Court Refuses to Block Executive Order Barring ‘Racially Discriminatory DEI Activities’ by Federal Contractors

On October 14, 2026, the U.S. District Court for the District of Maryland declined to preliminarily enjoin President Donald Trump’s executive order requiring federal contractors to agree not to engage in “racially discriminatory” diversity, equity, and inclusion (DEI) activities, or to stay related Federal Acquisition Regulatory (FAR) Council guidance.

• On October 14, 2026, the U.S. District Court for the District of Maryland denied a preliminary injunction sought by five organizations whose members include government contractors, leaving Executive Order (EO) 14398 in effect while the case proceeds.
• The court found the groups were unlikely to succeed on their First Amendment and Fifth Amendment claims because the EO defines the prohibited activities as “disparate treatment based on race or ethnicity,” which is intentional discrimination that federal law already prohibits.
• The court read the EO narrowly, applying only to work performed under covered contracts, and noted that enforcement against lawful DEI-related speech or programs could be challenged as applied.

Judge Adam B. Abelson issued the ruling in National Association of Diversity Officers in Higher Education v. Trump. Three of the plaintiff organizations represent higher education employees; the other two are trade associations of construction contractors. They sought to block executive order (EO) 14398, titled “Addressing DEI Discrimination by Federal Contractors,” and an April 17, 2026, FAR Council memorandum implementing it.

EO 14398, issued March 26, 2026, directs executive departments and agencies to include in contracts and subcontracts, within thirty days, a clause stating that the contractor “will not engage in any racially discriminatory DEI activities,” defined as “disparate treatment based on race or ethnicity” in recruitment, employment, contracting, program participation, or allocation of resources. Noncompliance may lead to contract cancellation, termination, or suspension and ineligibility for future government contracts, and the EO directs the U.S. attorney general to consider False Claims Act (FCA) actions against violators.

The FAR Council’s April 17, 2026, memorandum (FAR Memo) requires agencies to modify existing contracts by July 24, 2026, and includes model contract language identical to the EO’s. The government later agreed not to initiate FCA enforcement related to the EO or FAR Memo until August 7, 2026.

The groups submitted member declarations describing concerns about lost work, canceled contracts, and chilled speech. They claimed the EO is overbroad, discriminates based on content, and imposes unconstitutional conditions, in violation of the First Amendment of the U.S. Constitution; is unconstitutionally vague, in violation of the Fifth Amendment of the U.S. Constitution; and exceeds the president’s authority in its FCA enforcement provision. They also claimed the FAR Memo violates the Administrative Procedure Act (APA).

The court relied on the U.S. Court of Appeals for the Fourth Circuit’s February 2026 decision in an earlier NADOHE lawsuit (NADOHE I), which upheld a 2025 requirement that contractors certify compliance with federal antidiscrimination laws, “which the First Amendment doesn’t confer a right to violate.” EO 14398 does not expressly reference those laws, but the court found it requires compliance with them “impliedly,” because “disparate treatment” has a settled legal meaning: intentional discrimination.

Had the EO simply barred “racially discriminatory DEI activities,” it “may very well have run afoul of the First Amendment,” the court said, because that phrase “is far from self-explanatory.” (Emphasis added).But the clause incorporates the EO’s definition, which limits it to “disparate treatment based on race or ethnicity.”

The court also found that the EO does not reach the groups’ principal examples, such as studying diseases with “disparate negative health outcomes for particular races” or teaching, researching, or publishing on DEI topics, because those activities do not, “without something more, treat anyone less favorably than others because of race or ethnicity.”

For the same reasons, the court rejected the content discrimination and unconstitutional conditions claims, concluding that the groups “lack a protectable First Amendment interest in speech that is prohibited by” the EO “because they lack an interest in speech that is prohibited by federal antidiscrimination law.”

On vagueness, the court held that the clause applies only to work performed under the contract containing it. Enforcement based on conduct or speech outside the contract “may well be unconstitutional retaliation,” the court said, and should be addressed through as-applied challenges.

The court declined to stay or enjoin the FAR Memo because its requirements are “substantially identical to the requirements imposed by” the EO, and the groups did not show irreparable harm from any provision “distinct” from the contract clause itself. The court did not decide the group’s other APA claims.

The ruling lets the government continue inserting the EO 14398 clause in new and existing contracts, and contractors that agree to it may face FCA exposure if the government believes they are not complying.

However, the court read the EO narrowly. It reaches only intentional discrimination based on race or ethnicity, and only work performed under a federal contract. Enforcement against DEI-related speech or programs that do not involve disparate treatment would be “unauthorized by” the EO and “could very well violate the First Amendment,” the court said. The government also conceded that medical research on diseases that disproportionately affect one race is not barred, and that a contract “could not be terminated” for “talking about historical examples of racial disparities.”

The ruling is unlikely to be the final word on EO 14398. A coalition of nineteen states and the District of Columbia has filed a separate lawsuit, Maryland v. Hegseth, also pending in Maryland federal court, alleging that agency actions implementing EO 14398 exceed statutory authority and violate the APA. Contractors may wish to track agency requests for contract modifications and monitor developments in these challenges.