Introduction
On October 14, 2026, the U.S. District Court for the District of Maryland denied a preliminary injunction against Executive Order 14398, permitting the Administration’s March 2026 order related to federal contractor diversity, equity, and inclusion (DEI) practices to remain in effect while litigation proceeds. Unlike the earlier litigation involving Executive Orders 14151 and 14173, where courts initially enjoined certain provisions based on concerns regarding vagueness and overbreadth, the court declined to issue similar relief here. For contractors, the practical result is continued compliance obligations and potential False Claims Act exposure tied to the certifications required by the Executive Order.
Background
Executive Order 14398 and Enforcement Efforts
On March 26, 2026, President Trump signed Executive Order (EO) 14398 – “Addressing DEI Discrimination by Federal Contractors.” Exec. Order No. 14398, 91 Fed. Reg. 16,147 (Mar. 26, 2026). The EO requires covered contractors to agree that, in connection with the performance of work under a federal contract, they will not engage in “racially discriminatory DEI activities.” In turn, the EO defines such activities as “disparate treatment based on race or ethnicity” in recruitment, employment, contracting, program participation, or the allocation or deployment of an entity’s resources. Furthermore, the EO directs federal agencies to implement these restrictions in the federal awards. Section 3 of the EO provides that compliance with its requirements is material to the government’s payment decisions, creating a potential False Claims Act (FCA) hook for contractors.1 We have previously covered this executive order and recent FCA settlements relating to allegedly discriminatory DEI-related practices here. These FCA settlements and other more recent ones have made it clear that federal enforcement in this area is aggressive and ongoing.
In April 2026, contracting agencies were directed to include the requirements of EO 14398 in new procurements as described in a Federal Acquisition Regulatory Council Memorandum (FAR Memorandum). The FAR Memorandum directed agencies to incorporate the new contract clause, FAR 52.222-90, into covered new procurements and to make every effort to modify covered existing contracts through bilateral modifications to include the same requirements.2 The clause also requires flowing its requirements down to subcontractors at all tiers.3
EO 14398 is not the first of its kind to target federal contractor DEI-related practices related to federal procurement. At the beginning of 2025, the Administration issued Executive Orders 14151 and 14173, which similarly sought to restrict certain, arguably broader, DEI-related activities. Those orders were promptly challenged in federal courts as impermissibly broad and vague due to the absence of definitions for key terms such as “DEI,” “equity-related,” and “illegal DEI.”4 Litigation challenging these two executive orders is ongoing and has yielded mixed results at the district court and circuit court levels.5 Presently, these provisions are effective and subject to enforcement following the Fourth Circuit's decision to vacate a lower-court injunction that had blocked portions of Executive Orders 14151 and 14173.6
Court Challenge to EO 14398
Shortly after EO 14398’s issuance, a group of collegiate administrators challenged it in the U.S. District Court for the District of Maryland. See National Association of Diversity Officers in Higher Education v. Trump, No. 8:26-cv-01532 (D. Md. Apr. 20, 2026). The complaint asserted multiple grounds, including that the executive order was unconstitutional, violates the First and Fifth Amendments, does not comport with due process requirements, and is overly broad and impermissibly vague. The complaint also alleged that the FAR Memorandum violates the Administrative Procedure Act because it was implemented without following the required rulemaking procedures. The group sought preliminary relief, asking the Court to enjoin enforcement of the E.O. while the case proceeded through litigation.7
On October 14, 2026, the court denied the plaintiffs’ motion for a preliminary injunction. National Association of Diversity Officers in Higher Education v. Trump, No. 8:26-cv-01532 (D. Md. Oct. 14, 2026). The court found that the EO was sufficiently clear as to what conduct it prohibits and therefore concluded that plaintiffs were unlikely to succeed on the merits of their challenge. In its order, the court emphasized that EO 14398 “only prohibits contractors from engaging in conduct that is already prohibited by federal law: intentional discrimination based on race or ethnicity.” The court based its analysis on the Executive Order’s definition of “racially discriminatory DEI activities” as “disparate treatment based on race or ethnicity.” The court further reasoned that “disparate treatment” is a well-established legal term of art and therefore should be interpreted according to its settled legal meaning, finding no record evidence that the Executive Order intended otherwise. Accordingly, the court rejected plaintiffs’ argument that the phrase was impermissibly broad or that it reached virtually all race-related contractor speech.
Contractor Takeaways
The court's refusal to grant a preliminary injunction is notable given prior decisions to enjoin earlier, and arguably broader, DEI-related executive orders. Unlike Executive Orders 14151 and 14173, portions of which were initially enjoined at the district-court level for vagueness and undefined terms, EO 14398 survived similar scrutiny. Although not a final ruling on the merits, the decision suggests that the court viewed EO 14398 as more narrowly tailored and less ambiguous than earlier orders. As a result, contractors should expect the government to continue enforcing the order and its associated contract requirements.
