As explained in a prior blog post, on January 21, 2025, President Trump signed Executive Order 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”) (the “EO”), establishing new requirements for federal contractors and grant recipients to agree that their compliance with federal anti-discrimination laws is “material to the government’s payment decisions” for purposes of the False Claims Act (“FCA”) and to certify that they do not operate any “programs promoting DEI that violate any applicable Federal anti-discrimination laws.”  On February 21, a federal judge in the District of Maryland granted a preliminary injunction to block these and other portions of the EO, including potential FCA enforcement actions based on the certification provision, as well as a provision of Executive Order 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing”).

The preliminary injunction was short-lived:  On March 14, a three-judge panel of the Fourth Circuit Court of Appeals issued a stay of the preliminary injunction.  With respect to EO 14173, the stay means that agencies may now require federal contractors and federal grant recipients to certify that they do not “operate any programs promoting DEI that violate any applicable federal anti-discrimination laws,” and the U.S. government may also bring FCA enforcement actions against federal contractors and grant recipients that allegedly make a false certification.  In addition, agencies are again permitted, under the terms of EO 14151, to terminate all “equity-related” grants or contracts, though grants may not be terminated “based on a grantee’s speech or activities outside the scope of the funded activities.”

In terms of practical considerations, two of the three judges on the Fourth Circuit panel emphasized that their opinion was based on their interpretation that the EO does not “purport to establish the illegality of all efforts to advance diversity, equity or inclusion” and that the “Certification” and “Enforcement Threat” provisions of the EO apply “only to conduct that violates existing federal anti-discrimination law” [emphasis added].  Those judges cautioned that “[w]hat the Orders say on their face and how they are enforced are two different things.  Agency enforcement actions that go beyond the Orders’ narrow scope may well raise serious First Amendment and Due Process concerns . . .”

In practice, this means that only those agency enforcement actions challenging DEI programs that clearly violate existing federal antidiscrimination law (mainly Title VII of the Civil Rights Act of 1964 and Section 1981 of the Civil Rights Act of 1866 (42 U.S.C. § 1981)) would likely fall within the bounds of what the Fourth Circuit would deem appropriate under the EO, and this should provide some assistance to entities required to make these certifications.  However, it is likely that the U.S. government may still pursue enforcement actions against companies that have DEI practices that the administration disfavors, even if those practices do not violate existing interpretations of Title VII and Section 1981.

The Fourth Circuit’s March 14 opinion contemplates an “expedited briefing” schedule.  While the schedule will ultimately be up to the parties, it is likely that briefing will occur over approximately the next six weeks with an argument likely to be set for May.

Photo of Lindsay Burke Lindsay Burke

Lindsay Burke co-chairs the firm’s Employment Practice Group and regularly advises U.S., international, and multinational employers on employee management and culture issues and international HR compliance. She is a key member of the firm’s Institutional Culture and Social Responsibility practice, working together with…

Lindsay Burke co-chairs the firm’s Employment Practice Group and regularly advises U.S., international, and multinational employers on employee management and culture issues and international HR compliance. She is a key member of the firm’s Institutional Culture and Social Responsibility practice, working together with white collar colleagues to conduct culture assessments, internal investigations of executive misconduct, and civil rights and racial equity audits and assessments. Lindsay has been at the forefront of the changing workplace issues impacting employers in the U.S. in the last decade, including #MeToo, Covid-19, and the renewed focus on diversity, equity, and inclusion. She frequently advises employers in relation to their processes and procedures for investigating complaints of discrimination, harassment, and retaliation and trains executive teams and board members on culture risk and the lawful implementation of DEI programs.

Lindsay also guides employers through the process of hiring and terminating employees and managing their performance, including the drafting and review of employment agreements, restrictive covenant agreements, separation agreements, performance plans, and key employee policies and handbooks. She provides practical advice against the backdrop of the web of state and federal employment laws, such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Equal Pay Act, the Family and Medical Leave Act, the Fair Labor Standards Act, and the False Claims Act, with the objective of minimizing the risk of employee litigation. When litigation looms, Lindsay relies on her experience as an employment litigator to offer employers strategic advice and assistance in responding to demand letters and agency charges.

Lindsay works frequently with the firm’s privacy, employee benefits and executive compensation, corporate, government contracts, and cybersecurity practice groups to ensure that all potential employment issues are addressed in matters handled by these groups. She also regularly provides U.S. employment law training, support, and assistance to start-ups, non-profits, and foreign parent companies opening affiliates in the U.S.

