Executive Order 14398 Survives Preliminary Challenge: What Contractors and Subcontractors Should Know with Respect to DEI

On October 14, 2026, U.S. District Judge Adam B. Abelson, District of Maryland, denied a motion for a preliminary injunction and stay in National Ass’n of Diversity Officers in Higher Education v. Trump with respect to the March 2026 Executive Order (EO) No. 14398, “Addressing DEI Discrimination by Federal Contractors.”

EO 14398 prohibits federal contractors and subcontractors from engaging in “racially discriminatory” diversity, equity, and inclusion (DEI) initiatives; requires government access to books, records, and accounts for purposes of assessing compliance; and contains a provision that compliance is “material” to government payment decisions for purposes of liability under the federal False Claims Act (FCA).

Judge Abelson concluded that the plaintiffs had not satisfied their burden to show: (a) a likelihood of success on the arguments that the EO violated the First or Fifth Amendments; and (b) a likelihood of harm warranting relief under the Administrative Procedure Act. In reaching this decision, Judge Abelson relied on a precedential February 6, 2026, opinion of the U.S. Court of Appeals for the Fourth Circuit in a case challenging two related executive orders issued by the Trump Administration.  In that case, the Fourth Circuit also denied Plaintiffs’ constitutional challenge, despite the threat of “False Claims Act” enforcement.

The decision provides guidance to employers, federal contractors, and recipients of federal funding, who may also face threats of FCA enforcement. Judge Abelson wrestled with the oft-repeated question: What is “racially discriminatory” DEI? In addressing the plaintiffs’ facial challenge to the EO, he determined that EO 14398 sufficiently defined racially discriminatory DEI by its express prohibition of “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), [and] contracting.” He further held that disparate treatment was a “common legal term essentially synonymous with unlawful intentional discrimination.”

Judge Abelson emphasized, and the government conceded, that there is “absolutely” DEI activity that falls comfortably within the confines of permitted activity under the law, such as “courses or ... research efforts on topics relating to race, ethnicity, diversity, equity, or inclusion” and “[p]ublishing materials relating to improving diversity, inclusion, and equity,” among other activities. He noted that “scientific or medical studies of diseases that affect one race disproportionately would not be legally prohibited” and contractors “talking about historical examples of racial disparities ... would not be disparate treatment based on race or ethnicity.”

Judge Abelson’s decision also foreshadowed potential as-applied challenges to governmental overreach. The decision noted, for example: “If the government were to bring or threaten a False Claims Act enforcement action against a contractor based on [DEI] speech or programs, that not only would be unauthorized by the Contractors Order, but could very well violate the First Amendment and thereby give rise to an as applied challenge to such enforcement action.” Significantly, Judge Abelson noted that EO 14398 only applies to activity in connection with the performance of work under the government’s contract. If the “government [attempted] to enforce the provisions of [EO 14398] against them for conduct or speech outside the contract, such enforcement action may well be unconstitutional retaliation.”

Yet with the government determined to uncover false claims, particularly in the context of health care fraud—and often with the help of whistleblowers—ensuring Title VI and Title VII compliance remains key. As we wrote in April, federal contractors should take several steps:

• Continue to audit policies, practices, contracts, programs, and procedures to ensure compliance with executive orders and other federal mandates including, for example, EO 14173, which targets “the employment, procurement, and contracting practices of federal contractors and subcontractors” in the context of “race, color, sex, sexual preference, religion, or national origin.”
• Stay informed about evolving case law in order to remain “a step ahead” of any federal DEI investigation or enforcement action.
• Monitor state and local laws, which sometimes require more vigilance or different compliance obligations than federal mandates.
• Stay abreast of new DEI-related rulemaking. For example, sweeping Office of Management and Budget (OMB) regulations regarding certain DEI programs are on hold, but only until December 11, 2026. The General Services Administration has also proposed a rule that would require federal aid recipients to certify that their DEI programs do not discriminate.

Epstein Becker Green Staff Attorneys Ann W. Parks and Elizabeth A. Ledkovsky contributed to the preparation of this post.

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The Workforce Bulletin blog is currently edited by Scott J. Connolly, Adam S. Forman, Greta Ravitsky, Elizabeth S. Torkelsen, and Jennifer Stefanick Barna.