What Is “Illegal DEI?” Key Takeaways for Employers in Light of Litigation and Guidance Issued by the Federal and State Governments

This alert will explore what the federal government may consider to be “illegal DEI” in light of legal challenges to President Trump’s multiple executive orders (EO’s) pertaining to diversity, equity, inclusion, and accessibility (DEI)¹ and provide employers with some best practices with respect to DEI initiatives.

Legal Challenges to the DEI EOs

The enforceability and constitutionality of the DEI EO’s have been challenged in numerous federal lawsuits, including Nat’l Assoc. of Diversity Officers in Higher Ed., et al. v. Donald J. Trump, et al.² On 21 February 2025, the United States District Court for the District of Maryland (the Court) issued a nationwide preliminary injunction (Order) enjoining the following directives in the DEI EO’s (1) canceling or freezing any awards, contracts, or obligations for government contractors engaging in illegal DEI; (2) requiring contractors to make certifications with respect to illegal DEI; and (3) bringing False Claims Act enforcement actions against federal contractors based on such certifications. The Court found that the DEI EOs failed to define “operative terms” such as “DEI,” “illegal DEI,” “illegal DEI policies,” or “illegal discrimination or preferences.”³ The Court also noted that the government was unable to clarify what type of actions constituted “illegal DEI” when asked direct questions and presented with hypotheticals during the hearing.⁴

Notably, the Order did not enjoin the US Attorney General from preparing a report containing recommendations for enforcing federal civil-rights laws, “encouraging the private sector to end illegal discrimination and preferences,” including DEI, and identifying up to nine potential civil compliance investigations per federal agency of publicly traded corporations, large nonprofit corporations or associations, or foundations with assets of US$500 million or more. Also, the Order did not apply to a number of agencies, including the Equal Employment Opportunity Commission (EEOC).

As anti-DEI efforts are a top enforcement priority for the Trump administration, the administration has appealed the Order to the Fourth Circuit Court of Appeals (Fourth Circuit) and filed a motion to stay the Order pending appeal, which was denied by the Court.

Valuable Resources for Defining Illegal DEI

In light of the federal government failing to define “illegal DEI” in the DEI EOs or related legal challenges, employers’ approaches to current DEI initiatives should be informed by current federal antidiscrimination law, communications from federal agencies thus far on this topic, and applicable state law guidance. While awaiting more tailored guidance from the federal government, private employers can glean some do’s and don’ts of DEI from the following resources, explained in more detail herein.

• The memorandum issued by the US Office of Personnel Management (OPM) regarding the future of federal agencies’ DEI programs (Memo);⁵ and 
• Multi-state guidance issued by the Attorneys General of 15 states⁶ addressing DEI employment initiatives (the Multi-State Guidance).

The OPM Memo identifies certain DEI initiatives and practices that are no longer permitted in the federal agencies and in some cases, are considered illegal. For example, “diverse slate” hiring⁷ is included as an example of an “unlawful diversity requirement” that considers an applicant’s protected characteristic as part of the hiring process.⁸ The OPM Memo also directs agencies to reorganize and eliminate “Special Emphasis Programs” (SEPs) that promote DEI based on protected characteristics. SEPs were established to remove barriers to equal employment opportunity for traditionally underrepresented groups in the workforce,⁹ not unlike diversity internships and career development programs in the private sector. Further, the OPM Memo directs all agencies to disband employee resource groups (ERGs) that “advance employment opportunities based on protected characteristics,” and to ensure membership in ERGs is not restricted based on any protected characteristic. 

The Multi-State Guidance takes the position that the DEI EOs do not prohibit lawful practices and policies that promote DEI in the private sector. As such, the Multi-State Guidance recommends that employers continue lawful DEI practices, including: prioritizing widescale recruitment efforts to attract a larger pool of applicants; setting standardized evaluation criteria to reduce the impact of biases on the interview process; ensuring equal access to all aspects of professional development; conducting training on topics such as unconscious bias, inclusive leadership, and disability awareness; and establishing working groups to participate in creating strategies that support more inclusive behaviors and practices. 

Key Takeaways for Employers

The OPM Memo and Multi-State Guidance provide helpful guidance to private employers as they prepare for increased scrutiny and potential government investigations. Specifically, private employers should consider:

• Suspending “diverse slate” hiring practices and focusing instead on widescale recruiting to attract a large pool of applicants.
• Reviewing the purpose and impact of any employer-recognized ERGs and ensuring that such groups are inclusive and open to everyone.
• Reorganizing or ending DEI internship and career development programs based on protected characteristics.
• Conducting internal audits of DEI policies and procedures, especially as to recruitment and hiring.
• Providing trainings on topics like unconscious bias and disability awareness.

Conclusion

As evidenced by the ever-changing DEI landscape, employers should keep in mind that various state law requirements and enforcement priorities under anti-discrimination laws may be in tension with the federal directives in the DEI EOs and US Department of Justice and EEOC enforcement priorities, which will increase uncertainty surrounding compliance. Employers should work with counsel to ensure hiring and retention practices and equal employment opportunity policies comply with applicable law in light of the updated enforcement guidance provided by the federal government to reduce the risk of government investigation while maintaining compliance with applicable law.