The decision also has direct FCA implications. Because the implementing clause is being incorporated into new and existing contracts, each payment request under a covered contract may carry an implied certification of compliance with the E.O.’s directives. Multiple FCA settlements to date suggest that further investigations, including whistleblower-initiated qui tam suits, will follow. At the same time, contractors retain meaningful defenses. The EO’s declaration that compliance is material is not dispositive—the Supreme Court has held that a requirement is not material “merely because the Government designates compliance . . . as a condition of payment.”8 And by confining the EO to intentional “disparate treatment,” the court’s reading narrows the conduct that could support liability, while making contemporaneous documentation of a contractor’s good-faith compliance analysis central to any scienter defense.9
As has been the case since early 2025, contractors should continue to carefully evaluate their DEI programs (particularly as related to the limitations and restrictions imposed by EO 14398). In practical terms, that means identifying contracts that incorporate FAR 52.222-90, reviewing recruitment, promotion, supplier, and resource-allocation programs for race- or ethnicity-based disparate treatment, documenting the legal basis for compliance certifications, confirming subcontractor flow-down, and ensuring internal reporting channels can promptly escalate DEI-related complaints. Contractors should also continue to monitor the pending litigation, as the decision clarifies the prohibited conduct but is not a final ruling on the merits.
Cozen O’Connor’s Government Contracts and False Claims Act teams are here to assist with compliance matters related to DEI enforcement, including contract certifications, internal reviews, and responses to government inquiries and qui tam actions.
1 Memorandum on Agency Implementation of Executive Order 14398, Addressing DEI Discrimination by Federal Contractors, Federal Acquisition Regulation Council (Apr. 17, 2026). Other requirements include: (1) prohibiting contractors from engaging in “racially discriminatory DEI activities;” (2) requiring contractors to provide information, records, and access to books and accounts to demonstrate compliance; (3) permitting contract cancellation, termination, or restrictions on future contracting for noncompliance; (4) requiring contractors to report known or reasonably knowable subcontractor violations and take any remedial actions directed by the government; and (5) requiring contractors to notify the government if a subcontractor challenges the validity of the clause in court.
2 Memorandum on Agency Implementation of Executive Order 14398 at 2 (“In accordance with FAR 1.107(d) (May 2, 2025 deviation), contracting officers must make every effort to bilaterally modify existing contracts by July 24, 2026. If a contractor refuses to agree to a bilateral modification, the contracting officer should consider whether, absent the modification, the contract no longer meets the agency’s needs and should therefore be terminated for convenience.”) (emphasis added).
3 Id. at 9; FAR 52.222-90(c) (“The Contractor must include the substance of this clause, including this paragraph (c), in subcontracts at any tier, including those for commercial products and commercial services, for which the place of delivery or performance is in the United States.”).
4 In some cases, district courts have granted preliminary injunctive relief and expressed concern that the lack of clear definitions left federal contractors and grant recipients unable to determine what conduct was prohibited, creating uncertainty regarding compliance obligations and raising constitutional concerns regarding vagueness and protected speech. See, e.g., National Association of Diversity Officers in Higher Education et al. v. Trump, Case No. 1:25-cv-00333 (D. Md. Feb. 21, 2025); Chicago Women in Trades v. Trump, 778 F. Supp. 3d 959 (N.D. Ill. 2025). Notably, the district court injunction in Chicago Women in Trades was narrower than the Maryland injunction, applying only to enforcement of the Certification Provision of EO 14173, whereas the Maryland court enjoined several challenged provisions of EO 14151 and EO 14173.
5 See, e.g., National Association of Diversity Officers in Higher Education et al. v. Trump, Case No. 1:25-cv-00333 (D. Md. Feb. 21, 2025), preliminary injunction vacated by National Association of Diversity Officers in Higher Education v. Trump, 167 F.4th 86 (4th Cir. 2026); Chicago Women in Trades v. Trump, 778 F. Supp. 3d 959 (N.D. Ill. 2025), appeal pending, No. 25-2144 (7th Cir.).
6 National Association of Diversity Officers in Higher Education v. Trump,167 F.4th 86 (4th Cir. 2026). On February 6, 2026, the Fourth Circuit vacated the Maryland preliminary injunction, concluding that the plaintiffs were unlikely to succeed on their facial constitutional challenges, while leaving open the possibility of challenges to particular applications of the orders.
7 EO 14398 is also being challenged by nineteen (19) states and the District of Columbia in a lawsuit in the same court. In State of Maryland v. Hegseth, the plaintiffs challenge the federal government’s implementation of EO 14398 under the Administrative Procedure Act and seek to prevent federal agencies from incorporating the order's requirements into new and existing federal contracts. State of Maryland v. Hegseth, No. 1:26-cv-02322 (D. Md. June 10, 2026).
8 Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 194 (2016).
9 See United States ex rel. Schutte v. SuperValu Inc., 598 U.S. 739 (2023).