Court Enjoins Portions of Trump Administration’s DEI Executive Orders
In another regulatory turn for federal contractors and private employers, a federal judge partially enjoined enforcement of provisions of the Trump Administration’s executive orders[1] regarding diversity, equity, inclusion and accessibility (DEI or DEIA) programs on Friday, February 21, 2025.[2] The preliminary injunction applies nationwide, covering both plaintiffs and nonparties.
The Provisions Enjoined
The court’s order restricts enforcement of three provisions across two executive orders:
The Termination Provision (§ 2(a)) of Exec. Order No. 14151 is enjoined. This provision requires each agency, department, or commission head to terminate all “equity-related grants or contracts” within 60 days of the order. This is a subsection of the order’s larger provision directing the Office of Management and Budget director to “coordinate the termination of all discriminatory programs, including illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities in the Federal Government[.]”
The Certification Provision (§3(b)) of Exec. Order No. 14173 is enjoined. This provision requires the head of each agency to include a requirement in each contract or grant award for the counterparty/recipient to agree that its compliance with federal anti-discrimination laws is material to payment decisions under the False Claims Act. It further requires the counterparty to certify that it does not operate programs promoting DEI that violate federal anti-discrimination laws.
The Enforcement Threat Provision (§ 4) of Exec. Order No. 14173 is enjoined. This provision directs each federal agency to identify up to nine potential civil compliance investigations of publicly traded corporations, nonprofits, foundations, bar or medical associations, or higher education institutions, with the goal of encouraging the private sector to end illegal discrimination and preferences.
The Provisions Are Unconstitutionally Vague
The Termination and Enforcement Threat Provisions are enjoined because they are “unconstitutionally vague as to all contractors and grantees who are subject to them.”
The orders are unconstitutionally vague because they do not define key terms such as “DEI,” “equity-related,” or “illegal DEI.” This leaves federal contractors and their employees with “no idea whether the administration will deem their contracts or grants, or work they are doing, or speech they are engaged in, to be ‘equity-related,’” and the private sector unaware of whether a particular program, discussion, or policy is deemed “illegal.”
The Provisions Violate Free Speech Rights
The Certification and Enforcement Threat Provisions were also enjoined because they are “content- and viewpoint-based restrictions that chill speech as to anyone the government might conceivably choose to accuse of engaging in speech about ‘equity’ or ‘diversity’ or ‘DEI,’ or the other topics the [Executive] Orders cite.”
Reports and Investigations May Continue
Citing prudential and separation-of-powers reasons, the court did not restrict the attorney general’s ability under the orders to prepare reports and pursue investigations. Pursuant to the Administration’s direction to the attorney general’s office and based on press releases from the attorney general’s office, the attorney general has been developing an “enforcement plan” for the provisions of the executive orders as well as a plan for conducting criminal investigations.
What’s Next?
This case is in early stages and is one of numerous challenges proceeding in the courts. We will continue to monitor this case as well as any related decisions impacting DEI policies of both federal contractors and private employers. We recommend employers consult DEI experts and labor and employment counsel to assess their DEI policies and determine if changes are necessary to mitigate risk.
[1] This case involves challenges to Exec. Order No. 14151, Ending Radical and Wasteful Government DEI Programs and Preferencing (Executive Order of January 20, 2025); Exec. Order No. 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, (Executive Order of January 21, 2025).
[2] The case is National Association of Diversity Officers in Higher Education et al v. Trump et al, No. 1:25-cv-00333 (D. Md.).
Potential Impact of the Executive Orders on EB-5 Investors
The Trump administration issued several executive orders (EOs) in the first week following the inauguration. Many of the EOs for immigration focus on enhancing security measures relating to foreign nationals, including scrutiny of nonimmigrant and immigrant visa applications and enhanced background checks for foreign nationals. At present, no EOs specifically relate to the EB-5 Immigrant Investor Program, but the enhanced scrutiny the newly issued EOs require may impact EB-5 investors.
EB-5 investors may experience increased scrutiny during Form I-526 or Form I-526E petition adjudication. A critical part of the EB-5 petition process is documenting the lawful funding source the investor used to make the qualifying EB-5 investment. The USCIS Immigrant Investor Program Office may conduct additional background checks on all individuals involved in the funding source, including the investor, his or her spouse, any gift or, and/or any individual or non-bank organization that provides a loan to the investor.
Moreover, EB-5 investors may experience enhanced background checks for EB-5 immigrant visas at U.S. embassies and consulates worldwide. The EO “Protecting the United States from Foreign Terrorists and Other National Security and Public Safety Threats,” tasks government agencies with reviewing all visa programs to prevent hostile state and nonstate actors from entering the United States. This EO likely will result in enhanced background checks of EB-5 investors applying for immigrant visas abroad or for adjustment of status in the United States. Investors born in or who are citizens of countries with a totalitarian or Communist Party-controlled government likely will receive increased scrutiny to determine if they have meaningful membership in the Communist Party. Both USCIS and foreign consular officers likely will also closely examine investors’ memberships in associations or other organizations.
An additional EO, “Guaranteeing the States Protection Against Invasion,” imposes vetting requirements on immigrants to the United States. This EO might result in enhanced medical and security requirements. The EO “Protecting the American People Against Invasion” may also result in a more stringent application of the “public charge” ground of inadmissibility. EB-5 investors are subject to the “public charge” ground of inadmissibility, and they must prove to the USCIS or the consular officer’s satisfaction that they are able to support themselves in the United States and are not likely to take public benefits after being granted permanent residence. USCIS or the State Department may require applicants to submit evidence to prove they would not be a public charge. The administration may expand the list of federal public benefits that can be considered in making a public charge determination. In the I-829 petition adjudication process, USCIS may request evidence on federal public benefits applicants receive.
