On April 20, 2026, the National Association of Diversity Officers in Higher Education filed suit in federal court on behalf of a coalition of five higher education and minority trade associations, challenging the executive order as unconstitutional. The plaintiffs—naming President Trump and over a dozen federal agencies—seek to declare EO 14398void, enjoin its enforcement, and invalidate the False Claims Act materiality provision as exceeding the President's procurement authority. They argue the order is overbroad, conflates lawful diversity initiatives with unlawful discrimination, chills First Amendment-protected speech and association, and imposes unconstitutional conditions by leveraging federal funding.
Contractors face immediate exposure. The April 25 compliance deadline is now live, and noncompliance carries steep penalties: contract termination, debarment, and Department of Justice False Claims Act litigation or intervention in whistleblower suits. The litigation outcome remains uncertain, but the Fourth Circuit's recent decision vacating an injunction against prior Trump DEI orders suggests courts may not halt implementation. Contractors should audit current DEI programs for potential FCA liability and monitor the suit's progress closely.