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Federal Court Puts Brakes on Trump-Era DEI Ban for Contractors: What California Employers Need to Know
Apr 22, 2025

Federal Court Puts Brakes on Trump-Era DEI Ban for Contractors: What California Employers Need to Know

Topics: Discrimination, Harassment & Retaliation, Employee Hiring, Discipline & Termination, Legal Information

Federal courts continue to navigate the Diversity, Equity, and Inclusion (“DEI”) landscape including Executive Orders targeting DEI. In a recent development last week, U.S. District Judge Matthew Kennelly granted a preliminary injunction against the United States Department of Labor (“DOL”) from enforcing the Executive Order titled “Ending Radical and Wasteful Government DEI Programs and Preferencing” issued by President Trump on January 20, 2025 that effectively bans DEI programs for federal contractors and grantees.

The ruling in Chicago Women in Trades v. Trump (N.D. Ill., No. 1:25-cv-2005) extends a prior temporary restraining order, concluding that requiring contractors to certify non-participation in DEI programs likely violates their First Amendment rights. There, Chicago Women in Trades, a nonprofit that provides job training to women, challenged the requirement for contractors to certify that they do not operate DEI programs.

The court stated, “Although the government emphasized, both in its briefing and at oral argument, that the certification provision implicates only illegal DEI programs, it has studiously declined to shed any light on what this means. The answer is anything but obvious.” The court found requiring such certification likely violates the non-profit’s free-speech rights under the Constitution. The court declined to extend the ruling nationwide but prevented the DOL from cutting off funding to the non-profit. The Trump administration has said that nationwide orders from judges improperly limit the President's powers.

The court’s ruling is not occurring in a vacuum. It lands amid a broader national reconfiguration of what is considered “legal” DEI. On April 11, 2025, four major law firms—Kirkland & Ellis, Latham & Watkins, Simpson Thacher, and A&O Sherman Sterling—entered into agreements with the Trump administration and each pledged at least $100 million in pro bono legal work to causes supported by the Administration. At the same time, industry voices like legal recruiters are making quiet adjustments. Major legal recruiting firm Major, Lindsey & Africa, for instance, silently removed DEI-related content from its website.

This trend has created a background in which courts are increasingly distinguishing between permissible DEI practices and those that may be construed as illegal preferences or quotas based on protected characteristics. According to recent EEOC guidance, Title VII does not prohibit all DEI practices but does prohibit any employment action that uses race, sex, or other protected traits as a motivating or differentiating factor.

A Reminder: Federal Shifts Don’t Cancel State Law Obligations

For California employers, especially those with federal contracts, the ruling provides temporary breathing room, but not immunity from legal scrutiny. Even if enforcement of the federal executive orders is paused, the practical takeaway remains: employers must walk a tightrope between compliance with potentially conflicting directives.

California’s robust anti-discrimination framework, including the Fair Employment and Housing Act (“FEHA”), continues to support many initiatives that fall under the DEI umbrella. While federal action may be rolling back DEI-related mandates, California law still requires efforts to prevent discrimination, promote workplace equity, and provide reasonable accommodations. Employers here must remain careful not to conflate legal EEO (Equal Employment Opportunity) practices with potentially problematic DEI branding, especially in federal compliance contexts.

Key Takeaways for California Employers

Whether you are a federal contractor, a law firm navigating client and other optics, or a tech company adapting internal policies, here are five practical steps to take now:

1. Audit Your DEI Programs

Ensure they are grounded in lawful EEO principles. Avoid policies or practices that suggest goals, quotas or preferences based on race, sex, or other protected traits. Make sure your audit is done in a manner that ensures that it is privileged from discovery.

2. Separate DEI from EEO and Accessibility Functions

As seen in the EEOC settlements, decoupling legal compliance efforts from broader DEI goals is becoming a best practice.

3. Train Management Teams

Educate supervisors, recruiters, and hiring managers about the distinction between inclusive outreach and prohibited disparate treatment.

4. Document Compliance Thoughtfully

Review your employee handbooks, job postings, grant applications, and training materials. Use language that emphasizes compliance and fairness over ideological aims.

5. Monitor State and Federal Trends

This is a fast-moving legal area. With pending appeals and possible Supreme Court involvement, employers must remain agile and well-informed.

If you want more suggestions and a more in-depth discussion of the state of DEI, legal v. illegal DEI, how to navigate the land mines, affinity groups, and other related information we encourage you to join CDF Labor Law on April 30, 2025, for a complementary webinar where our panel will spend a full hour providing information on these topics and discussing Frequently Asked Questions. Register HERE.

About CDF

For more than 30 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

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About the Editor in Chief

San Diego Associate Attorney. Taylor has experience defending employers of all sizes in employment-related claims regarding wrongful termination, discrimination, harassment, retaliation, and employment-related tort and contract claims. Taylor also has experience defending management in wage and hour class actions and PAGA representative actions. Taylor is a member of the Lawyers Club of San Diego and received her Juris Doctor from the University of San Diego School of Law, where she was a member of the Student Bar Association, Employment and Labor Law Society, Business Law Society, and Women’s Law Caucus.
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