A federal court rejected a challenge to Executive Order (EO) 14398, “Addressing DEI Discrimination by Federal Contractors.” The court concluded the EO’s prohibition targets only unlawful intentional discrimination and applies to work performed under a specific contract containing the required clause.

In the Oct. 14, 2026, opinion in National Association of Diversity Officers in Higher Education v. Trump, No. 26-cv-1532 (D. Md.), the court declined to temporarily block the EO and denied preliminary relief against the Federal Acquisition Regulatory Council’s implementing memorandum. Importantly, the ruling addresses preliminary relief but does not resolve the case.

Background

Issued March 26, 2026, the EO directs agencies to include a clause in federal contracts prohibiting racially discriminatory diversity, equity, and inclusion (DEI) activities. Unlike its predecessor EO 14151 which arguably did not clearly define prohibited DEI activities, EO 14398 defines the prohibited activities as “disparate treatment based on race or ethnicity in recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.” Violations may lead to contract termination, ineligibility for future contracts, or False Claims Act enforcement.

Five associations challenged the EO, arguing in part that it restricts protected speech and is impermissibly vague. The plaintiffs sought a preliminary injunction blocking enforcement of the EO.

Court’s Interpretation

The court found the plaintiffs had not shown a likelihood of success on their constitutional claims. Central to the court’s analysis was its interpretation of “disparate treatment.” The court focused on the term’s established legal meaning: unlawful intentional discrimination. Under that reading, the court concluded that the EO prohibits conduct already barred by federal antidiscrimination law.

The court also rejected the argument that the clause’s connection to contract performance was impermissibly vague. It explained that the EO applies only to work performed for the government under the contract containing the clause. Although the opinion does not provide detailed guidance on how that limitation applies to particular organizational activities, it recognizes that contractors may be able to challenge enforcement targeting protected speech or conduct outside a covered contract’s scope.

Considerations for Contractors

The decision leaves the EO and implementing memorandum in place while the litigation continues. Contractors should review applicable contract language and assess how their programs and activities relate to work performed under contracts containing the clause.

If you have questions about this decision or EO 14398, contact a Jackson Lewis attorney.