What Federal Contractors and Grant Recipients Need To Know About EO 14173’s Certification and Non-Discrimination Requirements Concerns
Executive Order (EO) 14173 “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” creates new obligations that could carry significant risks for any organization doing business with the United States federal government. Federal contractors, subcontractors and recipients of federal grant money are or will soon be subject to potential liability under the False Claims Act (FCA).
Quick Hits
EO 14173 is raising potential compliance concerns for organizations during business with the federal government under the FCA, subject to civil and criminal penalties.
Organizations doing business with the federal government now have obligations to certify that they do not operate any programs promoting diversity, equity and inclusion that violate any applicable Federal anti-discrimination laws..
These same organizations also must agree that their compliance with all federal nondiscrimination laws in any federal contract, subcontract, or grant recipient and makes that certification a “material” term for purposes of the FCA.
Organizations doing business with the federal government may want to consider steps to take to minimize compliance risks under the FCA, which can open the door to civil and criminal exposure.
EO 14173, which was signed on January 21, 2025, and other executive actions have raised questions for employers doing business with the federal government as to what programs the government may target and whether efforts to maintain compliance with still-existing federal civil rights and antidiscrimination laws could pull them within federal regulators’ crosshairs. Notably, EO 14173 appears to implicate potential civil or criminal liability for private companies and federal contractors under the FCA, one of the government’s primary tools for combating fraud against the federal government.
The FCA imposes liability on individuals or companies that defraud the federal government by making materially false or fraudulent statements to influence the government to pay out. Those statements must be material to the government’s decision to make the payment. It also includes a “qui tam” provision that allows private individuals, known as “relators” or “whistleblowers,” to file lawsuits on behalf of the government and potentially receive a portion of any recovered damages.
The U.S. Department of Justice (DOJ) has said it collected more than $2.9 billion in settlements and judgments in all fraud claims brought under the FCA in the last fiscal year ending on September 30, 2024, with more than $2.4 billion stemming from qui tam suits.
Specifically, EO 14173 states that agency heads must “include in every contract or grant award: A term requiring the contractual counterparty or grant recipient to agree 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 FCA.
That language requires organizations doing business with the government to certify that they do not have any DEI programs that are unlawful under federal antidiscrimination laws and seeks to make such a certification a material term for purposes of the FCA. Of particular concern is that such claims under the FCA could come not only from the government but also from individuals inside and outside of the organization in qui tam suits.
Next Steps
These actions put employers doing business with the federal government on notice that the new administration is empowering interested individuals, such as applicants, employees, and others to join or possibly replace traditional federal employment agencies, such as the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP), as watchdogs on compliance obligations.
Employers may want to review or audit all their existing DEI or Diversity, Equity, Inclusion, and Accessibility (DEIA) programs or initiatives and to determine if they align with lawful practices under applicable federal anti-discrimination laws.
Employers doing business with the federal government may also want to consider options to create active, robust, and ongoing compliance programs to assist with this new obligation and certification under the FCA. Employers may consider thorough analysis protected by the attorney-client privilege as part of these compliance programs.
New York Federal Court Ruling Highlights a Potential Pitfall in Settlement Agreement Enforcement
On January 8, 2025, the U.S. District Court for the Eastern District of New York held that an employee’s refusal to sign a confidentiality and nondisparagement acknowledgment form annexed to a settlement agreement resolving discrimination and retaliation claims invalidated the entire agreement.
Quick Hits
New York’s General Obligations Law (GOL) § 5-336 and Civil Practice Law and Rules (“CPLR”) § 5003-B both impose strict requirements on nondisclosure clauses in matters involving discrimination claims, including that the inclusion of such clauses in a settlement agreement be at the plaintiff’s preference.
The U.S. District Court for the Eastern District of New York recently held that an unsigned GOL § 5-336 and CPLR § 5003-B acknowledgment form annexed to a settlement agreement did not constitute a separate settlement agreement; rather, it was “a material component of the broader [s]ettlement [a]greement,” as its execution was required to make the settlement agreement “effective.”
Employers may want to consider how they structure settlement agreements involving discrimination claims subject to GOL § 5-336 and CPLR § 5003-B and ensure all material components of such agreements are fully executed to avoid settlement enforceability issues.
Separ v. County of Nassau: Background and Ruling
In Separ v. County of Nassau, the parties entered into a settlement agreement to resolve allegations of discrimination and retaliation. The agreement complied with New York’s statutory requirements under GOL § 5-336 and CPLR § 5003-B by including provisions for a twenty-one–day consideration period and a seven-day revocation window, both exercisable by the plaintiff, Anne Separ. However, the settlement’s enforceability hinged on the execution of an acknowledgment form annexed to the agreement documenting Separ’s preference for confidentiality and nondisparagement. While Separ signed the agreement itself, she refused to sign the acknowledgment, leading the employer to seek judicial enforcement of the agreement.
The U.S. District Court for the Eastern District of New York rejected the employer’s argument that the acknowledgment was “separate and apart” from the settlement agreement and “ha[d] no bearing on whether the [a]greement itself [was] binding and enforceable on the parties.”
Finding that the acknowledgment was a material component of the broader agreement and that enforceability depended on all required components being fully executed, the court held that the execution of the acknowledgment acted as a condition precedent to effectuate the settlement per the “effective date” provision contained in the agreement.