The administration’s EOs do not change the EB-5 Program, which Congress extended through Sept. 30, 2027. The EOs generally do not change the EB-5 Program’s rules or eligibility requirements, and applicants from all nations can apply. USCIS and the State Department may implement additional background checks on EB-5 investors at the I-526 or I-526E petition stage, the immigrant visa stage, the adjustment of status stage, and the I-829 petition stage.
One Month into the New Administration, Employers Have a Lot to Think About
This past week marked the one-month anniversary of the new Trump Administration, and there have been many developments — including in just the past week — to which employers need to pay attention.
Secretary of Homeland Security revokes Temporary Protective Status (TPS) for Haitians and certain Venezuelans. The Secretary of Homeland Security may designate a foreign country for TPS due to conditions in the country’s that temporarily prevent the country’s nationals from returning safely. Currently, 17 countries have been granted TPS. Those granted TPS are entitled to work authorization (“EAD”). On February 1, 2025, Secretary of Homeland Security Kristi Noem decided to terminate TPS under the 2023 designation for Venezuela. If the termination stands, on April 7, 2025, a certain category of Venezuelans (approximately 350,000 people) previously granted TPS will lose status to remain in the U.S. And, on February 20, 2025, Secretary Noem revoked TPS for Haitian nationals (approximately 500,000 people) effective August 3, 2025. Unless revoked or blocked through court litigation, on the above dates, Venezuelans and Haitians here on TPS will lose their work authorization. Any employer who continues to employ a worker without valid work authorization can be subject to civil and criminal prosecution. It is possible workers from these two countries may have other legitimate bases, such a pending asylum petition, to remain in the country and remain employed. Employers who employ foreign nationals from these two countries should review each employee’s situation and determine strategies and/or options to keep them lawfully employed. In addition, employers should review their employees on TPS designation and stay vigilant other revocations in the weeks and months to come.
NLRB’s Acting General Counsel Revokes Certain Memos Issued by his Predecessor. On February 14, 2025, National Labor Relation Board (NLRB or “Board”) Acting General Counsel William B. Cowen issued a memo revoking various memos issued over the past three years by then NLRB General Counsel Jennifer Abruzzo, whom President Trump fired shortly after taking office. The general counsel (GC) of the NLRB supervises the regional offices and plays a key role in directing enforcement and persuading the NLRB members on policy issues. Of the many memos rescinded were the prior memos calling for “full relief” (including various types of compensatory damages and not just back pay when violations were found) as well as a memo suggesting noncompetes violate workers’ rights and guidance about the NLRB’s decision Cemex Construction Materials Pacific, LLC, which made it more difficult for employers to avoid representation elections. The revocation of the prior memos indicates an immediate and dramatic shift away from the pro-employee and union positions of the prior GC and Board under the Biden Administration.
President Trump Issues Executive Order requiring Independent Regulatory Agencies to Submit to Presidential Oversight. On February 18, 2025, President Trump issued an executive order entitled “Ensuring Accountability for All Agencies.” This order requires so-called independent agencies, such as the NLRB and perhaps the EEOC as well, to submit to more oversight from the White House on budgetary and regulatory matters and limits the legal positions they can take. Should this executive order stand the legal challenges that are likely to come, the president will be able to directly influence policy and enforcement activities more directly at these employment enforcement agencies.
Acting EEOC Chair Seeks to Protect Anti-American Bias. Signaling another dramatic shift in enforcement priorities at an employment related government agency, on February 19, 2025, U.S. Equal Employment Opportunity Commission (EEOC) Acting Chair Andrea Lucas announced “The EEOC is putting employers and other covered entities on notice: if you are part of the pipeline contributing to our immigration crisis or abusing our legal immigration system via illegal preferences against American workers, you must stop. The law applies to you, and you are not above the law. The EEOC is here to protect all workers from unlawful national origin discrimination, including American workers.”
EEOC’s Final Rule Under the Pregnant Workers Fairness Act Under Attack. Acting Chair Lucas also issued a statement describing her opposition to certain parts of the Commission’s Final Rule implementing the Pregnant Workers Fairness Act (PWFA). The acting chair does not agree with the Commission’s interpretation of the phrase “pregnancy, childbirth, or related medical conditions” and the contrivances the Commission used to arrive at its construction of the statute. Related to this, on Thursday February 20, 2025, the Eighth Circuit Court of Appeals issued a decision holding that attorneys general from 17 Republican-majority states have the right to sue the EEOC over the same PWFA rule, reviving their challenge to abortion-related components of the regulations.
Currently, both the NLRB and EEOC lack a sufficient quorum to enact any changes since President Trump fired members from both those agencies. It is clear that the Trump Administration will be issuing many more changes in enforcement strategy and implementing policies that will be directly affecting employers. Stay tuned!
Michigan Makes Significant Revisions to Earned Sick Time Act
Late on Thursday, February 20, 2025, the Michigan legislature passed amendments to the Earned Sick Time Act (ESTA) that was otherwise set to take effect by court order the next day. The amendments were signed into law by Governor Gretchen Whitmer on Friday, February 21, 2025. Had the legislature and governor not acted, some very onerous provisions of the law would have gone into effect. The amendments which are effective immediately update the Michigan sick leave law as follows:
Accrual basis. The accrual rate under the amended ESTA remains one (1) hour of sick leave for every 30 hours worked. There is no cap on accrual, but employers may cap usage at 72 hours per year. The amendments changed the law’s carryover provisions to allow employers to limit the amount of carryover to 72 hours for large employers (with over ten employees). For small employers, the accrual basis has also changed. Under the prior version of the law, small employers would have been required to provide up to 40 hours of paid leave and 32 hours of unpaid leave. The amendments no longer require 32 hours of unpaid leave. Small employers still must provide accrual of sick leave at the same rate (one (1) hour for every 30 hours worked) but may cap accrual of sick leave at 40 hours of paid leave.