Photo of Evan Parness Evan Parness

Evan Parness, vice chair of the firm’s Employment Practice Group, has a full-service labor and employment practice that includes litigating cutting-edge issues at the trial and appellate levels, negotiating employment aspects of complex M&A deals and other business transactions, and counseling global employers…

Evan Parness, vice chair of the firm’s Employment Practice Group, has a full-service labor and employment practice that includes litigating cutting-edge issues at the trial and appellate levels, negotiating employment aspects of complex M&A deals and other business transactions, and counseling global employers on compliance with national, state, and local employment laws and regulations.

Evan represents employers and senior executives in non-compete, harassment, discrimination, retaliation, ERISA, and business tort litigation in state and federal courts, administrative agencies, and alternative dispute resolution bodies. He has secured significant trial and appellate victories for clients, including complete dismissals of discrimination and retaliation lawsuits, successful verdicts following trial, and injunctive relief on behalf of clients enforcing restrictive covenants.

Evan also counsels established and emerging companies on compliance with federal, state, and local employment laws and regulations, and litigation avoidance measures in connection with all aspects of workplace employment issues. He conducts sensitive internal investigations of alleged discrimination and harassment, and assists employers in shaping workplace policies to comply with law and promote a productive working environment.

Evan advises leading companies on the labor and employment aspects of significant business transactions and acquisitions. He negotiates employment-related provisions in business transaction documents and oversees due diligence of a potential target’s employment practices. He also counsels clients on executive employment and restrictive covenants agreements.

Chambers USA notes “Evan is an exceptional and talented lawyer. He possesses a deep understanding of the law and an unwavering commitment to his clients. He has a keen eye for detail and can dissect complex legal issues with remarkable efficiency. His thorough and methodical approach to each case ensures that no stone is left unturned, providing his clients with the best possible legal representation.”

The Legal 500 US notes that clients have commented that “Evan Parness is an amazing attorney. Always attentive and will take instructions outside of business hours, he is always there when we need him and looks for the best outcome for clients.”

Photo of Carolyn Rashby Carolyn Rashby

Carolyn Rashby provides business-focused advice and counsel to companies navigating the constantly evolving and overlapping maze of federal, state, and local employment requirements. Carolyn’s approach is preventive, while recognizing the need to set clients up for the best possible defense should disputes arise.…

Carolyn Rashby provides business-focused advice and counsel to companies navigating the constantly evolving and overlapping maze of federal, state, and local employment requirements. Carolyn’s approach is preventive, while recognizing the need to set clients up for the best possible defense should disputes arise.

As a senior member of Covington’s Institutional Culture and Social Responsibility Practice Group, Carolyn has co-led significant investigations into workplace culture, DEI issues, and reports of sexual misconduct and workplace harassment.

As an employment lawyer with over two decades of experience, Carolyn focuses on a wide range of compliance and regulatory matters for employers, including:

Conducting audits regarding employee classification and pay equity
Advising on employment issues arising in corporate transactions
Strategic counseling on a wide range of issues including discrimination and harassment, wages and hours, worker classification, workplace accommodations and leave management, performance management and termination decisions, workplace violence, employment agreements, trade secrets, restrictive covenants, employee handbooks, and personnel policies
Drafting employment contracts and offer letters, separation agreements, NDAs, and other employment agreements
Advising on employee privacy matters, including under the California Consumer Privacy Act
Providing guidance on use of AI in the workplace and development of related policies
Leading anti-harassment and other workplace-related trainings, for employees, executives, and boards

Carolyn also works frequently with the firm’s white collar, privacy, employee benefits and executive compensation, corporate, government contracts, and cybersecurity practice groups to ensure that all potential employment issues are addressed in matters handled by these groups.

Photo of Alex Thomson Alex Thomson

Alex Thomson is an associate in the firm’s Washington, DC office and is a member of the White Collar Defense and Investigations and Institutional Culture and Social Responsibility Practice Groups. He has extensive experience conducting civil rights and racial equity assessments for leading…

Alex Thomson is an associate in the firm’s Washington, DC office and is a member of the White Collar Defense and Investigations and Institutional Culture and Social Responsibility Practice Groups. He has extensive experience conducting civil rights and racial equity assessments for leading corporations, investigating workplace cultural issues including reports of misconduct, harassment, and discrimination, and advising clients on the lawful design and implementation of diversity, equity, and inclusion processes and practices.

Alex also advises clients responding to high-profile investigations before the Department of Justice that entail significant legal and reputational risks. His practice focuses on white collar criminal defense and government and internal investigations.

Alex serves on the Board of Directors for the Joint Distribution Committee (JDC), the leading global Jewish humanitarian organization. Prior to joining Covington, Alex served as a law clerk to the U.S. House Committee on the Judiciary and was a fundraiser for the Jewish Federation of Boston. He also has served on national finance committees for two presidential campaigns.