Trump DEI executive orders raise False Claims Act risks

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In Brief:

• Trump administration executive orders target DEI programs deemed discriminatory, including those used by federal contractors.
• Revocation of longstanding affirmative action rules raises compliance and False Claims Act exposure.
• DOJ guidance and new orders encourage whistleblowers to bring DEI-related qui tam cases.
• Employers face growing legal challenges under Title VII and the First Amendment over mandatory DEI training.

In late March, the Trump White House issued an executive order titled “Addressing DEI Discrimination by Federal Contractors.”

The order was the most recent of several executive orders issued by the administration aimed at what it considers DEI-related discrimination.

The first of the series of orders was Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” signed by President Trump on Jan. 21, 2025, mandating the removal of DEI programs that are deemed discriminatory within federal agencies and for federal contractors. The order, in effect, overturns previous mandates promoting affirmative action.

The order targeted race/ethnicity-related DEI programs that utilize protected characteristics for hiring or contracting preferences. It also affects federal contractors, requiring them to certify they do not operate “illegal DEI” programs, with compliance tied to the False Claims Act.

The order specifically revoked Executive Order 11246, which had mandated affirmative action for women and minorities for over 60 years. It does not change legal obligations for affirmative action regarding individuals with disabilities and protected veterans. In March 2025, the Department of Justice issued guidance to assist with the elimination of targeted programs.

Since early 2025, the Trump administration has been using executive orders to encourage whistleblowers to bring more cases under the False Claims Act, said Chad Blumenfield, a partner with Minneapolis-based Greene Espel.

Executive Order 14173, requires  the head of each agency to put language in every grant contract stating that the recipient is in compliance with all federal anti-discrimination laws.

“These would be a trigger for potential false claims issues,” said Blumenfield, a former federal prosecutor who represents companies in government enforcement actions and complex business litigation. “The government has been pretty clear that is what they are trying to do. The government has been trying to encourage whistleblowers to bring cases and telling agencies that these are good cases. But this  is a pretty challenging area in which to bring cases forward.”

Under the False Claims Act, “these policies have been getting a lot of attention but, traditionally, false claims cases have been mainly in the health care area and procurement in the defense space. While the government has been promoting this, it hasn’t really come to fruition in a meaningful way.”

“One important takeaway is that while DEI is the term they are using, they are really talking about  something they consider to be illegal discrimination — using race or gender to preference certain groups,” Blumenfield said. “If a company is trying to have a  quota or ‘thumb on the scale’ to promote someone, the government will take a critical look at that.”

The most recent executive order, EO 14398, is significant because it authorizes the attorney general to bring civil enforcement actions. “An EO from the White House directing the DOJ to take any action is notable in and of itself,” Blumenfield said. The “prompt review” language is a clear direction to DOJ attorneys evaluating False Claims Act cases to give them special attention.

“This is the latest and clearest signal to relators [aka whistleblowers] that if they bring [False Claims Act] cases premised on DEI violations, they will receive special attention from DOJ. Since DOJ intervention can go a long way toward determining the ultimate success of a qui tam case, this is a big deal,” Blumenfield noted.

“This ongoing and escalating encouragement notwithstanding, it remains unclear whether the lawyers who typically bring [False Claims Act] cases will be interested in bringing this kind of case.”

Diversity and inclusion initiatives also have faced lawsuits based on other laws. In recent months, court challenges to mandatory DEI training have been increasing, focusing on claims of hostile work environments, forced speech, and violations of Title VII or the First Amendment, said Matthew Bodie, a law professor at the University of Minnesota.

“Under the opposition clause of Title VII, if you opposed practices you believe are unlawful, you are entitled to raise those objections. If adverse employment action has been taken against you, then you can bring a claim under Title VII,” Bodie said.

Going forward, in challenges to DEI training “the area where you might see the most action would have to be involving some sort of adverse action taken against an employee,” Bodie said.

“The question is whether a policy directed at employees might affect their exercise of the First Amendment. An employer might be required to provide some reasonable accommodation of their beliefs. This is comparable to the way courts handle claims made under the Americans With Disabilities Act,” he said.

“There has to be an undue burden on an employer in order for them to be excused from accommodating the employee’s beliefs,” Bodie said. “I think you’ll see more people saying ‘My religion prevents me from participating actively in the  training.’”

The employer would then need to give them accommodation, or have to explain why doing so would put too much burden on them, Bodie said. “The employer could say, ‘We need everybody to go through DEI training to prevent people from acting in inappropriate ways,’ which is going to be a harder case to make. If I’m an employer, I want to avoid that if I can.”

“An employer will want to make sure they have some [acceptable] way to present DEI [information] just like any other human resources material. There is certainly a lot of HR thinking ‘out there’ about how to approach these issues.

“The threshold for adverse discipline against an employee is pretty low; it  can be a relatively minor thing that you have been denied,” Bodie said.

The federal Equal Employment Opportunity Commission is working on new regulations to enforce Title VII and other discrimination protection, Bodie noted.