Front loading. Under the prior version of the law, frontloading was not contemplated, and the state’s guidance advised that, even if employer’s frontloaded paid sick leave, it must still reconcile with the amount the employee would have accrued and must carry over any unused sick leave year to year. Under the amended version now in effect, an employer may choose to frontload 72 hours of sick leave at the start of the benefit year. If frontloading, the employer is not required to carryover, track accrual, or pay out sick leave at the end of the year. Small businesses may front load 40 hours of sick leave.
For part-time employees, employers may frontload the amount of sick leave the employees would be expected to accrue under the one (1) hour of sick leave for every 30 hours worked method. In order to take advantage of this, the employer must provide notice to the employee of the expected number of hours, and the employer must provide extra time if the actual time worked is higher than predicted.
Waiting period. Employers can now require new employees to wait 120 days before they are permitted to use sick leave (rather than 90); accrual or front loading is still required at the start of employment.
Combining sick leave with a PTO policy. The amendments make clear that sick leave can be added to a PTO policy so long as the PTO policy provides at least the same amount of leave as the ESTA. The amendments clarify that PTO time can be used for sick leave purposes or any purpose and that employers are not required to provide additional sick leave if an employee uses PTO for another purpose.
Rate of pay. The amended ESTA states that sick leave should be paid at the “normal hourly wage or base rate” but not less than minimum wage. Overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, and gratuities do not need to be included in the normal hourly wage/base rate.
Notice requirements. If the need to use sick leave is foreseeable, the employer may require seven days’ notice. If the need for leave is not foreseeable, the employer may require the employee to give notice in either of the following ways: (1) as soon as practicable; or (2) in accordance with the company’s policy regarding use of sick leave as long as (i) on the date of hire, or effective date of the law or when the policy takes effect, the employer provides the written policy to employees; and (ii) the notice requirement allows the employee to provide notice after the employee is aware of the need for use of sick time.
An employer cannot deny the use of leave for not following the notice policy if the employer (1) did not provide a written policy; or (2) the employer made changes to the policy and did not provide notice of the policy change within five days of the change.
Discipline. Employers can discipline employees for abuse of the sick leave policy or failure to follow the notice provisions.
There is no private right of action for employees. Like Michigan’s prior sick leave statute, in effect since 2018, all complaints must go through the Michigan Department of Labor and Economic Opportunity. In addition, the rebuttable presumption of violation of the law, which would have otherwise come into effect on February 21, 2025, was also removed by these amendments.
Collective Bargaining Agreements. If a collective bargaining agreement is in effect and conflicts with the ESTA, the amended act applies beginning on the stated expiration date in the collective bargaining agreement (notwithstanding any statement in the agreement that it continues in force until a future date or event or the execution of a new collective bargaining agreement). In other words, in the event of a conflict, any collective bargaining agreement that is in effect controls — until the expiration of the contract, at which time the provisions of the amended sick leave law will take effect.
Increments of usage. The amendments permit the employer to choose either (1) one-hour increments or (2) the smallest increment the employer uses to account for absences of uses of other time. The key difference here from the prior version of the ESTA is the employer choice for increment and that it is what the “employer” uses for absences, whereas the original ESTA mandated that the smaller of one hour or the smallest increment the employer’s payroll system should be used to account for absences.
Doctor’s notes. Like the original ESTA, documentation may still only be requested of any employee after more than three consecutive sick days are used. However, the amendments added the requirement that requested documentation must be supplied by the employee within 15 days. The requirement to pay the out-of-pocket costs for obtaining a doctor’s note remains.
Notice to employees. Employers have 30 days to provide employees with written notice to each employee of the sick leave policy and this new law. Small employers have until October 1, 2025, to implement the changes.
Exemptions.
Nonprofit agencies are exempt from the ESTA.
The following types of employees are not entitled to sick leave: employees of the U.S. government; any employee who (1) sets his or her own schedule and (2) faces no punishment for not meeting a minimum amount of hours; unpaid trainees/interns; and minors.
The changes mark a significant departure from the Michigan sick leave requirements that have been in place since 2018 and the Earned Sick Time Act that would have otherwise taken effect on Friday, February 21, 2025. It is likely that employees are also tracking these changes and will ask questions regarding how policy change affect their ability to take sick leave and PTO generally. Employers should review their policies and ensure compliance with the provisions of the new law.
Preliminary Injunction Granted Related to DEI-Related Executive Orders—Takeaways for Government Contractors
In the four weeks since President Trump issued Executive Order (“EO”) 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing”) and EO 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”), virtually all sectors of American society have been scrambling to understand their compliance obligations and seeking to reduce legal risk. Businesses have taken a range of approaches, from preparing to defend their diversity, equity, and inclusion (“DEI”) commitments to removing public-facing references to DEI. Some government contractors have received DEI-related certifications required by EO 14173, which implicate enforcement under the False Claims Act (“FCA”).
In a significant new development, on February 21, 2025, the United States District Court for the District of Maryland issued a nationwide preliminary injunction against both EO 14151 and EO 14173. Here’s what federal contractors need to know.
Case Background
The plaintiffs allege that EO 14151 violates the Constitution’s spending clause by directing the termination of “equity-related” contracts (Count I); that Sec. 2 of EO 14151 and Sec. 4 of EO 14173 are unconstitutionally vague (Counts II and III); that Sections 3 and 4 of EO 14173 violate the First Amendment’s Free Speech Clause (Counts IV and V, ); and that EO 14173 violates the constitutional separation of powers principle (Count VI).
