Labor & Employment Law Daily Wrap Up, REMEDIES, DAMAGES—D. Md.: Court declines to preliminarily enjoin Trump contractor DEI order, (Oct 15, 2026)

By Kathleen Kapusta, J.D.

“Plaintiffs lack a protectable First Amendment interest in speech that is prohibited by the Contractors Order because they lack an interest in speech that is prohibited by federal antidiscrimination law.”

Denying a request by five organizations whose members include government contractors to preliminarily enjoin an executive order issued by President Trump in March 2026—which directs executive departments and agencies to ensure that agreements with contractors and subcontractors include certain language related to diversity, equity, and inclusion—a federal court in Maryland found they failed to show a likelihood of success on the merits of their constitutional claims, including a First Amendment overbreadth challenge and a Fifth Amendment impermissibly vague challenge. Nor did they show they were suffering irreparable harm attributable to a Federal Acquisition Regulatory (FAR) Council memorandum implementing the order (National Association of Diversity Officers in Higher Education v. Trump, No. 26-cv-1532-ABA (D. Md. Oct. 14, 2026)).

The plaintiffs are five associations whose members include government contractors and/or individuals who work for entities that hold government contracts. Three of the plaintiffs represent members who are employed in higher education while the other two are nonprofit trade associations comprised of contractors in the construction business.

Order… They challenged the March 2026 executive order entitled “Addressing DEI Discrimination by Federal Contractors,” which directs “executive departments and agencies” to ensure that agreements with contractors and subcontractors include certain language related to DEI within 30 days, “to the extent permitted by law.” The Order also provides model contractual language that must be included in government contracts, including that “The contractor will not engage in any racially discriminatory DEI activities, as defined in section 2” of the Order, and that “‘racially discriminatory DEI activities’ means disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”

... and memo. They also challenged the FAR Council’s implementation of the Order in its April 2026 memo stating that “agencies must... [m]odify existing contracts” to comply with the Order “by July 24, 2026,” which was later delayed until August 7, 2026. The memo also includes model contract language that is identical to the language provided in the Order.

Lawsuit. According to the plaintiffs, they are being harmed by the Order and memo due to concerns of lost work or canceled contracts related to the new required contractual language and/or its chilling effect. They claimed, among other things, that the Order violates the First Amendment on its face because it is overbroad, discriminates on the basis of content, and imposes unconstitutional conditions and violates the Due Process Clause of the Fifth Amendment because it is too vague. They also claimed the memo violates the Administrative Procedure Act because it is arbitrary and capricious, unconstitutional, and does not comport with required procedures. They sought to enjoin the Order as unconstitutional and to stay or enjoin the memo under the APA.

NADOHE I. Turning to their First Amendment overbreadth claim, which they confirmed was a facial challenge, the court found the Order does not prohibit a “substantially disproportionate” amount of constitutionally protected speech. In its 2026 decision in Nat’l Ass’n of Diversity Officers in Higher Educ. v. Trump (NADOHE I), the Fourth Circuit, observed the court here, held that the “Certification Provision” of one of the challenged Orders in that case was not overbroad.

That provision required agencies to include in “every contract or grant award... [a] term requiring [the] counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” This requirement, explained the Fourth Circuit, was not overbroad because it “requires only that plaintiffs certify compliance with federal antidiscrimination laws, which the First Amendment doesn’t confer a right to violate,” especially because “existing federal law already demands such compliance, and plaintiffs have not challenged existing law as viewpoint-discriminatory or as over or underinclusive.”

Runs aground. Regarding the model contractual language at issue here, the court noted that it not only implicitly requires compliance with federal antidiscrimination laws, it does so with sufficient clarity as to render implausible the plaintiffs’ facial overbreadth challenge. While the court acknowledged that the requirement that contractors refrain from engaging in “racially discriminatory DEI activities,” is far from self-explanatory, it found the plaintiffs’ “facial overbreadth challenge runs aground on the rest of the sentence”—“as defined in section 2 of the Executive Order of March 26, 2026.”

