DEI Executive Orders: Back Door Enforcement After the Injunction

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Nonnie Shivers: Thanks for joining me and Scott on today’s podcast regarding the DEI executive orders and enforcement after the injunction. You might have been able to join me and Scott on our March 3rd webinar where we talked about in detail three executive orders, EO 14151, EO 14173, the DEI executive orders and the gender identity order, 14168. And we talked about five different lawsuits on that webinar and in particular the district of court of Maryland lawsuit, where a national injunction has been entered. So, we’re going to cover that briefly, those injunctions, and then what we’re really going to focus on today, between me and Scott, is what are we seeing in terms of enforcement activity which was not enjoined? So, Scott, you want to kick us off on talking about ending radical and wasteful government DEI programs and preferencing?

Scott Kelly: Yeah, of course. So, as you mentioned on February 21st, the U.S. District Court for the District of Maryland entered that preliminary injunction. There were three key aspects of the executive order, 14173, the Ending Illegal Discrimination and Restoring Merit Based Opportunity that were in play in that case. There was also the executive order of 14151, which is named ending Radical and Wasteful Government DEI Programs and Preferencing, and the case was actually titled the National Association of Diversity Officers in Higher Education. But in that case, the court issued a decision halting the enforcement of the requirement under 14173, that federal contractors and grant recipients had to certify that they don’t operate any programs promoting DEI, that violate any applicable federal anti-discrimination laws, and that they had to agree in all respects with all applicable federal anti-discrimination laws, is material for purposes of false claims act liability. The court also in the decision from February 21st enjoying the government from freezing or terminating any equity related contracts or grants under 14151.
Interestingly, Nonnie, the court did not enjoin Pam Bondi, the Attorney General from engaging in any investigation of DEI programs, but it did enjoin the enforcement provisions of 14173, including the one where the requirement that the Attorney General take appropriate measures to encourage the private sector, really the chilling aspect of that executive order, right? Telling the private sector not to engage in DEI or illegal DEI and preferences. So that injunction came on a Friday night, the 21st I think is when that came through, and then it looks like the… Well, we know now that the government appealed relatively quickly up to the Fourth Circuit, but then there was a motion by the government to lift the injunction, rather there were hearings held on that and I believe it on the Monday the 3rd of March, so not too long ago, the court disagreed with the government’s position, didn’t agree to lift any type of stay, and now that case I believe is before the fourth circuit. Do you agree that I got all that right?

Nonnie Shivers: You’ve got it all right. So, to recap what the preliminary injunction, it’s been upheld, that’s what Scott said accurately, but it didn’t enjoin. What my takeaways were was the government and agencies can still investigate and enforce. So, if there’s unlawful DEI that violates Title VII, there’s still investigatory authority. It also didn’t enjoin the AG specifically from pursuing enforcement action against individual companies. It didn’t enjoin the AG from continuing to amass that report that is required by the executive orders, identifying organizations for investigation so we expect that to still continue, and the agencies also aren’t enjoined from using those underlying statutory enforcement authorities to bring actions. So, commissioners’ charges, lawsuits, other types of enforcement activity are not enjoined. What we were going to talk about today, since we’ve level set on that is, so what are we seeing? What are employers receiving? What are we hearing, and what should employers be on the lookout for in terms of assessing their risk tolerance with DEI programs that are lawful under the law as it exists today, but may not be or may be within risk tolerance?
The first thing I thought we’d talk about, Scott, was the certification has been enjoined, right? So, we’re in agreement on that, that the provision requiring those federal contractors and subcontractors to certify for those FCA, False Claims Act purposes, that they don’t operate unlawful DEI programs. That’s enjoined, but we don’t see a full stop to those activities. So let me give one example of what I’ve seen at least since this enjoiner came out, since the injunction happened. So one thing that I saw come through was a request from a federal agency and it wasn’t a CERT request, it was just a request, that posed questions asking for responses, and it asked the organization to confirm that they had no DEI project or DEI elements of a project and it referenced the DEI EOS, but it didn’t provide any definitions, which of course there’s no definition in the DEI EOS of unlawful DEI.
It didn’t stop there, just so we can be transparent and thorough. It also asked other questions such as, is there a clear policy prohibiting collaboration with entities that advocate or implement policies contrary to US government interests, or can you confirm you don’t do work with entities with communist socialist or totalitarian parties or that espouse anti-American beliefs, which are ensconced in other executive orders. So folding in a lot of that, there were also immigration-related requests and the request that we saw here was, are you doing business with or engaging with any other company that endorses, quote, mass migration? So that’s one of the examples of what I would call a certification-like question or set of questions to a federal contractor or subcontractor that looks and sounds a lot like a certification Scott, but doesn’t have an actual certification nomenclature attached to it.