Considerations for Employers
The Separ decision emphasizes the importance of careful drafting and execution of settlement agreements, particularly when including nondisclosure provisions subject to GOL § 5-336 and CPLR § 5003-B. Moving forward, employers in New York may wish to review and update their internal settlement templates to ensure compliance with the Separ framework to avoid unintended pitfalls. Some suggestions include:
considering how the settlement agreement is structured;
ensuring all material components of the settlement agreement that require execution are fully executed; and
ensuring compliance with the consideration and revocation periods mandated by both GOL § 5-336 and CPLR § 5003-B.
Does Chicago’s Municipal Code Make Everyone A Minority?
Recent posts have discussed a registration statement filed Bally’s Chicago, Inc. for an offering that would impose a stockholder qualification based on race, gender and ethnic status. This qualification requirement is intended to satisfy the requirements of a Host Community Agreement entered into with the City of Chicago. The agreement defines “minority” pursuant to Section 2-92-670(n) of the Municipal Code of Chicago which, among other things, defines “minority” as including African Americans, American Indians, Asian Americans, and Hispanics. The MCC then adds:
individual members of other groups, including but not limited to Arab-Americans, found by the City of Chicago to be socially disadvantaged by having suffered racial or ethnic prejudice or cultural bias within American society, without regard to individual qualities, resulting in decreased opportunities to compete in Chicago area markets or to do business with the City of Chicago
What the authors of the Host Community Agreement apparently missed is that the effect of the Host Community Agreement is to bring everyone else within the definition of a “minority” because the allocation share ownership opportunities to specific racial and ethnic groups disadvantages others “without regard to individual qualities”.
Even more invidiously, the explicit inclusion of Arab-Americans while omitting Jewish Americans is manifestly anti-Semitic in effect, if not intent.
Trump Administration Says Title IX Does Not Apply to NIL Pay, Rescinds Recent Guidance
On February 12, 2025, the U.S. Department of Education under the Trump administration rescinded recent guidance that name, image, and likeness (NIL) payments to college athletes implicate the gender equal opportunity requirements of Title IX of the Education Amendments of 1972.
Quick Hits
The Department of Education has rescinded recent guidance that had warned NCAA schools that NIL payments could trigger the equal opportunity obligations of Title IX.
This announcement indicated that the department interprets Title IX as not applying to how revenue-generating athletics programs allocate compensation among their athletes.
On February 12, 2025, the U.S. Department of Education’s Office for Civil Rights (OCR) announced that it had rescinded the nine-page Title IX guidance on NIL payments previously issued on January 16, 2025, in the final days of the Biden administration.
“The NIL guidance, rammed through by the Biden Administration in its final days, is overly burdensome, profoundly unfair, and goes well beyond what agency guidance is intended to achieve,” Acting Assistant Secretary for Civil Rights Craig Trainor said in a statement.“Without a credible legal justification, the Biden Administration claimed that NIL agreements between schools and student athletes are akin to financial aid and must, therefore, be proportionately distributed between male and female athletes under Title IX.”
“Enacted over 50 years ago, Title IX says nothing about how revenue-generating athletics programs should allocate compensation among student athletes,” Assistant Secretary Trainor’s statement continued. “The claim that Title IX forces schools and colleges to distribute student-athlete revenues proportionately based on gender equity considerations is sweeping and would require clear legal authority to support it. That does not exist. Accordingly, the Biden NIL guidance is rescinded.”
The move comes as the National Collegiate Athletic Association (NCAA) and major college sports conferences have agreed to pay nearly $2.8 billion in back pay to former athletes as part of a proposed settlement to end NIL litigation and to establish a revenue-sharing framework to share more than $20 million annually with athletes.
The rescinded Biden-era guidance had warned NCAA schools that NIL compensation provided by a school, even if provided by private third parties, would be considered by the department as “athletic financial assistance,” which must be distributed in a nondiscriminatory manner under Title IX. The guidance had assumed that “the receipt of financial assistance does not transform students, including student-athletes, into employees,” but it opened the possibility to reevaluate that position.
The Education Department announcement also follows the NCAA’s announcement that it is banning transgender athletes from competing in women’s sports to align with President Trump’s recent executive order (EO), EO 14201, titled “Keeping Men Out of Women’s Sports.” That order directed the Secretary of Education to “take all appropriate action to affirmatively protect all-female athletic opportunities and all-female locker rooms and thereby provide the equal opportunity guaranteed by Title IX.”
Next Steps
The Department of Education’s announcement will have significant implications for NCAA schools, which have been adjusting to the quick evolution of college athletics in recent years. Changes have included the removal of restrictions on athletes earning NIL pay, loosening restrictions on athlete transfers, and the potential for revenue-sharing between schools and their athletes. Such changes have raised concerns under Title IX, particularly with potential disparities in NIL pay between athletes in men’s and women’s sports.
While the prior guidance had interpreted NIL pay as subject to Title IX, the Department of Education under the Trump administration appears to interpret NIL payments, and even potentially revenue-sharing, as outside of the typical athletic financial assistance governed by Title IX. This could open the door for more payments to athletes in the sports that tend to generate the most revenue, typically college football and men’s basketball.
The announcement further signals more potential changes by the Trump administration with the enforcement of Title IX.
However, the rescission of the prior Title IX guidance may not be the end of the road. While some are praising the decision, others continue to argue that inequitable distribution of the settlement funds between men’s and women’s sports will violate Title IX. This could result in legal challenges as schools evaluate how best to distribute the payments.
The Future of Gender-Affirming Care: Legal, Ethical, and Practical Considerations for Providers
Recent policy shifts have placed gender-affirming care at the center of a legal and political battle that has profound implications for healthcare providers, patients, and institutions. A newly issued executive order has created uncertainty for hospitals, medical schools, and healthcare systems that provide these critical services, raising concerns about potential restrictions tied to federal funding, regulatory enforcement, and ethical obligations.
