. As we reported, the federal district court agreed and entered a nationwide injunction prohibiting enforcement of the DEI-related provisions with limited exception. Almost immediately thereafter, the Trump administration appealed the entry of the injunction to the Fourth Circuit Court of Appeals.

On March 14, 2025, the Federal Appellate Court stayed the nationwide injunction, finding that the injunction was overly broad and that the executive order itself is likely not unconstitutional as it merely directs agency action. The Appeals Court opined that we must wait to see how the various agencies implement the directives within the executive order, and whether such implementation is done in a constitutional manner. As a result of the most recent court decision, the DEI certification requirement for government contractors and the civil False Claims Act risk is “back in play.” 

However, this is likely not the end of the story, as the manner of implementation and enforcement by the various federal agencies is sure to generate questions and challenges. The terminology of the required certifications and the initiation of civil False Claims Act cases on the basis of alleged “illegal” DEI or DEIA programs will lead to legal challenges and a developing body of caselaw.

Stay tuned for more developments.