A three-judge federal appeals court in Richmond, Va., ruled that Trump administration federal agencies can end diversity, equity and inclusion programs in their offices and fire workers hired to meet their requirements under federal law, lifting an injunction issued earlier in the case by a Maryland federal judge that allowed the agency’s diversity officers to remain in the lower court.
The ruling covers agencies such as the U.S. Departments of Transportation and Defense, the Federal Aviation Administration, the U.S. Army Corps of Engineers, and the U.S. General Services Administration, which affect employees to maintain compliance with equity-based federal laws, including those requiring the participation of minority, women and disadvantaged business enterprises in agency projects.
In 1977, the late Parren Mitchell, a representative from Maryland, founder of the Congressional Black Caucus and chairman of the House Small Business Committee, attached an amendment to a public works bill that required state and local governments applying for federal grants to set aside 10 percent of those funds for minority-owned businesses. In 1983, Congress codified the federal disadvantaged business enterprise program to require state and local governments receiving federal funds for transportation projects to set aside 10% of contracts for such enterprises.
“These were laws we had fought for more than 60 years ago,” said the Rev. Larry Bullock, president and CEO of the American Minority Contractors Association, which represents minority contractors and subcontractors in 28 states.
Bullock said the current administration’s executive orders do not change any federal law. “We are informing our members that the elimination of the federal DEI/DBE programs has not been decided by any court and we believe that this will ultimately be decided by the [U.S.] Supreme Court”.
In the current case, the National Association of Higher Education Diversity Officers, the city of Baltimore and the state of Maryland are among the plaintiffs challenging two executive orders signed in the early days of Trump’s second administration that ended all federal DEI programs.
The plaintiffs charged that President Donald Trump and Russell Vought, director of the US Office of Management and Budget, were unable to enforce their orders. Writing for the appeals court in Richmond, Chief Justice Albert Diaz said that “the president can determine his policy priorities and instruct his agents to make funding decisions based on them.”
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Diaz added that “President Trump has decided that equity is not a priority in his administration, and therefore has directed his subordinates to cancel funding that supports equity-related projects to the maximum extent allowed by law. Whether or not this is sound policy is not our call. We are only asking whether the policy is unconstitutionally vague to the recipients of the funding.”
Citing a 1998 National Endowment for the Arts funding case as precedent, Diaz wrote that the policy to end agency equity efforts was not unconstitutionally vague and that the administration can continue to pursue it while the legal challenge goes back to district court for trial.
However, in a separate concurring opinion, Diaz also hinted that DEI participants and advocates could continue actions. “For those disappointed by the outcome, I say this: follow the law,” he said. “Keep up your critical work. Keep the faith. And depend on the Constitution, which remains a beacon amid the tumult.”
Challenges on several fronts
A separate case in 2023 challenged the legality of M/WDBE requirements for federal projects in Kentucky under the constitution’s due process clause, and the U.S. Department of Transportation ultimately ruled its own program unconstitutional.
This has led to other challenges in DEI programs across the country. Many state transportation agency programs have shifted their focus to helping small businesses without considering owners’ gender or minority status, or asking applicants to explain their social disadvantage. The Kentucky case was originally limited to two plaintiffs, Mid-American Milling Co. and Bagnell Trucking that operated in Kentucky and Indiana, but was expanded to any state where the companies bid on projects, giving it much more legal impact.
The federal DOT’s updated policy guidance in September removed race- and gender-based preferences from its DBE programs and instructed state agencies to base their programs on other forms of disadvantage.
“The interim final rule removes presumptions based on race and sex from the definitions of “socially and economically disadvantaged individual,” it says, instead requiring the owner of a DBE or ACDBE applicant to demonstrate on a case-by-case basis that the individual meets the criteria.”
“As a direct result of these cases, you’re going to see some states that meet the requirements of the law and some that don’t, citing ongoing litigation,” said Bullock of the American Minority Contractors Association.
In another federal challenge last year, Louisiana construction technology company Revier Technologies challenged two U.S. Small Business Administration programs for violating the Constitution’s equal protection clause because of race-based classifications. They are the State Small Business Credit Initiative and the Department of Homeland Security Cybersecurity and Intelligence Diversity Grant. Revier’s lawsuit says both programs put employment at a disadvantage for not being a minority or women-owned business.
The case in Richmond court and the Revier challenge “address the related concept of government action based on race,” said Matthew Schultheis, founder and CEO of Revier, which is the parent company of HAULR, a construction truck management app.
“Federal courts do not need to decide what ‘socially and economically disadvantaged’ means. The terms are found in a regulation that is challenged in my lawsuit,” said Schultheis, who previously worked for Autodesk and PlanGrid. “The administration could revise this regulation to make clear that racial presumption is no longer the law [Small Business Administration] recently suggested that he may be doing this, we’ll just have to wait and see what [it] ago.”
Schultheis was referring to a January policy guidance from the agency that mirrors DOT’s federal policy directive after the Kentucky case, which instructed employees not to make decisions about social disadvantage based on race or gender. The small business agency also says it “strongly agrees that the race-based presumption of social disadvantage listed in its regulations is unconstitutional.”
The Minority Contractors Association said in a statement that expanding the scope of the injunction in the Kentucky case to states where the plaintiffs operate or will bid will create inconsistent application of DBE policies, resulting in unequal economic opportunity for minority contractors across regions.
“It’s important to note that this is not the end of the discussion about executive orders,” said David Cayamitte, president and CEO of EMBRACE Partners, an insurance consultant and CEO of the Minority Business Development Institute, which helped MWDBE companies bond to work on federal projects after Hurricane Katrina in Louisiana and many other projects.
“There are other cases in other Circuits that are still to be decided, most importantly, in the Seventh Circuit,” he said. “Chicago Women in Trades (CWIT) v. Department of Labor In that case, the appeals court declined to lift a preliminary injunction blocking the certification provision in Trump’s second executive order. If the court order is upheld, “we will have a formal circuit split, where the Fourth Circuit says the orders are legal and the Seventh Circuit says they are not.”
Bullock said the various court cases could take up to two years or more to move through a legal process that could, in fact, end with a Supreme Court decision. Maryland officials and higher education officials can appeal the decision on the requirement to the appeals court in Richmond or send their challenge immediately to the higher court.