At its core, gender-affirming care encompasses a range of medical and psychological interventions that support transgender and nonbinary individuals. Major medical organizations, including the American Medical Association, the American Academy of Pediatrics, and the Endocrine Society, have long affirmed that these services are not only necessary but also life-saving for many patients. Treatments such as puberty blockers, hormone therapy, and surgical interventions have been standard components of medical care for gender-diverse individuals, following decades of research and clinical best practices. Despite this, the current policy climate has introduced new risks and challenges for providers and institutions committed to evidence-based care.
One of the most immediate concerns is the potential threat to federal funding for institutions that continue to offer gender-affirming services to minors. Federal research grants, medical education funds, and Medicare and Medicaid reimbursements could all be leveraged as enforcement mechanisms to discourage or prevent the provision of this care. The executive order signals an intent to use regulatory measures to impose restrictions, but it remains unclear how agencies will interpret and enforce these directives. Providers and institutions will need to monitor how federal agencies, such as the Department of Health and Human Services and the Centers for Medicare & Medicaid Services, implement these policies and whether legal challenges will limit or delay enforcement.
The legal landscape surrounding gender-affirming care is complex. Federal agencies have broad discretion in setting funding conditions, but they cannot do so in ways that violate constitutional protections or existing statutory laws. The Affordable Care Act’s Section 1557, for example, prohibits discrimination in healthcare settings based on gender identity. Recent court rulings have reinforced these protections, and legal challenges to any new restrictions will likely invoke these precedents. Several states and civil rights organizations have already initiated lawsuits, arguing that the executive order infringes on medical autonomy, equal protection rights, and existing federal nondiscrimination laws.
Beyond the legal and financial implications, healthcare institutions must also consider the ethical and reputational consequences of their response. Many hospitals and health systems have made public commitments to diversity, equity, and inclusion. A decision to scale back or eliminate gender-affirming services could undermine these commitments and erode trust within the communities they serve. For providers, the ethical obligation to deliver medically necessary care remains paramount. Professional organizations have repeatedly warned that restricting access to gender-affirming care can lead to severe mental health consequences, including increased rates of anxiety, depression, and suicidal ideation among transgender youth.
In light of these challenges, healthcare institutions should take proactive steps to prepare for potential regulatory changes and legal disputes. A critical first step is conducting a thorough review of federal funding streams to assess how dependent the organization is on grants, Medicaid, and Medicare reimbursements. Understanding the precise legal and financial risks will help inform decision-making. Institutions should also engage with legal and policy experts to explore compliance strategies that align with their commitment to patient care. In addition, collaboration with state and local governments may offer alternative funding mechanisms and legal protections that can mitigate federal enforcement risks.
Healthcare leaders must also consider the broader implications for access to care. In states where gender-affirming services remain protected under state law, institutions may still face federal pressure but will have legal support to continue providing care. In states where gender-affirming care is already restricted or under attack, providers may need to explore partnerships with out-of-state institutions, telehealth models, and other innovative solutions to ensure patients can still access the care they need.
As legal and policy battles over gender-affirming care continue to evolve, healthcare institutions will need to remain adaptable. The shifting regulatory environment requires a careful balance between compliance, financial sustainability, and institutional commitments to patient care. The coming months will likely bring new legal challenges, agency guidance, and policy shifts that could further shape the landscape. Healthcare leaders should proactively assess their organizational risk, consult legal and policy experts, and remain engaged in discussions about how best to navigate these complexities while ensuring access to appropriate care within the bounds of applicable laws.
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DEI and Government Contractors: A High-Stakes Shift
While much of the focus on President Trump’s recent Executive Order on Ending Illegal Discrimination and Restoring Merit-Based Opportunity (the “EO”) has been on its elimination of race and sex-based affirmative action requirements for federal contractors, another provides carries even greater potential implications. The EO also introduces new contractual obligations related to diversity, equity, and inclusion (“DEI”) efforts and signals an intent to use the False Claims Act (FCA) as a tool to target government contractors for what it views as “illegal” DEI initiatives—potentially subjecting those companies to substantial financial and even criminal penalties.
Government contractors are no strangers to being test subjects for Executive policy initiatives. Past administrations have leveraged the federal government’s immense purchasing power to enforce requirements that couldn’t gain traction in Congress. From paid leave and minimum wage mandates to COVID-related requirements, federal contractors have consistently faced unique obligations and consequences that don’t apply to their non-contractor counterparts. The same practice is playing out here.
Although the exact details of the new contractual requirements are still pending, government contractors are urged to begin preparations now to minimize potential business disruptions and significant liability risk. Below is a Q&A to further clarify these developments.
Q: What exactly is this new contractual requirement?
A: The EO includes a provision stating that “[t]he head of each agency shall include in every contract or grant award:
(A) A term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code; and
(B) A term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”
So, breaking this down, there are two components at issue. First, contractors will have to certify to the federal government that they do not operate programs “promoting DEI” that violate federal anti-discrimination laws.
Second, contractors will have to agree in their contracts – either new contracts or potentially in modifications to existing contracts – that their compliance “in all respects” with all applicable federal anti-discrimination laws is “material” to their receipt of money from the federal government.
Taken together, this means contractors, as a condition of receiving federal funds from the federal government, will have to certify that any programs they have that “promote DEI” do not violate federal anti-discrimination laws.
Q: Why is this such a big deal?
A: The reference to the U.S. Code in the EO is to a provision of the False Claims Act (“FCA”) which establishes liability for anyone who “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” (emphasis added).
