On September 11, 2025, the Fourth Circuit heard oral argument in one of the first cases to challenge the constitutionality of the two clauses in Executive Order 14173 that have been nicknamed “the certification provisions.”
Based on the court’s questions during oral argument, it seems likely that courts are going to allow the administration to keep inserting the certification provisions into grants and contracts. If the administration then terminates a particular grant or contract for DEI reasons, courts can address any vagueness, free speech, or due process arguments for that specific contractor or grant recipient who sues, and assess the rationale offered by the agency or agencies who imposed the terms or sought to enforce them.
Understanding how enforcement could proceed, and how to prepare for it, is important for any federal contractor or subcontractor.
Background of the Litigation
Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” requires federal government agencies to include these two provisions in every government contract or grant award:
- A term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of Title 31, United States Code; and
- A term requiring such counterparty or grant recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.
Executive Order 14173, Section 3(b)(iv). These provisions have been nicknamed the “certification provisions.”
The National Association of Diversity Officers in Higher Education (NADOHE) (and several other plaintiffs) sued the Trump Administration, challenging the constitutionality of these provisions.
- On February 21, 2025, a Maryland federal court issued a preliminary injunction, stopping the administration from including the certification provisions in all contracts and grants.
- The same judge then extended the injunction beyond the federal agencies originally named in the complaint and issued a nationwide injunction against all federal executive agencies (March 10, 2025).
- The Department of Justice sought to stay (pause) that nationwide injunction, and on March 14, 2025, the Fourth Circuit agreed to pause it.
Thus, for several months now, federal agencies have been including these certification provisions in contracts and grants. Although we have not seen any significant False Claims Act or EEOC enforcement actions yet, we think they are coming.
Oral Argument in the Fourth Circuit
The Fourth Circuit seemed receptive towards reversing or lifting the nationwide injunction. That would not mean the end of the litigation; it would mean that these early constitutional challenges to the executive order are not likely to be successful.
- It’s one thing to challenge the words themselves as being unconstitutional on their face or argue that these provisions are likely to deprive an entity of due process when contracts and grants are terminated, but these are still very theoretical arguments at an early stage of the lawsuit.
- It’s another matter entirely when the government actually has applied these words and taken specific action to terminate a contract or grant. Those actions would crystallize the controversy for the courts to adjudicate.
An emerging problem that grant recipients have faced, though, is that the administration has been deliberately vague when it terminated many grants. Most grants are being terminated because the award “no longer effectuates the program goals or agency priorities,” without citing the Executive Order or linking the grant termination to DEI reasons.
The federal government has significant latitude and is given much discretion to decide whether to fund a program or realign priorities. That makes it harder to challenge the termination on constitutional grounds.
How is the Federal Government Going to Enforce the Certification Provisions?
We anticipate three potential paths, but none depends on first receiving a decision from the Fourth Circuit:
- The government will finalize its Interim Final Rule;
- The EEOC is going to have a quorum and will begin filing lawsuits against organizations that discriminated against charging parties based on illegal DEI programs and practices;
- The Department of Justice is going to join whistleblower lawsuits alleging violations of the False Claims Act or initiate investigations (and lawsuits) against organizations that it alleges still maintain unlawful DEI initiatives.
1. The FAR Council Will Finalize Its Interim Final Rule
In prior administrations, when a President issued an Executive Order, typically a federal agency would be tasked with implementing it and often did so by rulemaking. The agency would:
- propose a rule,
- offer the public an opportunity to comment on the rule,
- review the comments, and
- finalize the rule, including giving the regulated community a rational amount of time to comply with the final version before any enforcement commences.
When a proposed rule is published, those who would be impacted by the rule have an advanced opportunity to understand what would be expected of them, and they can start to dedicate time and monetary resources to adapt.
This administration has not published any proposed rule to implement EO 14173. The FAR Council – which is comprised of representatives from the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration – is charged with developing many regulations impacting sourcing and procurement. It developed an “Interim Final Rule” and forwarded it to the White House’s Office of Information and Regulatory Affairs (OIRA) on April 15, 2025, but “Interim Final Rules” do not have to be published to the public in advance. Thus,
- We don’t know what it says.