Scott Kelly: Yeah, I saw some of the same things from clients, different type of industries, but essentially some of the same language about really the two aspects of the certification that’s in the 14173 executive order, the comply with all anti-discrimination laws and then that you don’t operate in an illegal DEI. There are different ways, different senate structures and things like that. There weren’t references to false claim act liability like we were seeing in some of the certification requests that were coming prior to the preliminary injunction being entered in the Maryland Federal District Court case. And pushing back, there have been questions anecdotally back to these procurement specialists that were working for the federal agency saying like, “Hey, we thought that these were enjoined,” and some have not responded. Some have said, “Well, there is a legal pause, so you don’t have to respond to this right now.” But it’s definitely actively continuing, I would say, where there is similar language like you, I think cert-like activity is a great way to represent it, that it seems to be persisting even in light of this preliminary injunction being in place.

Nonnie Shivers: Right. I think you hit on a really important point, Scott. I’m addressing things that are cert-like. Now, some organizations had already received cert requests and in contacting those agencies, like you noted, some have said to stand down and some have not engaged, but that may be in the playbook. So, the second thing I thought I’d note that I’ve seen, and I think it might be of interest to everyone listening today, is the uptick or the creation of reporting hotlines. So, let’s use an example. So, the Department of Education website that’s gone live is ndei.gov, and what that website currently elicits is it asks teachers, students, community members, but employees is our concern, to identify, “potential areas of investigation.” So again, activity that is not enjoined. And what they’re eliciting is anything that looks or sounds like illegal discriminatory practices at institutions of learning, including divisive ideologies and indoctrination.
So, where that language primarily comes from is it sounds and looks a lot like the gender identity executive order, which we addressed in our Monday webinar. And so, we’ve also seen as a second example, and this is not something that would likely be replicated in exactly the same way, is emails to contractors and subcontractors asking them to report pronoun use to DOGE and that it would be considered by the agency in reviewing contracts. So, we’ve seen some of that type of reporting request, hotlines, websites, anything else that seeing in that space, Scott, that employers should be aware of?

Scott Kelly: I think we’re seeing the same things there. I do think, and what’s interesting to me, is I think that that Department of Education website, I think really to me helps shore up a point that we’ve been trying to make to our different clients and just generally as we’ve done the webinars on the executive orders, is that there’s a lot of concern about the risk of what your programming might look like and how it might draw the ire of this administration knowing it’s animus towards diversity, equity, and inclusion. But it seems to me that that is not the only group that you need to be concerned about, right? I mean, you’re basically trying to get a lot of community activists, the social influencers and like are being drawn into, I think help this administration with their efforts to try to chill diversity, equity, inclusion programming in corporate America.
And so, really if you’re looking at your risk, if you’re only looking at it through the lens of what your risks are vis-a-vis the federal government, I don’t think that’s a complete analysis. I mean, you’ve got to be very careful, especially as you’re looking at your programming to really understand what any changes or any movements that you’re making whatsoever in this space is going to be watched closely and that you’re going to have a hard time keeping everybody that would be seen as a stakeholder happy in anything that you’re doing. So it’s really a difficult time I think for employers as they’re grappling with what they should be doing or not doing in this space.

Nonnie Shivers: I couldn’t agree more. The final area I’ll address and then know, Scott, you’ll have time to add onto this list of potential enforcement activity, is an uptick in advocacy group activity. So, you alluded to this, but I’ll drill down for a moment, which is we have the deputy chief of staff for the White House, Stephen Miller, who was previously with America First Legal AFL, was very active in the DEI space, sending out many a demand letter during the Biden administration and really marshaling resources to attempt to chill DEI that was lawful. And now Stephen Miller is the deputy chief of staff for the White House has the government at his disposal, so what we were seeing was a significant amount of government activity during the first days of the administration continuing through today. But now we’ve seen an uptick in advocacy group activity once again. So, for instance, demand letters and that includes government officials, but demand letters from Red State Attorneys general to financial institutions, demanding they cease race and gender-based preferences including in supplier and board diversity, as well as other recent events attempting to further foment that lawful DEI is unlawful, aligned with these executive orders very, very tightly.
So that recent uptick in advocacy group activity is not to say that that defines the law, but when you get into other areas that are adjacent, such as shareholder derivatives suits, which are then upticked as well, it creates part of that perspective for you all listening here to determine your risk tolerance for lawful programming.

