Update Applicable to:	Effective Date
All Employers that receive federal contracts or federal grant funding	February 6, 2026

What happened?

On February 6, 2026, the United States Court of Appeals of the Fourth Circuit, set aside a lower court order that had temporarily blocked parts of Executive Order 14151 and Executive Order 14173. The court said the challenged provisions are not unconstitutional on their face, and it sent the case back to the trial court for further review.

Executive Order 14151 and 14173: These executive orders require federal agencies to end certain “equity‑related” grants and contracts and add Diversity, Equity, and Inclusion (DEI)related compliance certifications to federal funding agreements.

As a result, organizations that receive federal contracts or grants must continue operating in an environment where enforcement may resume, but future lawsuits can still challenge how the orders are applied in specific situations.

Overview

• Applicability: Private employers with no federal funding are not directly affected but may find the DEI risk principles relevant.
  
• What the executive orders target: The orders focus largely on federal contracts and federal grant funding, directing agencies to end certain diversity-related government activities and to add compliance terms to funding agreements.

• Key provisions at issue:
  • Termination provision (Executive Order 14151): Directs agencies to terminate “equity-related” grants or contracts to the maximum extent allowed by law.
  • Certification provision (Executive Order 14173): Requires federal contracts and grants to include terms requiring recipients to certify compliance with federal anti-discrimination laws, and to certify they do not operate diversity programs that violate those laws; the provision references the False Claims Act risk tied to false statements.
  • Report provision (Executive Order 14173): Directs the government to produce a plan to deter diversity programs that constitute illegal discrimination or preferences.

• Why the appeals court removed the injunction:
  • The judges explained that stopping the orders completely (“across the board”) is only allowed when an order is obviously unconstitutional in every circumstance. The challengers could not show that.
  • They also ruled that the plaintiffs were not allowed to challenge the reporting requirement because any harm they described depended on a long chain of “what if” events, not something actually happening now.

Why this matters:

• Federal contractors and grant recipients may again see these requirements in their agreements. The decision removes the nationwide preliminary block that had paused parts of the orders, increasing the likelihood of contract/grant language requiring certifications and related compliance statements.

• Risk shifts to how it is enforced. The court’s approach signals that future disputes are more likely to center on specific terminations, specific certification demands, or specific agency interpretations, rather than a single court order stopping the policy nationwide.

• Anti-discrimination laws still apply. Regardless of the orders, employers remain subject to federal anti-discrimination obligations; what changes is the enforcement posture and how federal funding conditions may be used to drive compliance expectations.

Action Steps for Compliance

• Inventory the federal funding exposure – identify which business units, entities, or programs receive federal grants or hold federal contracts, and who signs funding certifications.

• Review current and upcoming contract/grant language – Flag provisions that:
  • require certification about diversity-related programs,
  • state compliance is “material” to payment, and/or
  • reference consequences tied to false statements (including those under the False Claims Act).

• Document a good-faith compliance basis before signing – Create a short internal record showing:
  • what programs were reviewed,
  • what legal standards were used,
  • what changes (if any) were made, and
  • who approved the certification.

• Check people programs for common legal risk triggers – Pay special attention to practices that can be viewed as decision-making based on protected traits, such as:
  • quotas,
  • preferential treatment tied to protected characteristics,
  • exclusionary eligibility rules,
  • stereotyping or assumptions in selection processes.

• Strengthen complaint channels and consistent investigations – Ensure employees have clear ways of reporting concerns and that investigations are handled consistently and documented.

• Prepare for “as applied” disputes – If a grant is paused/terminated or a certification demand appears broader than the law allows, route it quickly to legal review and preserve the record for a potential challenge based on the specific facts.

Source References

• Federal: DEI Restrictions on Hold Pending Supreme Court Review (VensureHR)
• US Court of Appeals – Fourth Circuit – No. 25-1189 (February 6, 2026)

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