On April 14, U.S. District Judge Matthew F. Kennelly ruled, in relevant part, that the U.S. Department of Labor (DOL) cannot require federal grant recipients to certify that their diversity, equity and inclusion (DEI) programs do not violate applicable federal anti-discrimination law and prohibited the termination of the plaintiff’s Women in Apprenticeship and Nontraditional Occupations (WANTO) grant on the basis that it was “equity-related.”
The district court judge partially granted the motion for a preliminary injunction after concluding that the certification requirement likely violates the First Amendment and that a requirement to terminate equity-related grants violates constitutional separation of powers principles when applied to funds that Congress directed be used for that very purpose. The preliminary injunction blocks DOL efforts to enforce the certification requirement nationwide but does not apply to any other federal agencies and only enjoined the termination of one of the plaintiff’s grants.
Background of the Lawsuit
The lawsuit, brought by Chicago Women in Trades (CWIT), a nonprofit supporting women’s participation in skilled trades, challenged provisions in two executive orders (EOs) issued in January 2025 that sought to end “illegal preferences and discrimination” by prohibiting DEI efforts considered to be in violation of federal anti-discrimination laws. More specifically, Section 3(b)(iv) of the January 21 EO entitled, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” states that each agency “shall include in every . . . grant award” a certification, enforceable via the False Claims Act, that the grantee “does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” CWIT also challenged provisions in the January 20 EO, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” including one that requires federal agencies “terminate, to the maximum extent allowed by law, all … ‘equity related’ grants or contracts.”
CWIT alleged that its work promoting employment opportunities for women would lead the government to believe its conduct falls within the scope of the certification provision. Indeed, CWIT received multiple emails from the Department of Justice directing it to cease DEI-related activities constituting credible threats of enforcement by the government.
In addition, CWIT alleged it faced pressure to self-censor, “which supports the proposition that there is a chilling effect on grantees.” For example, one of its contractors asked CWIT to provide presentations without referencing “DEI content” and a pass-through entity with which CWIT works “threatened to terminate CWIT’s subgrant unless it self-censored and . . . eliminate[d] any references to ‘DEI’ and ‘DEIA’ for an upcoming technical assistance program.”
The federal government argued that the certification only asks grantees to confirm compliance with existing laws. It contended that because grantees do not have a constitutional right to violate the law, the receipt of funds may be conditioned on certification of its compliance with applicable anti-discrimination laws.
However, Judge Kennelly disagreed, finding that “CWIT has demonstrated that it is likely to succeed on the merits of its claim in challenging the Certification Provision.” The judge reasoned that “[a]lthough the government may use conditions [to regulate speech] to ‘define the federal program,’ it may not ‘reach outside’ the program to influence speech.” At oral argument, the government conceded the certification is an attempt to regulate the speech of the grantee outside the federally funded program, as it prohibits the counterparty from operating any program, whether or not related to federal contracts or grants, promoting DEI that violates federal anti-discrimination law. The transcript from the TRO hearing reads: “[W]e’re not arguing that the Certification Provision doesn’t apply outside of the grants or contracts. It does. It plainly does.”
Further, Judge Kennelly also rejected the government’s argument that it cannot violate the grantee’s first-amendment rights because the certification simply requires the grantee to certify that it doesn’t violate the law. The court reasoned that the EO does not define “DEI,” “let alone what might make any given ‘DEI’ program violate Federal anti-discrimination laws,” and therefore, puts the grantee in “a difficult and perhaps impossible position” where it must choose whether to change its programmatic activity, decline to make a certification and lose their grants, or make a certification based on an uncertain definition and risk it be deemed false and therefore subject the grantee to liability under the False Claims Act. Even if the certification’s objective is limited to “illegal DEI,” “it is a bedrock First Amendment principle that advocating for violation of the law cannot be proscribed unless it rises to incitement.”
In addition, Judge Kennelly found that CWIT is unlikely to succeed in its facial separation of powers challenge to the Termination Provision. CWIT’s argument that the executive branch must respect congressional appropriation power and that the executive branch lacked the authority to place certain political conditions on grants absent a congressional delegation of authority to do so was unavailing to Judge Kennelly because CWIT could not show that the Termination Provision conflicted with all statutes that appropriate funds for grants. In fact, in some instances, the executive branch could do so as certain grant statutes do not require the government to fund equity-related initiatives. Judge Kennelly found that “[d]ue to CWIT’s failure to show that every grant’s termination would be unconstitutional, its facial challenge is unlikely to succeed.”
However, Judge Kennelly did find that CWIT demonstrated a likelihood of success on its separation of powers claims when applied to one of five CWIT grants. The district court found that the termination of the WANTO grant ran afoul of the Spending Clause and thus violated the separation of powers principles because the WANTO statute expressly requires DOL to “make grants to community-based organizations to provide technical assistance to employers and labor unions.” Further, “every example of ‘technical assistance’ that the [WANTO] Act lists involves supporting women, in particular, who hold nontraditional occupations.” Given the clear congressional directive, the executive branch has no authority to bypass “Congress’s condition and policy goal.”
Implications
First, while the preliminary injunction of the certification requirement applies nationwide, it is limited to the DOL. That said, the effect of the injunction could grow if the reasoning is adopted by other courts in similar challenges to certification demands by other agencies.
Second, the order prohibits DOL from terminating CWIT’s “equity-related” grant but chose not to extend the ruling nationwide. Judge Kennelly found “there is likely a low risk that other grantees who risk termination or are terminated will not challenge enforcement of this provision against them.” Therefore, to challenge the “termination provision”—which requires the “Director of the Office of Management and Budget (OMB) to ‘coordinate the termination of all discriminatory programs, including illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities in the Federal Government, under whatever name they appear’”—contractors will have to independently sue.
Going Forward
With regard to the certification provision, the decision rests primarily on the fact that the government has not defined the term “illegal DEI.” The resulting ambiguity has a chilling effect on free speech and the court found it would likely be unconstitutional as a violation of the plaintiff’s First Amendment rights. Until the government provides a definition for which contracts and courts can interpret, we will likely see additional injunctions. And, while the court’s separation of powers holding resulted in the limited prohibition against DOL terminating one of CWIT’s grants, the principal is an important one as there are certainly other statutes that require that agencies issue similar grants.
As lawsuits continue to unfold and the patchwork of injunctions evolves, we will continue to keep contractors and grant recipients appraised of key developments.
