In January 2025, President Trump signed several executive orders aimed at ending or significantly limiting diversity, equity, and inclusion (“DEI”) programs and policies within the federal government and beyond that the administration believes constitute illegal reverse discrimination. Based on these executive orders, a number of federal agencies, including the Equal Employment Opportunity Commission (“EEOC”), released DEI-related guidance and altered their enforcement agenda and focus. In 2026, the Trump administration has continued to pursue its focus on rolling back allegedly illegal DEI activities, including through lawsuits.
U.S. DOJ’s Lawsuit Against State of Minnesota
On January 14, 2026, the U.S. Department of Justice’s (“DOJ”) Civil Rights Division filed a lawsuit against the State of Minnesota that alleges that Minnesota state agencies have unlawfully used sex and race-based affirmative action goals and plans in hiring decisions. The lawsuit alleges that Minnesota’s affirmative action activities violates Title VII of the Civil Rights Act of 1964 (“Title VII”) because they give employment preferences in hiring based on race, color, national origin, and sex through requiring decision makers to justify decisions to hire individuals from traditional majority groups over those from traditionally marginalized groups, such as women or people of color.
In discussing the lawsuit, former Attorney General Pamela Bondi stated, “[m]aking hiring decisions based on immutable characteristics like race and sex is simple discrimination, and the Trump Administration has no tolerance for such DEI policies.”
Employers should stay tuned to this lawsuit and its outcome, as the outcome could impact private employers both inside and outside of Minnesota.
FTC Warning on Anticompetitive DEI Hiring
On January 30, 2026, the Federal Trade Commission (“FTC”) Chairman, Andrew N. Ferguson, issued a letter to 42 law firms regarding potentially unfair and anticompetitive employment practices involving the Mansfield Certification. The Mansfield Certification is a DEI-related certification available to law firms that agree to consider talent pools for promotions and leadership opportunities made up of at least 30 percent of members of underrepresented racial or other groups. A separate Mansfield Certification Plus certification is available when a legal organization certifies that they have taken concrete steps to meet the benchmark goal. The FTC letter alleges “[p]otentially anticompetitive collusion” between law firms due to the alleged use of DEI metrics and quotas involving race, sex, or other personal characteristics other than a candidate’s merit. The FTC letter also expresses concern that these law firms may be sharing competitively sensitive information about pay and other benefits.
Although this FTC letter is merely an alert of potential liability under laws that the FTC enforces, it demonstrates that anti-DEI policies and enforcement mechanisms are being adopted across multiple departments in the Trump administration.
Fourth Circuit Permits DEI Executive Orders to Proceed
On February 6, 2026, the U.S. Court of Appeals for the Fourth Circuit issued an opinion, in the case of National Association of Diversity Officers in Higher Education, et. al v. Donald Trump, et. al, that vacated the lower district court’s preliminary injunction against provisions in certain anti-DEI-related executive orders issued by President Trump in 2025 (Executive Order No. 14151 and Executive Order No. 14173). The litigation was brought by recipients of federal grants who allege that requirements in the executive orders for federal contractors and grantees of federal funds regarding DEI were facially unconstitutional. In vacating the preliminary injunction, the Fourth Circuit held that the plaintiffs did not have standing to bring their claims, because there was no injury-in-fact. The Court further rejected the plaintiffs’ Fifth Amendment vagueness and First Amendment viewpoint and chilled speech facial challenges to other provisions of the executive orders. The case was remanded to the District Court for Maryland for further proceedings.
As a result of this Fourth Circuit decision, federal agencies can continue to implement anti-DEI-related guidance based on the executive orders as the litigation proceeds on remand. Although the Fourth Circuit opinion suggests that the plaintiffs’ claims may fail, continued challenges to the DEI-related executive orders are expected. Additionally, employers should be aware that federal agencies may soon release additional anti-DEI requirements, especially as related to the previously halted executive orders.
EEOC Title VII and DEI Reminder Letter to Fortune 500 Companies
On February 26, 2026, EEOC Chair Andrea Lucas issued a letter to the CEOs, general counsel, and board chairs of various Fortune 500 Companies, reminding them of the EEOC’s anti-discrimination mission. This letter describes the prohibition against the use of race, sex, and other protected characteristics in employment, including those labeled as DEI programs. This letter provides a reminder of employer’s non-discrimination obligations under federal law, including Title VII.
Although this letter does not necessarily present any new guidance for employers, it reminds employers of the EEOC’s anti-discrimination position which prohibits race or sex-based decisions and cautions that DEI programs may be prohibited if they similarly use protected characteristics in employment decisions.
March 2026 Executive Order
On March 26, 2026, President Trump issued Executive Order 14938, “Addressing DEI Discrimination by Federal Contractors.” The Order supplements activity by the Trump administration in 2025 aimed at eliminating alleged illegal DEI by federal contractors and subcontractors, mandates new provisions in government contracts, and details consequences for non-compliance including potential contract termination, False Claims Act liability, and/or debarment..
The order directs federal agencies to prohibit contractors and subcontractors from engaging in racially discriminatory activities, defined as “disparate treatment based on race or ethnicity” in recruitment, employment, contracting, program participation or resource allocation. In addition, within 30 days, agencies must include a new contract clause prohibiting such activities in federal contracts. The order also provides that contractors must recognize that compliance is material to the federal government’s payment decisions for False Claims Act purposes, and it requires contractors to maintain compliance records and provide government access.
The Executive Order relies on the Federal Property and Administrative Services Act (FPASA), a federal statute that authorizes the president to impose requirements governing federal procurement. Commentators have noted that legal challenges are expected.
Key Takeaways
As demonstrated by federal court and agency actions in the first few weeks of 2026, there is a continued legal risk for employers that use sex or race-conscious employment practices. Like we saw in 2025, such practices may pave the way for reverse-discrimination lawsuits. Additionally, further anti-DEI guidance from federal agencies may be on the horizon. As such, employers should continue to consider legally privileged internal audits of their internal policies and practices to assess and address any potential risks.
Employers should continue to be aware of potential changes in DEI policies and enforcement due to court decisions, executive guidance, and other legal developments, and should work with legal counsel to best position themselves for any potential consequences. If you have any questions about recent DEI updates, please contact your regular Lathrop GPM attorney.