So, the EO, by requiring contractors to agree that compliance with the terms of Federal anti-discrimination laws is material to the government’s payment decisions, seeks to establish that a false DEI certification will constitute a false claim under the FCA and subject the contracting entity to the FCA’s penalties.
Q: Can anyone besides the contractor be held liable for FCA violations?
A: Yes. In addition to the contractor, “any person” (e.g., an employee) who makes a false certification, statement, or record, could be individually liable for FCA violations.
Q: What kind of penalties are involved?
A: Under the FCA, those submitting false statements are subject to a civil fine between $14,308 and $28,619 per violation, as well as “3 times the amount of damages which the Government sustains because of the act of that person.”
Moreover, businesses and individuals can also be held criminally liable under the FCA. Potential penalties include prison sentences of up to 5 years, as well as fines of up to $250,000 for individuals and $500,000 for businesses for each felony offense, and $100,000 to $200,000 for misdemeanors.
Finally, as a result of an FCA violation, a contractor could face potential suspension or debarment from the federal contract award process.
Q: What damages could the government incur due to an inaccurate statement regarding a contractor’s DEI efforts?
A: It appears that the current Administration is taking the position that any decision by the federal government to make a payment to a contractor is “influenced” (that’s how “material” is defined by the FCA) by the contractor’s compliance with federal anti-discrimination laws. As a recent GSA memorandum stated: “compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code.” The EO provides that contractors will be required to agree that such compliance is a material to all payments.
It is possible the government will argue that damages should be measured based on the total value of the contract under the theory that the federal government was fraudulently induced into entering a contract, or continued to pay during the term of the contract, due to the contractor’s misrepresentation about its DEI efforts and/or compliance with anti-discrimination laws.
Q: Is there much risk here? How does the government determine if a certification is false?
A: Well, among other ways, the FCA contains a bounty program. The law permits individuals to bring what are called “qui tam” actions on behalf of the government as qui tam “relators.” To bring a qui tam suit, a plaintiff must file a complaint under seal in the name of the government. Within 60 days of receiving the complaint and any “material evidence and information,” the government must decide whether to intervene in the action or pursue the claim through an alternative remedy (such as an administrative proceeding). If the government declines to intervene in the action, it must notify the court, “in which case the person bringing the action [will] have the right to conduct the action.”
Individuals are incentivized to bring qui tam claims because they can personally receive a significant percentage – up to 30% – of the government’s total recovery.
So, employees or others with non-public information who have a basis to assert a contractor’s DEI efforts are discriminatory can bring a relator claim alleging that the contractor is promoting illegal DEI and is not in material compliance with federal anti-discrimination laws.
Q: What exactly will contractors be certifying?
A: That’s a good question and something we won’t know for sure until we see further government action. The EO isn’t clear on what “programs promoting DEI” means, though it specifically calls out “preferences,” “mandates,” and “workforce balancing” as prohibited activities.
In another Executive Order, the Administration defined “Discriminatory equity ideology” as “an ideology that treats individuals as members of preferred or disfavored groups, rather than as individuals, and minimizes agency, merit, and capability in favor of immoral generalizations.” A different Executive Order defined “DEI office” as one that is established for the purpose of “influencing hiring or employment practices at the institution with respect to race, sex, color, or ethnicity, other than through the use of color-blind and sex-neutral hiring processes.” Other statements from the Administration indicate that DEI may be considered to mean any effort that could be seen as conferring some benefit or preference based in some part on a protected characteristic. For example, in a recent statement, the White House described DEI in hiring and promotion as relating to “factors that favor some Americans over others.” In addition, on February 5, 2025, newly-appointed Attorney General Pam Bondi defined the term “illegal DEI and DEIA preferences, mandates, policies, programs” in a memorandum on “Ending Illegal DEI and DEIA Discrimination and Preferences” as “programs, initiatives, or policies that discriminate, exclude, or divide individuals based on race or sex.”
Given that the EO requires agencies to submit a plan identifying potential “regulatory action and sub-regulatory guidance” to “encourage the private sector to end illegal discrimination and preferences, including DEI,” we are likely to see agency guidance issued in the coming weeks or months that provides at least some clarity to contractors on the types of efforts that may be considered unlawful.
Q: How will contractors actually make this certification?
A: It hasn’t been announced. In the past, contractors have used the OFCCP’s Contractor Portal to certify compliance with various OFCCP obligations, but they also submit separate certifications through the Government’s SAM system.
Q: Have these changes already taken effect?
A: No. Agency heads are ordered to include the new provisions in contracts and grant awards, but the provisions do not appear to have been developed yet. Typically such provisions are developed by the Federal Acquisition Regulatory Council.
It is also important to note that the EO speaks to including the new terms in “every contract or grant award.” It is unclear whether this means the new provisions will apply only to future contracts, or if agencies will issue modifications to existing contracts as well.
Q: Are there additional risks posed by this EO?
A: Yes. Employees can bring claims under the FCA against an employer alleging they have been “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against” because of their protected activity under the FCA, which includes taking acts in furtherance of an FCA action or other efforts to stop a violation of the FCA.
Successful claimants are entitled to remedies including (i) “reinstatement with the same seniority [the whistleblower] would have had but for the discrimination;” (ii) twice the amount of back pay and interest on the back pay; and (iii) compensation for “any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.”
Accordingly, federal government contractors will have to be attuned to employee complaints about DEI efforts, understanding that, in addition to other concerns, they may constitute protected activity under the FCA and create additional liability risk.
Q: What should contractors do now?