The Challenged Provisions
The Court generally describes the EOs’ “Challenged Provisions” as follows:
The “Termination Provision” of EO 14151 directs executive agencies to terminate “equity-related” grants and contracts;
The “Certification Provision” of EO 14173 directs executive agencies to require a new contract certification, enforceable through the FCA, stating that the contractor does not promotea DEIprogram that violates applicable federal anti-discrimination laws; and
The “Enforcement Threat Provision” of EO 14173 directs the Attorney General (“AG”) to encourage the private sector to end illegal discrimination and preferences, including DEI, and to have agencies identify up to nine targets for potential civil compliance investigations.
The following analysis focuses on the Certification and the Enforcement Threat challenges, which are the most salient for government contractors.
1. Likelihood of Success on the Merits
The Court found that Plaintiffs showed injury from the Certification and Enforcement Threat Provisions because Plaintiffs “reasonably expect that they will be forced to either restrict their legal activities and expression that are arguably related to DEI, or forgo federal funding altogether.” (Memorandum of Opinion (“Mem. of Op.”) at 25.)
(a) First Amendment Rights of Contractors
The Court specifically addressed the First Amendment rights of federal contractors, reiterating that in Board of Cnty. Com’rs, Wabaunsee Cnty., Kan. v. Umbehr the Supreme Court held that the government does not have “carte blanche to terminate independent contractors for exercising First Amendment rights.” 518 U.S. 668, 679 (1996). Although the government has some ability to restrict a government contractor’s free speech rights, Fulton v. City of Philadelphia, Pennsylvania, 593 U.S. 522, 535 (2021), the First Amendment prohibits the government from “seek[ing] to leverage funding to regulate speech outside the contours of the program itself.” Agency for Int’l Dev. v. All. for Open Soc’y Int’l, Inc., 570 U.S. 205, 214-15 (2013) (“AID”). Additionally, the government may not terminate government contracts “because of the[] [contractors’ or grantees’] speech on matters of public concern.” Wabaunsee County, 518 U.S. at 675.
The Court also found Plaintiffs are likely to succeed because the Certification “constitutes a content-based restriction on the speech rights of federal contractors…” and applies to all of a contractor’s work, whether or not funded by the government. (Mem. of Op. at 25.)
The Court noted that during the hearing, the government failed to satisfactorily address hypotheticals about DEI implementation by federal contractors and thus, “[b]ecause even the government does not know what constitutes DEI-related speech that violates federal anti-discrimination laws, Plaintiffs have easily shown a likelihood that they will prevail in proving that the Certification Provision operates as a content-based prior restraint on their speech, and likely will also prevail in showing that the Certification operates as a facially viewpoint-discriminatory order as well. The speech-chilling effect of the Certification Provision is particularly obvious given the vagueness of the [EOs]…”, and that “federal contractors… have shown they are unable to know which of their DEI programs (if any) violate federal anti-discrimination laws, and are highly likely to chill their own speech—to self-censor, and reasonably so—because of the Certification Provision. Indeed, the Certification Provision was likely designed to induce, and certainly has been shown to have the effect of inducing, federal contractors… to apply an overinclusive definition of illegal DEI to avoid risking liability. This is exactly what AID prohibits…” (Mem. of Op. at 47.)
(b) The FCA
The Court also addressed the precarious situation of contractors facing the Certification Requirement, noting that the vagueness of EO 14173 puts them “in a position to have to guess whether they are in compliance” and that they are “threatened with False Claims Act liability if they miss the mark. Such escalation of consequences dramatically raises the stakes, and by extension dramatically expands the degree of injury to interests protected by the Fifth Amendment.” (Mem. of Op. at 54-55.)
2. Irreparable Harm
The Court found that Plaintiffs are suffering irreparable harm due to a chilling effect on their speech and a potential loss of federal funding. The Court noted: “…the Challenged Provisions strip Plaintiffs of the ability to know what the government might now consider lawful or unlawful. There have been 60 years of statutes, regulations, and case law developed since the Civil Rights Act of 1964. The Challenged Provisions strip away much of the prior executive branch guidance, and then threaten the loss or condition the receipt of federal funds, and also threaten civil enforcement actions—some backed by the possibility of treble damages—for violations. And in so doing, they threaten to punish prior expressions of protected speech, and chill future expressions of protected speech.” (Mem. of Op. at 56-57.)
3. Balance of the Equities
Here, the Court approvingly cited the Plaintiffs’ statement that “[e]fforts to foster inclusion have been widespread and uncontroversially legal for decades” (Mem. of Op. at 59), and stated that the “the status quo must be maintained while Plaintiffs and the government litigate the claims asserted in this case. The balance of equities tips strongly in Plaintiffs’ favor.” (Mem. of Op. at 60.)
Implications for Federal Government Contractors
The injunction has several immediate implications for federal government contractors:
1. Contractors no longer face the immediate threat of termination due to undefined “equity-related” activities.
2. Agencies cannot require contractors to make certifications pursuant to the Certification Provision.
3. The government may not bring an FCA suit or other enforcement action based on the Enforcement Threat Provision, temporarily reducing the risk of government-initiated FCA action.
4. The injunction does not apply to the requirement under EO 14173 that the AG submit a report in coordination with the heads of relevant agencies that identifies key sectors of concern within each agency’s jurisdiction, and each sector’s “most egregious DEI practitioners,” as well as up to nine targets for potential civil compliance investigations. We therefore expect the AG to continue preparing this report—which is what was prompting some contractors to reconsider the extent of their public commitments to DEI in the first place. The AG’s report is due May 21, 2025.