- We don’t know how much time you will be given to comply with it.
- We don’t know how to comply or avoid enforcement.
Several lawyers familiar with rulemaking procedures speculate that the administration may be waiting for litigation to play out before publishing the rule, and this appellate case before the Fourth Circuit might be one of those cases.
2. The EEOC is On the Cusp of Having a Full Quorum
Once the Senate confirms Brittany Panuccio to the EEOC, its ability to issue new guidance and pursue an enforcement agenda aligned with the president’s priorities will proceed. The EEOC has discussed four enforcement priorities during meetings and conferences with the government contractor community:
- Combatting unlawful DEI-motivated discrimination
- Protecting American workers from anti-American national origin discrimination
- Defending the biological and binary reality of sex and related rights, including women’s rights to single-sex spaces at work
- Protecting workers from religious bias and harassment, including antisemitism and other areas of recent under-enforcement.
The EEOC does not need to wait for a Fourth Circuit decision on the constitutionality of the executive order or a decision on the scope of a preliminary injunction to pursue its enforcement agenda. We suspect that it has already begun to field discrimination charges that will enable it to pursue these enforcement priorities once it achieves a quorum.
3. The Department of Justice Will Initiate Enforcement of the False Claims Act or Decide to Join Lawsuits Brought by Whistleblowers
In May 2025, the Department of Justice created a Civil Fraud Investigative Unit. The purpose of this unit is to investigate and pursue claims against recipients of federal funds who knowingly violate federal civil rights laws by making false statements about their compliance. Executive Order 14173 leverages the False Claims Act to impose penalties against entities that certify falsely that they are adhering to anti-discrimination laws, particularly those related to DEI programs, gender identity, and religious discrimination.
- Employers do not know whether an isolated adverse result in a single discrimination case could justify the government’s decision to withhold payment on goods and services already provided.
- When the Obama Administration proposed a federal blacklisting regulation, it was met with significant resistance, and President Trump quashed the unfinalized regulation in 2017 during his first term.
- Now, President Trump has tied nationwide compliance with “all” federal anti-discrimination laws to the government’s right to withhold payment. Compliance with federal nondiscrimination laws is “material” to the government’s payment terms, and the Department of Justice can enforce this through the False Claim Act.
- That could bring federal agency procurement to a complete halt, if one single adverse judgment involving one federal antidiscrimination statute is “material” to the government’s payment decision on a multi-year, multi-billion-dollar project.
In addition, just prior to Labor Day, the head of the Justice Department’s Civil Rights Division, Harmeet Dhillon, put out a call on social media for discrimination complaints by American citizens, if they believed a foreign worker with a visa was wrongly hired over them. According to media reports, approximately 80 complaints came in.
- The Civil Rights Division is required under federal statute to vet each complaint within 10 days, including assigning it to a staff attorney to conduct an initial review to determine if the complaint is legitimate and send a notice about the complaint to the employer.
- The Department of Justice also can send Civil Investigative Demand letters to government contractors and grant recipients, but other than the one sent to Harvard in May 2025, which has been discussed extensively in news stories and Harvard’s briefs in litigation, we have seen no specific details about any other demand letters.
- If the DOJ decides to launch a formal investigation, a violation finding could result in large civil penalties against employers.
What Should Your Organization Be Doing Now
1. Conduct a DEI Audit, preferably under attorney-client privilege.
The actual certification itself is as of the date the certification is signed. But the administration has not limited its inquiries to only 2025.