A: Contractors would be well-advised to start preparing now for this new development. At a minimum, contractors should carefully account for and evaluate their DEI programs and initiatives to determine the risks attendant to each and ensure they feel comfortable certifying that those programs are in compliance with anti-discrimination laws. Contractors should consider conducting these assessments in consultation with legal counsel to preserve privilege associated with their review.
Contractors should also be sure to inform anyone at their companies who is involved in government contracting or who may receive a modification order of the new development and instruct them to look for and notify appropriate personnel should the new term be included in a new contract or modification order to avoid a circumstance where contractors become subject to the new requirements without full organizational knowledge and awareness.
Blast from the Past: The Potential Ripple Effect of the ‘Return to In-Person Work’ Executive Order on the Private Sector and Key Considerations for Employers
President Donald Trump’s “Return to In-Person Work” executive order (EO) mandates that federal employees return to full-time office work. This EO effectively ended the widespread hybrid and remote work arrangements that had become common in the government sector. Federal agencies must now “take all necessary steps” to enforce in-person attendance. While the EO does not apply to the private sector, it may encourage private employers to implement similar policies. Although employers generally have the right to require in-person work, they must ensure that such requirements comply with the law.
Reasonable Accommodations & Remote Work
One of the most pressing legal issues tied to return-to-office mandates is the question of reasonable accommodation under federal and state disability laws. The Americans with Disabilities Act (ADA) requires employers to provide reasonable accommodations for employees with disabilities. In recent years, many employees with disabilities requested remote work as an accommodation. Pre-COVID-19, many employers were skeptical of remote work. In the wake of the pandemic shutdown that necessitated remote work, many employers had to revisit this issue and determine whether remote work might be a reasonable accommodation.
Key Considerations for Employers When Providing Reasonable Accommodations
The duty to accommodate under the ADA arises once the employer is aware of an employee’s disability. While the employee generally bears the responsibility to request accommodation, some courts require employers to provide accommodations if they knew or should have known about the disability and need for accommodation. You have to engage in the interactive process in making your determination. In doing so, employers should consider the following:
Essential Job Functions
The key factor in evaluating whether remote work is a reasonable accommodation of an employee’s disability is whether the employee can perform the essential job functions remotely. You should review job descriptions to determine if in-office presence is necessary. If you think it is, you may request medical documentation to confirm the disability and why remote work is medically necessary (and for how long). Remember that you do not have to remove any essential job functions. You should also make sure that other employees are not currently performing this job remotely (and have not done so in the past).
Undue Hardship
Employers must determine if remote work would cause an undue hardship by considering:
The nature and cost of the accommodation
The facility’s financial resources, workforce size, and expenses
The employer’s overall resources, size, and locations
The impact on operations and workforce structure
The effect on facility operations
Frankly, proving an undue hardship, particularly in connection with a remote work request, is an uphill battle.
The Choice is Yours
As organizations implement return-to-office policies, it’s crucial to balance business needs with compliance under the ADA. Employers should enforce in-person attendance but should not automatically reject an employee’s request for remote work as an accommodation. Have a good process in place to ensure all requests are evaluated in accordance with the law.
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Ramadan Starts Soon: Considerations for Employers
Ramadan is coming up soon, so now is a good time to consider religious accommodations and legal protections for Muslim employees.
Quick Hits
Employers may need to provide religious accommodations to Muslim workers during the month of Ramadan.
Ramadan will begin on the evening of February 28, 2025, or March 1, 2025, depending on the moon.
Ramadan will end on the evening of March 29, 2025, or March 30, 2025, with the Eid al-Fitr holiday to begin the following day.
Ramadan is expected to begin on the evening of February 28, 2025, and end on the evening of March 30, 2025. Because the Islamic calendar is a lunar calendar, the exact start and end dates of Ramadan depend on sightings of the crescent moon. Each year, Ramadan lasts twenty-nine or thirty days. Eid al-Fitr is the religious holiday celebrated the day after Ramadan.
Muslims observing Ramadan abstain from eating and drinking from dawn—approximately an hour and a half before sunrise—until dusk every day during Ramadan. Many Muslims may be exempt from fasting for all or part of Ramadan, including those who are ill, pregnant, breastfeeding, or traveling. It is a common practice to eat a meal and pray right before dawn and right after sunset during Ramadan. In addition to the five daily prayers, additional nighttime and early morning prayers are recommended during the month, which are performed communally in Masjids.
Employers can consider flexible work hours and/or telework to accommodate Muslim employees’ religious needs. Some employees may need to request time off to celebrate Eid al-Fitr, which is marked by special prayers and services.
Employees who work during the end of a daily fast may request the opportunity to break their fasts with food and drink, as well as with time and space to pray. Employees also may need certain accommodations, such as rest breaks, while they are fasting, depending on their medical conditions, age, or other factors.
Importantly, employers may want to remember that Muslim employees do not all have the same accommodation needs or preferences. Practicing a religious faith often involves personal and varying nuances and beliefs that differ among individuals. Having a conversation with each employee is helpful in understanding their specific situations or requests (if any), and such discussions meet the legal requirement for employers to engage in an “interactive process” regarding any religious accommodation requests.
Legal Obligations
Under Title VII of the Civil Rights Act of 1964, employers may not discriminate against or harass workers based on their religion. Title VII requires an employer to reasonably accommodate an employee whose religious belief conflicts with a work requirement or when the requested assistance better allows the employee to perform his or her job functions—unless the accommodation would impose an undue burden on the employer. In 2023, the Supreme Court of the United States held that a substantial burden must be shown to rely on the undue hardship defense.
In addition to the federal law, many states have laws that similarly prohibit religious discrimination in the workplace and require reasonable accommodation.