Moving Forward
Contractors should consider the following steps in light of the injunction:
Document DEI-Related Interactions with the Government: Contractors should document any communications or actions taken by federal agencies that might contravene the injunction.
Stay Informed: Monitor further legal developments, both in this case and in a similar one filed February 19, 2025, in the United States District Court for the District of Columbia.
Consult Legal Counsel: Contractors should consult counsel regarding existing DEI programs, including whether and how to amend such programs given the changing legal landscape.
Conclusion
The preliminary injunction is an initial victory for federal contractors that provides immediate relief from the threat of losing federal funding for not signing a DEI certification, the threat of government-initiated FCA enforcement, and the infringement on DEI-related speech.
President Trump Signals Friendly Perspective on Non-Compete Agreements and Begins Revamp of National Labor Relations Board Policy
On February 14, 2025, the Trump Administration started its makeover of existing National Labor Relations Board (“NLRB”) policies by rescinding several Biden-era General Counsel Memoranda. These rescissions are a clear next step in revamping the NLRB, coming on the heels of the NLRB General Counsel’s, Jennifer Abruzzo, termination on January 27, 2025. Although not unexpected, the rescissions are an important development for all employers that use restrictive covenants and severance agreements. Among the rescinded Memoranda are:
GC 23-05: SEVERANCE AGREEMENTS
This Memorandum sought to expand the Board’s McLaren Macomb decision that ruled that most standard confidentiality and non-disparagement clauses in severance agreements are unlawful under the NLRA. Under this Memorandum, the NLRB “clarified” that: (a) confidentiality provisions are unlawful unless they were “narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications [that] may be considered lawful”; (b) non-disparagement provisions have to be “limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity”; (c) “duty to cooperate” provisions that require an employee to cooperate with company investigations must be closely scrutinized and are generally unlawful; and (d) savings clauses typically do not cure what the NLRB considers to be an unlawfully overbroad restriction.
GC 23-08 (NON-COMPETE AGREEMENTS) AND GC 25-01 (REMEDIES FOR NON-COMPETE “STAY OR PAY” CLAUSES)
Through GC 23-08, the NLRB took the position that non-compete agreements given to non-managerial employees generally violate the NLRA. GC 25-01 sought to expand financial remedies for employees who were subject to non-compete and “stay or pay” agreements, not only nullifying them, but providing a means of seeking potentially significant damages against employers that improperly used non-compete and “stay or pay” agreements.
KEY TAKEAWAYS
There are two basic takeaways from this recent action. First, the Trump Administration’s rescinding the two Memoranda covering non-compete agreements signals that it will abandon the Biden Administration’s attempts to invalidate non-compete agreements. Recall that a more comprehensive Federal Trade Commission Rule that generally banned all non-compete agreements was struck down by a federal court in August, 2024. That decision will almost definitely stand, and non-competes will be governed by state law.
Second, there remains some risk in using confidentiality and non-disparagement provisions in severance agreements, particularly for non-managerial employees. The McLaren Macomb ruling that most confidentiality and non-disparagement provisions are invalid is still the law until the NLRB itself (not just its General Counsel) changes the rule. The NLRB currently only has two members (out of five) so the Trump Administration cannot change the law or fully implement its labor agenda until the Board positions are filled.
Healthcare Preview for the Week of: February 24, 2025 [Podcast]
Can the House Pass a Budget Resolution This Week?
The House is back from recess, so both chambers of Congress are in session this week (although the House is out again on Friday).
With 18 days left to pass a budget before the March 14, 2025, deadline, the focus this week is on whether the House can pass a budget resolution. There may be a budget resolution vote on Tuesday evening, but this timing could shift if Republicans are not able to get enough support. House Republicans have a 218 – 215 majority, meaning they can only afford to lose one vote.
President Trump has endorsed having “one big, beautiful bill” that includes a permanent extension of the 2017 tax cuts, as opposed to the Senate’s approach of two separate reconciliation bills.
On February 13, 2025, the House Budget Committee approved a budget seeking at least $880 billion in mandatory spending cuts to programs overseen by the House Energy and Commerce Committee. The Medicaid program is a likely target to provide a significant portion of those savings. Some Republicans have started to raise concerns about the level of potential funding cuts to Medicaid because of the impact such cuts would have on constituents and providers in their districts and across their states.
Outside of budget discussions, the House Energy and Commerce Health Subcommittee will hold a hearing on pharmacy benefit managers. The Senate will hold hearings for several of President Trump’s cabinet nominees, including nominees for deputy secretary of the US Department of Homeland Security, deputy director of the Office of Management and Budget, director of the Office of Science and Technology Policy, and federal trade commissioner. Senate committees will also hold hearings on combatting the opioid epidemic and the HALT Fentanyl Act.
The Medicaid and CHIP Payment and Access Committee also meets this week and will cover topics such as state supplemental and directed payments, substance use disorder, and the prior authorization process.
Today’s Podcast
In this week’s Healthcare Preview podcast, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the status of the reconciliation process in the House, including the debate on Medicaid, and the looming March 14 government funding deadline.
Medicaid in the Crosshairs What Restructuring Could Mean for States, Providers, and Beneficiaries
As budget negotiations heat up in Washington, Medicaid has emerged as a key target for cost-cutting measures. With policymakers looking to trim federal spending while maintaining commitments to Social Security and Medicare, Medicaid is one of the few major programs left on the table. Proposals floating around Capitol Hill include everything from block grants and per capita caps to stricter eligibility requirements and reductions in federal matching rates. These potential changes could fundamentally alter the structure of Medicaid, shifting more financial responsibility to states and reshaping access to care for millions of Americans.