- Organizations should be cataloging all DEI programs, policies, and initiatives, and we recommend going back to 2020. Although the unlawful DEI certification is effective as of the date it is signed, government investigations and pressure tactics have been much broader. In the context of several high-profile mergers, some federal agencies issued information requests dating prior to January 21, 2025. Moreover, the letters that the EEOC issued in March 2025 to 20 law firms requested data and documents going back to 2020 (and in some requests, back to 2015). Many employers implemented diversity programs and initiatives after the death of George Floyd in 2020, and some of those programs or initiatives may have used or resulted in unlawful race preferences. For that reason, we suspect that future Civil Investigative Demand letters or EEOC information requests are going to ask for information going back beyond January 21, 2025.
- We recommend cataloging under attorney-client privilege and requesting and receiving legal advice regarding compliance with federal anti-discrimination laws. That may shield the obligation to share the investigation results in response to a lawsuit or Department of Justice civil investigative demand.
2. Keep conducting annual nondiscrimination analyses.
- For decades, government contractor employers have used the results of impact ratio analyses and other statistical methods to evaluate discrimination patterns in hiring, promoting, terminating, and compensating. Those results were not conclusive proof that discrimination in fact existed, but they were an effective triage system when organizations followed through to investigate why those results were occurring.
- An essential element of proof in a False Claims Act lawsuit is whether the employer knew of the fraud. Did the organization “know” it was noncompliant with all federal antidiscrimination laws when it sent its invoices for payment or delivered its product or services? The courts have interpreted knowledge to include acting in deliberate ignorance or in reckless disregard. These nondiscrimination analyses may enable the employer to say that it did not knowingly violate the False Claims Act. It was not deliberately ignorant, nor did it act in reckless disregard. It did these analyses in good faith to confirm that there were no barriers to equal employment.
- It is a very risky litigation strategy to dump a lot of data onto an investigative agency without knowing in advance what that data is going to show the government, or without articulating what conclusions you want the enforcement agency to reach. Think about how much time it took to ensure the internal reliability and accuracy of applicant data for just one OFCCP audit location before you could work with it, much less submit it to OFCCP. There is greater risk that the EEOC or DOJ will ask for nationwide data because the False Claim is corporate-wide, not limited to an OFCCP “establishment.” If you stop the annual consistency checking of this data and the preparation of the nondiscrimination analyses, you risk scrambling in an EEOC investigation or DOJ enforcement action, or worse, sending inaccurate or incomplete data to the government.
3. Shore up record keeping practices and documentation when making employment decisions.
- Executive Order 14173 is fundamentally about ensuring merit-based opportunity in employment decisions.
- The burden is on the employer to demonstrate that it hired the most qualified person for the job opening, and to have records explaining why it promoted who it promoted, why it didn’t promote others, why it terminated employees, and why it is paying similarly situated employees different amounts of compensation.
- Presumably, none of these decisions was made because of race or sex, but the institutional memories of organizations are better refreshed when there is documentation to assist in recalling events and reasons.
4. Review Employment Insurance Defense Policies.
Never before has a president sought to connect enforcement of the nation’s federal anti-discrimination laws with the risk of a False Claims Act lawsuit. Organizations risk nonpayment for their services and products if they are not in compliance with “all applicable Federal anti-discrimination laws.” Plaintiffs’ lawyers and the federal investigative agencies are going to increase settlement leverage in discrimination matters by referencing the False Claims Act. It might be a good idea to review any employment practice liability insurance policies to ensure you understand what’s covered and what’s excluded.
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The government is raising the stakes for government contractor’s and grant recipient’s noncompliance with all federal nondiscrimination laws, and organizations would be well-advised to assess and eliminate any potential areas of noncompliance with federal nondiscrimination laws before they certify. Based on the judges’ questions during oral argument, we do not think the Fourth Circuit’s decision in NADOHE, et al. v Trump is going to slow that down.
How OutSolve Can Help
OutSolve offers two key services for employers:
- DEI Audit: Thorough review and audit of your DEI programs that will cover all areas of an organization.
- Nondiscrimination in Employment Report: Includes disparity analyses for hiring, promotions, and terminations, and can also include workforce composition analytics and labor market comparisons, to help your organization pinpoint any areas that might need investigating or further attention.
Reach out to us today to see how we can help you analyze your workforce.