Next Steps
Employers can consider ways to recognize Ramadan and provide education about it in their internal newsletters or social events.
To avoid violations of state and federal laws, employers may wish to review their written policies, practices, and employee training to prevent harassment and discrimination based on religion.
Employers must accommodate employees’ religious beliefs and practices unless a proposed accommodation would cause a substantial burden to business operations. Also, employers may want to keep in mind that not all Muslims observe Ramadan the same way.
Race/Gender/Ethnicity Based Share Restrictions
Yesterday’s post took note of a proposed initial public offering by Bally’s Chicago, Inc. that would impose a stockholder qualification based on race, gender and ethnic status. This qualification requirement is intended to satisfy the requirements of a Host Community Agreement entered into with the City of Chicago.
I noted that Section 204(a)(3) of the California Corporations Code expressly allows a California corporation to include in its articles provisions that impose “special qualifications of persons who may be shareholders”. Section 102 of the Delaware General Corporation Law includes no similar authorization.
Stanley Keller kindly pointed me in the direction of Delaware Code Section 202 which authorizes restrictions on the transfer or registration of a Delaware corporation’s securities to be imposed by the certificate of incorporation, by the bylaws, or by agreement. Section 202(c)(5) permits a restriction on transfer or registration if it is not “manifestly unreasonable”. Section 205(d)(2) further provides that such a restriction shall be conclusively presumed to be for a reasonable purpose if it is for “complying with any statutory or regulatory requirements under applicable local, state, federal or foreign law”.
In the case of Bally’s, it might be argued that the restriction is for the purpose of complying with an agreement (the Host Community Agreement) rather than a statutory or regulatory requirement. However, the Host Community Agreement requirement was intended to meet the requirements of the Illinois Gambling Act, 230 ILCS 10/1, et seq. which requires that any applicant for a casino owners’ license demonstrate it “used its best efforts to reach a goal of 25% ownership representation by minority persons and 5% ownership representation by women.” 230 ILCS 10/6(a-5)(9).
If it is ultimately determined that the Host Community Agreement and/or the Illinois Gambling Act are unconstitutional, an interesting question will arise whether the conclusive presumption in Section 205(d)(2) should be applied to an unconstitutional requirement.
May Corporations Allocate Shares Based On Race, Gender, Or Ethnicity?
Last December, Bally’s Chicago, Inc., a Delaware corporation and indirect subsidiary of Bally’s Corporation filed a registration statement with the Securities and Exchange Commission to raise funds in connection with the development and operation of a casino in the City of Chicago (Amendment No. 4 filed on January 29, 2025 is available here). Bally’s Chicago had previously entered into a Host Community Agreement with the City that, among other things, imposes minority and women ownership requirements. To meet these requirements, the registration statement contemplates a rather unusual plan of distribution in which Bally’s Chicago will determine whether investors have attested to qualification criteria (see the “Plan of Distribution” section of the prospectus).
Given that these qualification criteria are based on race, gender and ethnicity, it may be no surprise that they are being challenged as violating the Fourteenth Amendment to the U.S. Constitution and federal civil rights statutes. Last week, U.S. District Court Judge Franklin U. Valderrama declined to issue a temporary restraining order, ruling that the plaintiff had shown neither a likelihood of success nor irreparable injury. Glennon v. Johnson, U.S. Dist. Ct. Case No. 1:25-cv-01057 (N.D. Ill. Jan. 6, 2025).
Perhaps an initial question is whether stockholder qualifications of any sort are permisable under applicable state corporate laws. The California General Corporation Law expressly permits the articles of incorporation of a California corporation to include “special qualifications of persons who may be shareholders”. Cal. Corp. Code § 204(a)(3). However, “[i]t would be a rare case in which any such special qualifications were desired, but it may happen occasionally in the case of a close corporation where it is desired to restrict the ownership of the corporation only to persons with certain specified characteristics or possibly in a special type of publicly held or semipublicly held corporation”. Harold Marsh, Jr., R. Roy Finkle & Keith Paul Bishop, Marsh’s California Corporation Law § 5.14 (Fifth Edition, 2025-1 Supp. 2020-2021). The only similar authorization that I could find in the Delaware General Corporation Law is Section 342(b) which pertains to close corporations (“The certificate of incorporation of a close corporation may set forth the qualifications of stockholders, either by specifying classes of persons who shall be entitled to be holders of record of stock of any class, or by specifying classes of persons who shall not be entitled to be holders of stock of any class or both.”) I am interested in hearing from any reader who is aware of similar authority with respect to corporations that are not close corporations.
Another question might be whether such a limitation is permissible under state civil rights laws such as California’s Unruh Civil Rights Act, Cal. Civ. Code § 51(b) (” All persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language, or immigration status are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.”) (emphasis added).
Finally, there is the question of whether the Securities and Exchange Commission will declare Bally Chicago’s registration statement effective. Late last week, one public interest firm had reportedly urged the SEC to withhold approval of the offering
DEI at Stake: Federal Groups Challenge Trump’s Efforts to Curb Inclusivity
The Trump administration is facing a new legal challenge to President Donald Trump’s executive orders (EOs) to eliminate diversity, equity, and inclusion (DEI) programs and initiatives after a group of diversity officers, professors, and restaurant worker advocates filed a lawsuit in a federal court in Maryland on February 3, 2025, alleging the orders are vague and unconstitutional.
Meanwhile, the U.S. Attorney General and the U.S. Office of Personnel Management (OPM) issued memoranda on February 5, 2025, to implement the orders and guide federal agencies on their scope.
Quick Hits
A coalition of DEI advocates has initiated a legal challenge against President Trump’s executive orders to eliminate diversity, equity, and inclusion programs, claiming they are unconstitutional and infringe on free speech rights.