Waivers: A Policy Battleground
One of the most immediate levers for Medicaid reform lies in the use of Section 1115 waivers, which allow states to test innovative ways to deliver and finance care. Historically, waivers have been used to expand coverage, integrate social determinants of health into Medicaid, and experiment with new payment models. Under the Biden administration, states received waivers for initiatives like continuous eligibility for young children, health-related social needs interventions, and pre-release Medicaid coverage for individuals exiting incarceration. Many of these waivers are now under review, and the current administration may opt to roll them back, cutting off funding for programs designed to improve access and reduce health disparities.
At the same time, some states are eyeing waivers as a vehicle for more restrictive Medicaid policies, including work requirements and premium obligations for low-income enrollees. These policies, which were a hallmark of the first Trump administration, could return in full force, despite previous legal challenges. While work requirements are often framed as a way to encourage self-sufficiency, past attempts have led to significant coverage losses due to administrative complexity and reporting barriers. Georgia remains the only state actively implementing work requirements today, but other states could quickly follow suit if federal leadership signals support for these policies.
Federal Financing: More State Burden, Fewer Federal Dollars
The core structure of Medicaid financing—a federal-state matching system—has long provided states with a reliable source of funding for healthcare. However, a range of proposals could shift more of the financial burden to states.
One option is reducing the enhanced federal match for the Affordable Care Act expansion population, which currently stands at 90%. Rolling it back to standard Medicaid match rates would force expansion states to pick up a larger share of the tab, potentially leading some to scale back or even withdraw from expansion altogether.
Another major consideration is the reduction or elimination of provider taxes and intergovernmental transfers, which many states rely on to fund Medicaid. Provider taxes currently help states generate the non-federal share of Medicaid dollars, but restrictions on these financing tools could leave states scrambling to fill budget gaps. Without new revenue sources, states may have no choice but to cut provider rates, reduce optional benefits, or impose enrollment caps.
The Ripple Effect on Providers and Beneficiaries
The impact of Medicaid restructuring would extend beyond state governments. Providers—particularly safety-net hospitals, nursing homes, and home care agencies—could see sharp reductions in reimbursement, making it harder to sustain services for Medicaid populations. Proposals to limit state-directed payments and disproportionate share hospital funds could further destabilize facilities that serve a high percentage of low-income patients.
For Medicaid beneficiaries, the stakes are even higher. Changes in eligibility criteria, enrollment procedures, or benefit packages could leave millions without coverage. Older adults and individuals with disabilities who rely on Medicaid for long-term care may face significant barriers if states scale back HCBS funding, tighten income requirements, or impose cost-sharing mechanisms.
What Comes Next?
Medicaid is at a crossroads. As policymakers weigh different restructuring options, stakeholders across the healthcare landscape—including states, providers, and advocacy groups—must be prepared to engage. The decisions made in the coming months could redefine Medicaid’s role in the healthcare system, reshaping everything from eligibility and benefits to how care is financed and delivered.
For those invested in the future of Medicaid, now is the time to track policy developments, understand the implications of potential changes, and advocate for solutions that preserve access while ensuring financial sustainability. The outcome of this debate will determine whether Medicaid continues to serve as a safety net for millions—or whether its role is significantly diminished in the name of fiscal restraint.
Federal Court Concludes States Have Standing to Challenge EEOC’s Pregnant Workers Fairness Act Rule (US)
The U.S. Court of Appeals for the Eighth Circuit ruled on February 20, 2025, in Tennessee v. Equal Employment Opportunity Commission, that seventeen (17) State attorneys general have standing to challenge the EEOC’s Final Rule interpreting the Pregnant Workers Fairness Act (the “PWFA” or “the Act”). In the first federal appellate court decision to consider the issue, the Eighth Circuit panel held that the plaintiff-States have a sound jurisprudential basis to challenge the Final Rule because the States “are the object of the EEOC’s regulatory action.”
Congress enacted the PWFA in 2023. The Act requires covered employers to provide employees or applicants with reasonable accommodation to known limitations related to, affected by or arising out of “pregnancy, childbirth, or related medical conditions,” unless the accommodation will cause the employer undue hardship. 42 U.S.C. § 2000gg(4). Critical to understanding this employer obligation is the embedded term “related medical conditions,” which Congress left undefined, choosing instead to delegate to the Equal Employment Opportunity Commission (EEOC) the responsibility to “provide examples of reasonable accommodations addressing known limitations related to pregnancy, childbirth, or related medical conditions.” 42 U.S.C. § 2000gg-3(a).
In April 2024, after notice-and-comment rulemaking, the EEOC issued regulations broadly defining what constitutes “limitations related to, affected by, or arising out of pregnancy, childbirth or related medical conditions,” including within its examples, among others, lactation, miscarriage, stillbirth and “having or choosing not to have an abortion.” 29 C.F.R. Part 1636 & app. A. Numerous religious organizations voiced dissent to the EEOC’s broad definition of limitations related to pregnancy and childbirth. Even within the EEOC, there was vocal disagreement about the proposed regulations. Andrea Lucas—who at the time was an EEOC Commissioner but who, on January 20, 2025, was designated by President Trump as the Acting Chair of the EEOC shortly before he terminated two of the three Democratic Commissioners on the five-seat EEOC—vociferously objected to the agency’s broad interpretation of the phrase “pregnancy, childbirth, or related medical conditions,” claiming the phrase conflated accommodations to pregnancy and childbirth with accommodations to the female sex, including female biology and reproduction. Over Ms. Lucas’s objection, the EEOC’s Final Rule issued, with the broad definition of pregnancy-related limitations intact.