Scott Kelly: Yeah, and I think that we’ve seen these actions from America’s First Legal. We’ve also seen some new lawsuits from American Alliance for equal rights recently, but America’s First Legal, and this is out in the press, America’s First Legal as a great press machine, and so they issued a letter to the Acting Secretary of Labor and also the Acting Director of OFCCP, the letter was dated February 14th. But they were basically identifying a number of federal contractors that they felt were taking race and sex-based employment practices under the guise of DEI and that they were violating some of the civil rights laws. So they’ve asked both the Secretary of Labor, the Acting Secretary of Labor and OFCCP’s Acting Director to investigate these particular companies, which is an interesting approach, in light of the fact that the Acting Secretary of Labor issued an order on January 31st saying that OFCCP was to cease and desist all enforcement activities on race and gender that were currently in place.
I might’ve gotten the date there wrong, I think it was July 31st, had to be, the closure of these types of ongoing audits of federal contractors that we did see actually come into happening with OFCCP issuing those closure notices on January 31st, the acting Secretary of Labor’s order was before that, but in the Acting Secretary of Labor’s order, there was a statement that because of President Trump’s entering of the executive order, 14173, which we’ve been talking a lot about today on the certification and the new requirements of it, we hadn’t really spent much time today talking about how that executive order also rescinded the Women and Minority Executive Order that Lyndon Johnson signed known as Executive Order 11246, and OFCCP eventually had rights to enforce the obligations that federal contractors and subcontractors had there. So it’s interesting that the White… Well, you can’t say it’s the White House, right? It’s America’s First Legal to be clear, sent this letter, but there is a connection you would think, because Stephen Miller used to work there. I’m not sure exactly how that all works right now and not suggesting much more than that there was a connection there.
It reminds me a lot in my days of investigating and defending OFCCP investigations, there was always a concern that the Department of Labor, maybe Department of Justice, the Solicitor of Labor’s office, could have been sharing information about some of its more high profile, larger systemic investigations with well-known and prolific plaintiff law firms that handled a lot of systemic discrimination cases. There were articles about this published quite a bit. It was an ongoing concern we even would include in our communications with the OFCCP that if they had a cooperation agreement with a plaintiff’s law firm that we wanted to know about it. And so to me, this is just another example of how we’re just in a whole new world with this administration, not necessarily being in any type of cooperation agreement with a well-known plaintiff’s class action law firm, but actually with some of these civil rights groups or conservative groups that are taking up the helm at this scrutiny of corporate America’s DEI program and their related commitments.

Nonnie Shivers: Anything else, Scott, before we give a couple of final takeaways?

Scott Kelly: No, how about you kick us off on those?

Nonnie Shivers: Yeah, so a lot of that is a sea change, right? We don’t know what’s next. There’s concern. Employers want to stay in a compliance space within their risk tolerance and want to understand the executive orders and where they stand. A lot of people hungry for information and attempting to look into what these really mean for the business and our programs. One of the things I strongly recommend is to stay up to date on the evolution. Make sure you are aware of which orders impact you and which ones don’t, as well as the tone and tenor of them because it sets the stage for what’s to come. It’s also the time to make sure you’re following individuals in leadership roles in the agencies on social media, right? It’s back to COVID days when we needed to learn about mask orders from Gavin Newsom’s account. So, I’d strongly recommend that you follow some of that, stay up to date on what they’re saying publicly in speeches. It will give you ideas on where the enforcement lead is headed and where it’s buried.
The other thing I’ll say is this is still the time, in my opinion, to conduct those privileged assessments of your DEI program for the purposes of obtaining legal advice and what was lawful remains lawful, but the sea is changing, right? It’s a seismic change and so I think it’s important, again to continually assess all of the factors relevant to your organization and look at it through the lens of the law. Lean into the law. What do you have, Scott?

Scott Kelly: I would echo those same considerations. Keep in mind that if this preliminary injunction, if there’s a change in that or there’s at least five, if not more, similar challenges to this executive to 14173 pending in different district courts across the US, we could get a different result. In one of those, it might only pertain to certain agencies and not all agencies. I mean, so this is going to be a patchwork, piecemeal thing. There’s no easy button in figuring all of this out. So, I would say watch that closely. We have a new hub for resources related to the administration that can be found at our website www.ogletree.com. I would recommend you checking that out because we try to keep that updated as best we can given all of these updates.
And then I’ll close with saying that, you know, I think consideration, especially for the federal contractors who are listening, or grant recipients, who might not necessarily have that certification threat or provision right there in front of your face, I would say that that might be something that could be coming, but there’s a lot of this, I would say, backdoor enforcement activity going on and so getting ready to be able to say that you’re comfortable, that you’re complying with all federal anti-discrimination laws is something that I think it’s time to do that now, if you’ve not started doing it. For federal contractors, there’s a big void that was created with 11246 being rescinded because you don’t have to do those women and minority affirmative action programs. You actually have until April 20th to get them out of here, April 21st, but April 20th, to be very careful.
That doesn’t mean that you shouldn’t be considering doing some other type of analysis of your workplace metrics or your workforce data to ensure that you’re mining and aware of any legal risk and you’re taking the steps that are necessary to minimize those to the extent you can. That’ll just help set you up, whether you have to certify or not. I think it would be a best practice or something definitely to consider in this environment. So, with that, I think we’ll sign off for today, and hopefully things will calm down, but if not, I’m sure you’ll hear from us on another related topic sometime soon. Thanks for listening today.

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