Fourth Circuit Stays Injunction on DEI Executive Orders – What Federal Grantees and Contractors Need to Know

As we shared in a previous client alert, on February 21, 2025, a U.S. District Court judge issued a preliminary injunction in National Association of Diversity Officers in Higher Education et al. v. Trump et al., Dkt. No. 1:25-cv-00333 (D. Md. Feb. 21, 2025) that blocked portions of the Trump administration’s executive orders on diversity, equity, and inclusion programming (“DEI”) by federal contractors and grantees and private sector entities. On March 10, 2025, the same U.S. District Court issued a clarified preliminary injunction, explaining that the February 21 preliminary injunction applied to all federal executive branch agencies, departments, and commissions, but not the President.

The federal government appealed the preliminary injunction to the Fourth Circuit Court of Appeals, arguing that the Executive Orders instructed agencies to enforce existing laws without violating First Amendment rights. On Friday, March 14, 2025, the Fourth Circuit issued an Order staying the preliminary injunction. This stay means that executive agencies may now enforce the portions of the January 20 and January 21, 2025 Executive Orders previously enjoined, including:

• Executive agencies may terminate “equity-related grants or contracts” (the “Termination Provision”);
• Executive agencies may require federal contractors or grantees to certify that they do not operate illegal programs promoting DEI and agree that they are in compliance with “all applicable Federal anti-discrimination laws” (the “Certification Provision”); and
• The Attorney General may take “appropriate measures to encourage the private sector to end illegal discrimination and preferences” including by identifying “potential civil compliance investigations” to deter illegal DEI programs (the “Enforcement Provision”).

The Fourth Circuit’s order also clarifies that these Executive Orders only require the executive agencies that are enforcing these Executive Orders to enforce them consistent with current federal rules and law, which prevent the agencies impinging on protected speech rights. As a reminder, federal civil rights laws have not changed under the new administration (that would require an act of Congress or a court holding), so federal grantees and contractors that were complying with federal law in their programing prior to January 20 and 21, 2025 would still be in compliance with those laws today.

Notable for legal scholars, after the Fourth Circuit unanimously stayed the preliminary injunction, each judge offered a concurring opinion. Chief Judge Diaz reasoned that “how the administration enforces these executive orders … may well implicate cognizable First and Fifth Amendment concerns.” Judge Harris recognized the executive orders should only terminate funding as “subject to applicable legal limits,” only for “conduct that violates existing federal anti-discrimination law.” Judge Rushing stated that “the government is likely to succeed in demonstrating that [a narrow application of] the challenged provisions of the Executive Orders,” do not violate the First or Fifth Amendments. 

Separately, Judge Rushing reasoned that a nationwide “scope of the preliminary injunction alone should raise red flags” as it “purported to enjoin nondefendants from taking action against nonplaintiffs.” It remains to be seen whether other Circuit Courts will take a similar stance.

What does this mean for institutions of higher education? 

As shared in our prior client alert, institutions should review their policies or programs and confirm that their practices comply with existing federal discrimination law. Institutions should also review any federal agency requests for certification or changing terms and conditions related to their federal grants and contracts. Please continue to monitor developments and consult legal counsel with concerns related to compliance.