Less than one week after the Final Rule took effect, seventeen State Attorneys General, all hailing from Republican states, challenged the Final Rule on behalf of State employers, contending the EEOC exceeded its authority under the PWFA when it included abortions within the scope of pregnancy “related medical conditions.” At oral argument, the States conceded there may be some situations when a State employer should reasonably accommodate an employee obtaining an abortion, such as in the case of an incomplete miscarriage, ectopic pregnancy or when pregnancy-related medical conditions (such as diabetes) imminently threaten the health of the pregnant employee. However, the States objected, the Final Rule also purports to require accommodation for elective abortions “prompted exclusively by the woman’s choice, where no ‘physical or mental condition related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions…’ exists, but where getting the abortion creates some limitations on the employee’s ability to do her job.” The States argued that, in many jurisdictions they represented, elective abortions—indeed, almost all abortions—are illegal; therefore, a regulation requiring accommodation for an illegal medical procedure created a non-speculative injury to the State-employers. The EEOC retorted that the States’ request to enjoin the regulation was unwarranted and the States lacked standing to bring the case because the States’ asserted injuries were purely speculative, both with respect to any individual accommodation and the overall cost of compliance with the regulation.
The federal court for the Eastern District of Arkansas agreed with the EEOC and held, on June 14, 2024, that the States lacked standing to challenge the Final Rule. The district court held the Plaintiff-States had not asserted a redressable injury-in-fact, pointing specifically to the EEOC’s inability to bring enforcement actions against State employers and the vagary around the compliance costs the States argued they would bear implementing the regulation. On appeal, however, the Eighth Circuit Court of Appeals reversed, concluding that “[t]he imposition of a regulatory burden itself causes injury.” The appellate court reasoned:
Covered entities must comply with the Rule, and we presume that the States will follow the law as long as the Rule is in effect. An employer cannot meet its obligations under the Rule without taking steps to ensure that its employees know their rights and obligations under the Rule. As a practical matter, the Rule requires immediate action by the States to conform to the Rule, and this action produces an injury in fact.
The case now returns to the district court to hear the States’ arguments on the merits. Should the States prevail on the merits, the Final Rule is likely to be substantially revised. Although EEOC Acting Chair Lucas lacks the authority unilaterally to rescind or modify the Final Rule, she has indicated that the EEOC will reconsider portions of the Final Rule that are “unsupported by the law” once a quorum is re-established. We will continue to monitor and update with developments.
Weekly Bankruptcy Alert February 24, 2025 (For the week ending February 23, 2025)
Covering reported business bankruptcy filings in Massachusetts, Maine, New Hampshire, and Rhode Island, and Chapter 11 bankruptcy filings in New York and Delaware listing assets of more than $1 million.
Because your business extends beyond the borders of a single state, ours does too. Today, we are a multi-disciplinary team of highly creative, hard working, responsive, business savvy and experienced bankruptcy and creditors’ rights professionals serving you from offices located in four New England states and the District of Columbia.
Chapter 11
Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate
Nikola Corporation2(Phoenix, AZ)
Motor Vehicle Manufacturing
Wilmington(DE)
$500,000,001to$1 Billion
$1,000,000,001to$10 Billion
2/19/25
Elfand Organization LLC(New York, NY)
Not Disclosed
Manhattan(NY)
$1,000,001to$10 Million
$1,000,001to$10 Million
2/18/25
DanPowr64 LLC(Salem, MA)
Not Disclosed
Boston(MA)
$1,000,001to$10 Million
$1,000,001to$10 Million
2/19/25
679 Columbia Realty, LLC(Franklin, MA)
Residential Building Construction
Worcester(MA)
$0to$50,000
$0to$50,000
2/19/25
JW Realty Holdings LLC(Monroe, NY)
Activities Related to Real Estate
Poughkeepsie(NY)
$1,000,001to$10 Million
$1,000,001to$10 Million
2/20/25
Chapter 7
Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate
Sky Properties LLC(Providence, RI)
Not Disclosed
Providence(RI)
$100,001to$500,000
$500,001to$1 Million
2/20/24
1Business Type information is taken from Bankruptcy Court filings, which may include incorrect categorization by the debtor or others.
2Additional affiliate filings include Nikola Properties, LLC, Nikola Subsidiary Corporation, Nikola Motor Company LLC, Nikola Energy Company LLC, Nikola Powersports LLC, Nikola H2 2081 W Placentia Lane LLC, 4141 E Broadway Road LLC, Free Form Factory, Inc., and Nikola Desert Logistics LLC.
Red State AGs Sue New York State in Challenge to Climate Change Superfund Act
In December 2024, the State of New York enacted the “Climate Change Superfund Act,” which would impose retroactive fines on fossil fuel producers for greenhouse gas emissions that contribute to climate change. (New York was actually the second state to enact such a law; Vermont had implemented a similar law earlier in the year, and a number of other liberal states are contemplating such laws.) This law has now been challenged in court by a coalition of attorneys-general from conservative states, led by Texas (the other states are Alabama, Arkansas, Georgia, Idaho, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, West Virginia, and Wyoming), who argue that this law is unconstitutional because, among other things, it infringes upon issues that are solely within the purview of federal law (e.g., the Clean Air Act), and not subject to regulation by individual states.
Irrespective of the legal merits of either New York’s law or the attorneys-generals’ challenge, this development is nonetheless significant as demonstrating–yet again–the increasing gulf between blue states and red states with respect to state policy concerning climate change and related issues. There are now a number of separate legal fronts where opposing coalitions of states are ranged against one another, each seeking to implement its preferred policy. And this increasing divergence among the states has rendered the regulatory landscape even more complex for companies that operate nationally, with a geographic footprint on both sides of the divide. In the absence of a national consensus developing over climate change policy, it seems unlikely that even coherent and powerful federal action could completely overcome this divide–to the detriment of any company or individual seeking to navigate through these turbulent waters.
