Still No Answers: Seventh Circuit Oral Argument Leaves DEI Questions Unresolved

Quick Hits

• Despite repeated requests from multiple courts, the administration has yet to articulate what distinguishes lawful DEI programs from those that the federal government believes violate antidiscrimination laws, leaving employers without clear compliance guidance.
• Federal contractors and money recipients that cannot certify compliance face potential False Claims Act liability, including treble damages, civil investigative demands, and possible criminal exposure—consequences far exceeding traditional antidiscrimination enforcement.
• The Seventh Circuit panel signaled concern about the scope of a lower court’s injunction in light of the Supreme Court of the United States’ ruling in Trump v. CASA, Inc.; employers outside the plaintiff’s direct relationships may want to prepare for the possibility that the injunction’s scope and impact may be limited.

Background

Executive Order (EO) 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” includes a certification provision requiring federal agencies to include terms in every contract or grant requiring each recipient to (1) certify compliance with all federal antidiscrimination laws, and (2) certify “that it does not operate any programs promoting DEI that violate any applicable Federal antidiscrimination laws.”

Chicago Women in Trades (CWIT), a nonprofit organization that trains women for careers in the construction trades and receives federal grant funding through the U.S. Department of Labor, challenged the certification provision. CWIT has argued the provision violates the First Amendment because it targets speech rather than conduct and constitutes viewpoint discrimination because it singles out pro-DEI programs while ignoring anti-DEI programs that might also violate antidiscrimination laws. CWIT has also argued that the provision imposes unconstitutional conditions by requiring certification of compliance for activities beyond those receiving federal funding. Several entities cancelled or sought to cancel relationships with CWIT out of concern about the certification requirement.

The U.S. District Court for the Northern District of Illinois issued a preliminary injunction blocking enforcement of the certification provision. The government appealed.

Takeaways From the Oral Argument

Oral argument exposed persistent uncertainty facing employers about what distinguishes lawful from unlawful DEI programs. Lawyers for the government continued to struggle to define what constitutes “unlawful DEI,” drawing sharp criticism from Judge David Hamilton, who stated, “[Y]ou understand the frustration, from everybody dealing with this case on the court side, has been the government’s failure to answer that question.”

The government did acknowledge that lawful DEI programs exist and that EO 14173 does not prohibit “educational, cultural, or historical observances that celebrate diversity, recognize historical contributions, or promote awareness without engaging in exclusion or discrimination.” But the panel remained unsatisfied with the government’s lack of concrete guidance on where the line falls.

The panel also signaled concern about the scope of the district court’s injunction, given the Supreme Court’s ruling in Trump v. CASA, Inc., suggesting the district court’s broad preliminary injunction could be narrowed. District courts remain split on whether the certification provision regulates speech or conduct, an issue Chief Judge Michael Brennan identified as “the distinguishing metric” between different outcomes in different courts.

Next Steps

Employers uncertain about the status of their DEI programs remain in largely the same position, and the Seventh Circuit’s ruling, when issued, likely will not resolve that question.

Federal contractors and grantees face exposure beyond ordinary antidiscrimination enforcement. The certification requirement can trigger False Claims Act liability, with treble damages, civil investigative demands, and possible criminal exposure, creating a materially different risk profile than a traditional enforcement action. The certification provision also extends to programs “whether federally funded or not,” meaning employers may need to certify compliance across their entire organization.

Employers may want to consider evaluating whether their DEI programs comply with existing federal antidiscrimination laws and document that compliance. Because the government acknowledged that educational, cultural, or historical observances that “celebrate diversity, recognize historical contributions, or promote awareness without engaging in exclusion or discrimination” do not run afoul of the executive orders, employers may wish to frame their initiatives accordingly while monitoring further developments in this litigation and related cases.

For more information on DEI enforcement, please join us for our upcoming webinar, “DEI Programs and Enforcement: What Employers Can Expect in 2026,” which will take place on February 24, 2026, from 2:00 p.m. to 3:00 p.m. EST. The speakers, T. Scott Kelly and Nonnie L. Shivers, will discuss the latest updates from the U.S. Equal Employment Opportunity Commission (EEOC), among other things. Register here.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance Practice Group, Government Contracting and Reporting, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Employment Law, Government Contracting and Reporting, State Developments, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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