EEO Compliance Dispatch

A three-judge panel of the U.S. Court of Appeals for the Fourth Circuit has ruled that two of President Trump’s executive orders targeting Diversity, Equity and Inclusion are not unconstitutional – at least not on the grounds asserted by the challengers.

Background

Last February, Judge Adam Abelson (a Biden appointee) issued a nationwide preliminary injunction, barring the Trump Administration from enforcing portions of the executive orders. Judge Abelson focused on these provisions:

• The provision in Executive Order 14151, “Ending Radical Government DEI Programs and Preferencing,” that directs executive agencies to terminate all “equity-related grants or contracts with the executive branch (referred to as the Termination Provision).
• The provision in Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” that requires federal contractors and grantees to certify that they are in compliance with federal antidiscrimination laws (referred to as the Certification Provision).
• The provision in Executive Order 14173 that instructs the Attorney General to identify “specific steps or measures to deter DEI programs or principles (whether specifically denominated ‘DEI’ or otherwise) that constitute illegal discrimination or preferences. . . .” (referred to as the Enforcement Threat Provision).

According to Judge Abelson, the first and third provisions were likely to violate free speech and due process protections. The second provision was likely to violate free speech protections.

The federal government appealed. A three-judge panel of the Fourth Circuit paused the injunction, which allowed the government to enforce the executive orders while the appeal was pending.

The Fourth Circuit’s decision

On Friday, the Fourth Circuit panel issued its decision on the merits. Interestingly, the Fourth Circuit panel consisted of two Obama appointees and one Trump appointee.

                Standing

The panel first found that the plaintiffs – the National Association of Diversity Officers in Higher Education, the American Association of University Professors, and the Mayor and City Council of Baltimore – did not have standing to challenge the Enforcement Threat Provision.

Generally, to have standing, the plaintiff must show an actual or imminent injury, that the injury was caused by the defendant, and that the injury can be remedied by judicial relief.

The panel determined that the Enforcement Threat Provision did not cause any injury or threat of injury to the plaintiffs. The provision was aimed entirely at internal government actions, such as directing the Attorney General to compile information to advise the president. According to the panel, “it is difficult to see how [the plaintiffs] can be in imminent danger of an injury based on a provision that simply requires a cabinet officer to issue a report at a future date.”

However, the panel concluded that the plaintiffs had standing with respect to both the Termination and Certification Provisions because of monetary losses resulting from cancelation of contracts and grants, or from being required to choose between receiving federal funds and abandoning “lawful efforts and speech related to [DEI].”

                Constitutionality

The panel then addressed the argument that the Termination and Certification Provisions were unconstitutional. The provisions were challenged “on their face” rather than “as applied.” “[A] facial challenge requires a showing ‘that the [provision] is unconstitutional in all of its applications, or that [it] lacks any plainly legitimate sweep.’” (Emphasis added). A challenge based on application of the provisions would focus on how the provisions actually operate and affect the plaintiffs.

                Termination Provision

The plaintiffs asserted that the Termination Provision violated the Fifth Amendment of the U.S. Constitution because it was vague and did not afford due process. “[D]ue process demands fair notice and prohibits arbitrary enforcement.”

In the panel’s view, however, the Termination Provision only directs federal agencies to act in accordance with the president’s wishes. It “calls for federal actors to terminate . . . ‘equity-related’ grants or contracts.” The Termination Provision “is nothing more than ‘an outward-facing’ policy directive from the President to his agents.”

The President may determine his policy priorities and instruct his agents to make funding decisions based on them. . . . President Trump has decided that equity isn’t a priority in his administration and so has directed his subordinates to terminate funding that supports equity-related projects to the maximum extent allowed by law.

The panel held that, because the government has the right to make funding decisions based on policy choices, the Termination Provision was not unconstitutionally vague on its face. Accepting the vagueness argument “‘would be to call into question the constitutionality’ of other government funding programs and awards based on ‘subjective criteria such as excellence.’”

                Certification Provision

The plaintiffs asserted that the Certification Provision violated the First Amendment of the U.S. Constitution because it infringed on their freedom of speech. Again, the panel noted that the government has significant discretion to set spending priorities and to fund some activities but not others.

Moreover, according to the panel, the Certification Provision does not implicate protected speech. The Provision requires contractors and grantees to certify that they are in compliance with federal antidiscrimination laws, and the First Amendment does not provide a right to violate those laws. “Put another way, plaintiffs have no protectable speech interest in operating . . . DEI programs that violate federal antidiscrimination law.’”

What’s next?

The Fourth Circuit sent the case back to the lower court for further proceedings. But if a party cannot obtain a preliminary injunction, it is exceedingly unlikely to obtain a permanent injunction, which is the main goal of such litigation.

In contrast to the Fourth Circuit, other courts have granted preliminary injunctions, barring executive agencies from enforcing portions of the president’s executive orders. For example,

• The U.S. Department of Homeland Security was enjoined by a federal judge in Illinois from enforcing DEI-related conditions on the City of Chicago and local governments. The decision was based on First Amendment grounds (speech).
• The Federal Emergency Management Agency and DHS were enjoined by a federal judge in California from conditioning federal disaster-relief and public-safety grants on compliance with the DEI executive orders. This decision is on appeal to the U.S. Court of Appeals for the Ninth Circuit.
• The U.S. Department of Labor was enjoined by a federal judge in Illinois from requiring grant recipients to certify that they don’t have programs that violate federal antidiscrimination laws. This decision is on appeal to the U.S. Court of Appeals for the Seventh Circuit.

The Fourth Circuit decision restores the federal government’s ability -- at least for now -- to enforce key portions of the DEI-related executive orders (subject to other courts’ orders). The panel made clear that facial challenges to these orders face steep odds. But challenges by organizations directly affected by the application of the executive orders may have better chances of success.

With conflicting rulings emerging across different jurisdictions and with appeals pending, contractors should assume continued legal uncertainty and proactively evaluate with counsel their DEI initiatives, certifications, and funding conditions. We will keep you posted.

For assistance, please contact a member of Constangy’s EEO/Contractor Compliance, Reporting & Analytics Practice Group.