The lawsuit argues that the vague language of the executive orders creates uncertainty that could lead to discriminatory enforcement against those promoting lawful DEI efforts.
The U.S. Office of Personnel Management has provided guidance to federal agencies on interpreting and implementing the recently signed executive orders regarding DEI and DEIA initiatives.
The developments raise questions for employers wishing to implement or continue implementing DEI programs to foster more inclusive workplaces.
DEI Executive Orders
In the first days of President Trump’s second term, he signed two key executive orders to eliminate all “illegal” DEI and diversity, equity, inclusion, and accessibility (DEIA) programs from the federal government and discourage the use of such programs in the private sector: EO 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” and EO 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” and President Trump’s rescission of many of Biden’s executive actions.
EO 14151 directs federal government agencies to end all illegal DEI and DEIA mandates, policies, programs, preferences, and activities in the federal government, including “equity action plans,” “equity action initiatives,” or other programs, grants, or contracts. The EO further eliminates DEI or DEIA performance requirements for employees, contractors, or grantees. The EO further seeks to eliminate “environmental justice” offices, positions, programs, policies, and services across the federal government.
EO 14173 terminates several prior executive actions to promote DEI in the federal government and orders the development of “appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” The order argued that employers “have adopted and actively use dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called” DEI or DEIA programs that violate civil rights laws.
Specifically, the EO directs the attorney general to develop recommendations for using federal civil rights laws and other measures to deter DEI in the private sphere and directs federal agencies to “identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, and institutions of higher education with endowments over 1 billion dollars.”
DEI Legal Challenge
On February 3, 2025, a coalition of DEI advocates—the National Association of Diversity Officers in Higher Education, American Association of University Professors, Restaurant Opportunities Centers United, and the Mayor and City Council of Baltimore—filed a lawsuit in the U.S. District Court for the District of Maryland alleging the Trump EOs on DEI and DEIA are vague and unconstitutional.
The lawsuit alleged President Trump’s EOs are unconstitutional, threaten to put their members in the “crosshairs” of federal investigators, and will unlawfully strip federal funding from private entities that wish to continue with DEI efforts.
According to the lawsuit, President Trump’s policies leave their members “with an untenable choice: continue to promote their lawful diversity, equity, inclusion, and accessibility programs, or suppress their speech by ending the programs or policies that the President may consider ‘illegal DEI.’”
Specifically, the suit challenges EO 14173, alleging that it “is designed to, and does, chill free speech on matters of substantial political import,” which is “amplified by its vagueness.” The lawsuit alleges that “[t]he undefined terms leave potential targets with no anchor as to what speech or actions the order encompasses,” the suit alleges. “They also give executive branch officials like the Attorney General carte blanche authority to implement the order discriminatorily.”
The groups raise several constitutional claims, including those based on the First Amendment, the Due Process clause of the Fifth Amendment, and separation of powers, alleging that the orders are vague and suppress their free speech.
The suit names President Trump and several agency heads and acting heads as defendants and is seeking preliminary and permanent injunctions to block the implementation of EO 14151 and EO 14173.
Agency Guidance
On February 5, 2025, OPM Acting Director Charles Ezell issued a memorandum to the heads and acting heads of federal departments and agencies on eliminating DEI and DEIA programs and initiatives, including DEI or DEIA offices, employee resource groups (ERGs), and “special emphasis programs” within the agencies The memo shows how OPM interprets the DEIA orders, providing valuable insights into what the EOs may be interpreted to prohibit for federal contractors, federal money recipients, and even private employers.
The memo directs federal agencies to “eliminate DEIA offices, policies, programs, and practices (including policies, programs, and practices outside of any DEIA offices) that unlawfully discriminate in any employment action” based on “protected characteristics.”
The memo explained that “[u]nlawful discrimination related to DEI includes taking action motivated, in whole or in part, by protected characteristics” and that “a protected characteristic does not need to be the sole or exclusive reason for an agency’s action.” Specifically, the memo stated that unlawful DEI includes practices such as “diverse slate” policies that mandate the composition of hiring panels or candidate pools.
However, the restrictions are not meant to include offices or personnel required by law “to counsel employees allegedly subjected to discrimination, receive discrimination complaints, collect demographic data, and process accommodation,” but “[s]uch functions should be transferred” to other personnel and offices at the agency, the memo stated.
Similarly, the memo says that agencies should “eliminate Special Emphasis Programs that promote DEIA based on protected characteristics in any employment action,” including hiring, promotions, training, and internships or fellowships.
The memo further stated that the orders revoke the authority for ERGs and that agencies should eliminate them to the extent that they promote unlawful discrimination. However, agency heads “retain discretion” to allow programs such as affinity group lunches, mentorship programs, and gatherings “for social and cultural events” so long as such events are not restricted to members or attendance to those of a protected characteristic.
The memo also highlighted the administration’s position that the Biden administration had “conflated” DEI with “longstanding, legally-required” disability accessibility obligations. The memo told agencies to “rescind policies and practices contrary to the Civil Rights Act of 1964 and the Rehabilitation Act of 1973,” except to retain a minimum number of employees to carry out legally required disability and accessibility laws.
DOJ Memo
Also on February 5, 2025, newly confirmed U.S. Attorney General Pamela Bondi issued two memoranda implementing EO 14173. One memo directs the U.S. Department of Justice (DOJ) to review all “consent decrees, settlement agreements, litigation positions (including those set forth in amicus briefs), grants or similar funding mechanisms, procurements, internal policies and guidance, and contracting arrangements” that include “race- or sex-based preferences, diversity hiring targets, or preferential treatment based on DEI- or DEIA-related criteria.”