Texas Attorney General Ken Paxton and a coalition of 21 attorneys general have filed a federal lawsuit challenging New York’s new law that would force fossil-fuel companies to pay billions for emitting greenhouse gas. And some experts predict similar litigation against other states. According to the lawsuit, the New York law titled the Climate Change Superfund Act would retroactively fine coal, natural gas and oil producers $75 billion for emissions. New York Gov. Kathy Hochul signed it into law on Dec. 26, 2024, with funds due in 2026.
www.law.com/…
Court Temporarily Hits the Brakes on EO 14173 Ending Illegal Discrimination: What Employers Should Know
Big Picture
On February 21, 2025, a federal judge in the District Court of Maryland granted a temporary injunction blocking portions of President Trump’s Executive Orders “Ending Illegal Discrimination and Restoring Merit Based Opportunity” (“14173”) and “Ending Radical and Wasteful Government DEI Programs” (“14151”) (collectively the “EOs”). To learn more about each EO’s directives read Blank Rome’s previous coverage on 14173 here and 14151 here. This is a temporary nationwide ban on certain portions of the EOs.
After pointing out that the Trump Administration has declared “DEI to be henceforth illegal”, the Court found the EOs do not “define any of the operative terms” such as “illegal DEI”, “equity-related”, “promoting DEI”, or “illegal discrimination or preferences”. This vagueness fails to provide companies and organizations with proper notice as to what types of programs are prohibited. Further, the Court found that the EOs likely violate the First Amendment by expressly threatening “the expression of views supportive of equity, diversity and inclusion.” This is a nationwide ban.
Background: EOs Have Government Contract Implications & Implicate the Private Sector
Among other provisions, EO 14173 requires that all federal contracts and/or grant awards contain a term where the contractor/grantee must agree its “compliance in all respects with all applicable Federal anti-discrimination laws” is material to the government’s payment decisions for purposes of the False Claims Act (“FCA”) (the “Certification Provision”).
EO 14173 also applies pressure to the private sector, directing the Attorney General (“AG”), in consultation with heads of federal agencies, to prepare a report by May 20, 2025, containing strategies on how to encourage the private sector to end “illegal discrimination” by, among other things, creating a “plan of specific steps or measures to deter DEI programs or principles” including the identification of “up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars” (the “Enforcement Threat Provision”).
Additionally, relevant to the Court’s decision, EO 14151 directs federal agencies to “within sixty days of this order … terminate, to the maximum extent allowed by law, all … ‘equity-related’ grants or contracts” (the “Termination Provision”).
Basis for the Legal Challenge: DEI Advocates Challenge EOs
On February 3, 2025, various diversity, equity, and inclusion (“DEI”) advocates moved to preliminarily enjoin the enforcement of both EOs on, among other grounds, the following:
Violation of the Fifth Amendment, arguing the EOs are unconstitutionally vague as they do not define key terms such as what “illegal” DEI or “equity-related” is thereby not providing proper notice to employers; and
Violation of the First Amendment, arguing the threat of civil compliance investigations and new government contractor certifications chill ability to freely discuss important DEI-related topics.
Court Enjoins Enforcement of Termination & Certification Provisions for Government Contractors
After conducting a hearing on February 19, 2025, the Court partially agreed with Plaintiffs and preliminarily enjoined the Administration from enforcing portions of the EOs, specifically halting the following actions as it relates to government contractors:
Terminating any awards, contracts, or obligations on the basis of being “equity-related” under the Termination Provision;
Requiring any grantee or contractor to make any “certification” or other representation pursuant to the Certification Provision; and
Bringing any FCA enforcement action, including but not limited to any enforcement action premised on any “certification” made pursuant to the Certification Provision.
Court Enjoins Enforcement Through Civil Compliance Investigations for Private Sector
As it relates to the private sector, the President’s administration is blocked from bringing any enforcement action pursuant to the Enforcement Threat Provision. Importantly, the Court specified that although enforcement is blocked, the AG may continue to prepare their report including “[a] plan of specific steps or measures to deter DEI programs or principles. . .that constitute illegal discrimination or preferences.”
Notably the Court’s decision does not block similar provisions in EO 14173 directing the AG to include additional information in their report, namely, “key sectors of concern within each agency’s jurisdiction”; “litigation that would be potentially appropriate for federal lawsuits, intervention, or statements of interest”; and the “most egregious and discriminatory DEI practitioners in each sector of concern.”
Next Steps for Employers
While this is an early win for proponents of DEI initiatives, government enforcement plans have not been blocked and new lawsuits are being filed against companies challenging their DEI programs daily. Most recently, the state of Missouri filed suit against multinational chain of coffeehouses for their “illegal DEI” practices (including minority-based mentorship programs and diversity goals) and the state of Florida filed a class action lawsuit against a large retail corporation alleging the company misled investors about the risks related to their LGBTQ Pride campaign.
Government contractors, organizations receiving federal funding, and private sector employers may have a slight temporary reprieve but should consult with their legal counsel now regarding steps to take in light of the Court’s decision, as this decision is likely to be appealed by the administration. Further, it is important to understand the AG’s ability to continue preparing their report encouraging the private sector to end DEI initiatives and enforcement through means outside of the Enforcement Threat Provision currently being fair game.
If not done so already, all companies should conduct a privileged assessment of current DEI statements, policies, and initiatives to ensure compliance with federal laws. All employers should remain diligent in their review given that the Court’s decision is a temporary pause on enforcement and this outcome, along with the outcomes of additional pending lawsuits filed, and those sure to be filed, are developing.