As discussed in a recent Cozen O’Connor Alert, Diversity, Equity and Inclusion (DEI) has been at the top of President Trump’s mind, so much so that he recently issued an executive order effectively ending the use of DEI in government contracting. On February 5, 2025, U.S. Attorney General Pam Bondi issued a memorandum announcing a plan for the U.S. Department of Justice (DOJ) to investigate, eliminate, and penalize illegal DEI and DEIA initiatives held by contractors. The memorandum is in response to President Trump’s January 21, 2025 Executive Order (EO) 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity. EO 14173 revoked EO 11246, which required federal contractors and private contractors that received federal financial assistance to take actions to promote diversity, equity, and inclusion.

In an effort to align the executive departments with President Trump’s anti-DEI policies, the AG’s memorandum contains a specific directive to the DOJ for enforcing EO 14173. It instructs DOJ’s Civil Rights Division and Office of Legal Policy to submit a report to the associate attorney general “containing recommendations for enforcing federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including policies relating to DEI and DEIA.” The DOJ’s report must contain a plan with specific measures to deter the use of DEI initiatives, including “proposals for criminal investigations and for up to nine potential civil compliance investigations,” of certain entities and “[a]dditional potential litigation activities.” The memorandum creates uncertainty as to what types of DEI policies will be targeted because it does not define — and thus leaves to DOJ’s discretion and interpretation — the determination of what constitutes “illegal discrimination and preferences” and “egregious and discriminatory DEI and DEIA practitioners.”

In light of the memorandum’s aggressive but discretionary enforcement mechanism seeking to end “illegal” DEI initiatives in the private sector, it is imperative that federal contractors and private contractors receiving federal funding understand the potential legal implications of implementing DEI initiatives and evaluate the compliance of their DEI initiatives with rapidly evolving state and federal laws, regulations, and policies. Cozen O’Connor recently issued two Alerts that further discuss the DEI policies of the Trump administration and provide specific guidance on how to avoid legal scrutiny of DEI initiatives. In light of the attorney general’s memorandum, we strongly encourage you to review The Revocation of Executive Order 11246 and Critical DEI Considerations for Private-Sector Employers Under Trump Administration 2.0.

This area of law is in a state of flux and will undoubtedly result in further enforcement efforts by DOJ and lawsuits seeking to limit and/or bar enforcement of these and similar efforts to reduce DEI. The future of DEI remains uncertain, but we will continue to report on developments as they occur.

EO 14173 also requires that each federal agency include in every contract or grant award terms that will facilitate further enforcement efforts by DOJ and private whistleblower lawsuits seeking to stop DEI policies and programs operated by government contractors. The executive order requires that, going forward, each agency include in contract and awards a representation that the contract counterparty or grantee (1) “agree[s] that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” for purposes of the federal False Claims Act, 31 U.S.C. 3729(b)(4) (FCA), and (2) “certif[ies] that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” EO 14173(b)(iv). The implementation of those requirements has not been limited to new contract or grant issuances. In the last two weeks, government contract counterparties and grant recipients have found themselves subject to either the general or program-specific stop work orders issued by contracting agencies, with mandates to certify their compliance with the above two requirements in order to resume funding and performance under the appliable contract or grant.

The effect of the certifications is to induce immediate compliance with the anti-DEI restrictions of the executive order on government contractors, and to ease the path for government enforcement for non-compliance. The explicit agreement by a contractor that compliance with “Federal anti-discrimination laws is material to the government’s payment decisions” is intended to legally establish one element of a violation of the FCA. The certification is aimed at easing the burden of DOJ or a private whistleblower to show that a payment to or claim for payment by a government contractor that, for example, maintains DEI policies in its own hiring programs or in its operation of government-funded programs is an FCA violation, potentially subjecting the recipient to statutory fines and treble damages. Similarly, a government contractor’s certification that it does not operate any programs promoting DEI goes to the element of an FCA claim that a violation involve a false statement by creating a representation that would be false if the contractor maintained a DEI program in spite of its representation to the contrary.

These elements have similar effect for criminal prosecutions for violations of the order, which the memorandum signals are contemplated as well. The key distinction between civil and criminal enforcement, typically, is a matter of degree. In light of these developments, government contractors are advised to review the government-funded programs they administer, consider flowing down requirements to which they are subject to subcontractors and sub-awardees and evaluate their function of their own internal operations.