The memo further directs the DOJ to update its guidance to affirm “equal treatment under the law means avoiding identity-based considerations in employment, procurement, contracting, or other Department decisions” and to “narrow the use of ‘disparate impact’ theories that effectively require use of race- or sex-based preferences.”
The other memo states the DOJ’s Civil Rights Division “will investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” The memo further carries out the EO by directing the Civil Rights Division and the Office of Legal Policy to submit a report with recommendations to enforce federal civil rights laws to “encourage the private sector to end illegal discrimination and preferences, including policies relating to DEI and DEIA.”
However, both memos indicated in footnotes that they only apply to programs that “discriminate, exclude, or divide individuals based on race or sex” and “does not prohibit educational, cultural, or historical observances—such as Black History Month, International Holocaust Remembrance Day, or similar events—that celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.”
Next Steps
The Trump administration has taken a hardline stance against DEI and DEIA generally, characterizing specific DEI/DEIA practices like race and gender preferences, including such DEI initiatives as diverse slates, as “illegal” or “unlawful discrimination.” These efforts come as the administration is further seeking to define sex as binary and immutable and limit the Supreme Court of the United States’ holding in Bostock v. Clayton County, Georgia, that firing an employee because of the employee’s sexual orientation or transgender status constitutes unlawful sex discrimination under Title VII of the Civil Rights Act of 1964. Further, federal lawmakers have reintroduced the “Dismantle DEI Act,” which seeks to codify President Trump’s DEI orders and prevent future administrations from reinstating similar policies.
The OPM memo confirms that federal agencies must eliminate DEI and DEIA programs and offices, which the administration is already dismantling. Further, those prohibitions extend beyond hiring and promotion practices that take DEIA into account to include softer implementation of DEI, such as through ERGs and Special Emphasis Programs. However, the memo acknowledges that agencies still need personnel to maintain compliance with antidiscrimination and harassment laws, as well as to fulfill accommodation obligations for employees with disabilities covered by applicable law.
At the same time, the DEI executive orders are facing a legal challenge and are likely to face more challenges that raise constitutional and other legal questions about the president’s authority to effectuate such changes, particularly the power to discourage and chill DEI with private employers without explicit statutory authorization and in contravention to existing federal law, such as Title VII. A ruling in favor of the plaintiffs could reinforce the importance of the lawfulness of DEI programs and protect them from future executive actions. Conversely, a ruling favoring the executive order could set a precedent for further restrictions on DEI efforts.
Employers may want to monitor these quickly evolving developments and consider reviewing their own DEI and DEIA practices regarding risk tolerances.
How NCAA Changes to Transgender Policy Following President Trump’s Executive Order Impact Schools
Takeaways
President Trump signed executive order “Keeping Men out of Women’s Sports,” barring transgender women from competing in women’s sports and citing fairness, safety, and privacy concerns. Schools that do not comply with the new federal policy risk losing federal funding under Title IX enforcement.
In response, the NCAA immediately revised its transgender participation policy, restricting competition in women’s sports to athletes assigned female at birth.
Legal challenges are expected, as some states and advocacy groups argue the policy is discriminatory and violates previous Title IX interpretations.
Background
On Feb. 5, 2025, President Donald Trump signed executive order “Keeping Men Out of Women’s Sports,” which prohibits transgender women from participating in female athletic categories at federally funded educational institutions. The order also directed the State Department to demand changes within the International Olympic Committee. The Committee has left eligibility rules up to the global federations that govern different sports.
The Trump Administration has made a push to redefine sex-based legal protections under Title IX of the Education Amendments of 1972, emphasizing biological sex as the deciding factor for athletic eligibility. Previously, on Jan. 20, 2025, the Administration issued an executive order declaring the federal government would recognize only two sexes, male and female, for all legal and regulatory purposes.
The NCAA has over 530,000 student-athletes, fewer than 10 of whom are transgender, according to a statement the NCAA’s president, Charlie Baker had provided to a Senate panel in December. In January, Baker called for greater legal clarity on the issue from regulators.
Finding that clarity in the form of the new executive order, in response, the NCAA Board of Governors voted to amend its transgender participation policy the day after Trump’s executive order was issued.
The new policy states that eligibility for NCAA women’s sports is now strictly limited to athletes assigned female at birth. Transgender men (those assigned female at birth but who have begun a medical transition) may still participate in men’s sports without restriction. However, an athlete taking testosterone for gender transition may only practice with a women’s team and is prohibited from competing in official NCAA-sanctioned events. If a team allows an ineligible athlete to compete, the entire team will be disqualified from NCAA championships.
Legal and Institutional Challenges
The executive order immediately ignited controversy as several states and legal groups vowed to challenge the order.
Pushback is expected, particularly in states like California, Connecticut, Massachusetts, and New York, where laws expressly protect transgender rights. Schools in these states now face a dilemma: Whether to comply with federal regulations or uphold state laws that recognize gender identity protections for student-athletes. Schools in these states may risk severe financial consequences if they refuse to comply with the new federal mandate, potentially losing millions in federal education funding.
More than two dozen states already bar transgender athletes from participating in school sports, whether in K-12 schools or at the collegiate level. In January, the House passed a bill barring transgender women and girls from sports programs for female students nationwide (the bill is not likely to pass in the Senate).
What Comes Next?
Some key questions remain:
Will federal courts uphold or strike down the new Title IX interpretation?
How will schools in certain states navigate the conflict between the executive order and new NCAA policy and state laws?