That provision, the court continued, states that “‘racially discriminatory DEI activities’ means disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.” Observing that “disparate treatment” is a common legal term that is essentially synonymous with unlawful intentional discrimination, the court explained that “As with the Executive Orders at issue in NADOHE I, then, the Contractors Order only prohibits contractors from engaging in conduct that is already prohibited by federal law: intentional discrimination on the basis of race or ethnicity.”

This interpretation, said the court, was also supported by the context surrounding the phrase “disparate treatment” in the Order. “Disparate treatment” defines the phrase “racially discriminatory DEI activities” and the inclusion of the term “racially discriminatory,” the court stated, confirms that “disparate treatment” is to be interpreted based upon its established meaning in the context of federal laws that prohibit discrimination on the basis of race.

Moreover, said the court, if the government were to enforce the Order consistent with a broader interpretation by, for example, bringing FCA actions or canceling contracts in relation to DEI-related activity that does not constitute disparate treatment under existing law, the targets of such enforcement could bring an as-applied challenge. Because the plaintiffs did not establish that the Order’s unconstitutional applications, if any, are “substantially disproportionate to the [Order’s] lawful sweep,” the court found they failed to establish a likelihood of success on their overbreadth claim.

Content discrimination and unconstitutional conditions. As to the plaintiffs’ contention that the Order also impermissibly regulates speech based on its content and places an unconstitutional condition on the exercise of their First Amendment rights, the court found they failed to demonstrate a likelihood of success as to either of these arguments for largely the same reasons. The Order’s definition of “racially discriminatory DEI activities” as “disparate treatment based on race or ethnicity,” the court again explained, “means that any conduct prohibited by the Order is also prohibited by federal antidiscrimination law.”

Regarding employers too small to be covered by Title VII and Section 1981, the court pointed out, independently prohibits intentional discrimination in making and enforcing contracts, including employment contracts. Thus, the court found the Order does not impermissibly regulate the content of speech or impose unconstitutional conditions because it mandates compliance with existing laws. As a result, the plaintiffs failed to establish a likelihood of success as to their content discrimination or unconstitutional conditions arguments.

Fifth Amendment. Addressing the plaintiffs’ Fifth Amendment vagueness claim, the court noted that it focused on the preface of the model contractual language in the Order, which states that the contract language at issue applies “[i]n connection with the performance of work under this contract.” According to the plaintiffs, this is impermissibly vague because it leaves open the question of whether the language covers “only that portion of work that is directly funded by the covered contract” or “any expression by a contractor or subcontractor[.]”

Disagreeing, the court noted that the model language directs that contractors agree to certain provisions “[i]n connection with the performance of work under this contract” and the Order expressly applies only to work the contractor is performing for the government pursuant to the contract in which the model language appears. “The meaning of the Executive Order,” said the court, “is not impermissibly vague.”

As to any concern by the plaintiffs that the government might attempt to enforce the provisions of the Order against them for conduct or speech outside of the contract, the government acknowledged that could be unconstitutional retaliation. And if the government were to undertake such action, the plaintiffs or their members could bring as-applied challenges.

APA. Finally, the plaintiffs argued that the memo is arbitrary and capricious because it fails to provide a reasoned explanation, fails to take into account the reliance interests of government contractors, and fails to consider such things as the impact and cost of implementing the model contract language. Finding that the requirements imposed by the memo are substantially identical to the requirements imposed by the Order, and because it declined to preliminarily enjoin the Order, the court found they failed to show a likelihood of success on the merits of their claim that the memo is unconstitutional. Nor, said the court, have they shown they are likely to suffer irreparable harm absent a stay or injunction of the memo because the harms they identify flow from the contract clause that the Order independently requires.

The case is No. 26-cv-1532-ABA.

Judge: Abelson, A.

Attorneys: Andrea J. Matthews (Democracy Forward Foundation) for National Association of Diversity Officers in Higher Education, American Association of University Professors, and United Academics of Maryland-University of Maryland, College Park, National Association of Minority Contractors, and National Association of Minority Contractors, DMV Chapter. Esam Al-Shareffi, U.S. Department of Justice, for Donald J. Trump and the United States.

Companies: National Association of Diversity Officers in Higher Education; American Association of University Professors; United Academics of Maryland-University of Maryland; National Association of Minority Contractors; National Association of Minority Contractors, DMV Chapter

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