Attention Employers: DEI Legal Development Spotlight

This installment of DEI Legal Developments Spotlight continues our discussion of recent DEI-related updates impacting the private sector and public sector developments that may provide insight into similar issues in the private sector. Recent developmental highlights include focuses on:

• Race- and sex-based initiatives, programs, and policies
• Transgender rights
• Religious protections and accommodations
• DEI-related funding conditions
• New executive order (EO) issued addressing DEI discrimination by federal contractors
• U.S. Equal Employment Opportunity Commission’s (EEOC) Fiscal Year (FY) 2025 Performance Report
• U.S. Department of Justice’s (DOJ) first Civil Rights Fraud Initiative settlement

For links to our past timelines, see HERE. For our last edition of DEI Legal Developments Spotlight, see HERE.

KEY DEVELOPMENTS

March 2, 2026 (TX Comptroller sued over “unlawful” conversion of HUB program): Four minority businesses and a nonprofit trade group sued Acting Texas Comptroller Kelly Hancock alleging his December emergency regulation unlawfully converted the state’s Historically Underutilized Business (HUB) program—which benefited minority- and women-owned businesses in state contracting—to the “VetHUB” program, which serves only small businesses owned by service-disabled veterans. The regulation decertified more than 15,000 minority- and women-owned businesses from the program. The plaintiffs allege the “illegal rewriting” of the program contravenes the statute’s plain text and purpose and violates the state’s Administrative Procedure Act (APA) and Texas Constitution.

Related Developments

• A lawsuit was filed against the U.S. Small Business Administration (SBA) challenging a regulation that establishes a race-based presumption of “social disadvantage” under its 8(a) business development program (see November 17 entry HERE).
• The U.S. Department of Transportation issued an interim final rule that removed race- and sex-based presumptions from the definitions of “socially and economically disadvantaged individual” from two federal programs (see November 17 entry HERE).
• Texas Attorney General Ken Paxton issued a formal opinion stating that race- and sex-based DEI frameworks violate the Equal Protection Clause and the Texas Constitution, including state programs that prefer or consider race or sex in funding or development initiatives (see January 19 entry HERE).
• The SBA issued policy guidance stating that race-based presumptions of social disadvantage are unconstitutional and that it will administer the 8(a) business development program on a strictly neutral basis going forward (see January 22 entry HERE).

March 10, 2026 (4^th Cir. reverses transgender care win): The Fourth Circuit ruled that West Virginia’s Medicaid coverage exclusion for gender-affirming care does not discriminate based on sex. While the panel previously affirmed a district court’s decision that the policy violated federal law and regulations, it reversed in light of the U.S. Supreme Court’s U.S. v. Skrmetti decision and concluded that the policy violates neither the Equal Protection Clause nor the Affordable Care Act. The panel reasoned that the exclusion “does not deny someone coverage for medical services based on the person’s sex or transgender status,” but rather “denies coverage to everyone for certain services when sought to treat a given medical diagnosis.” 

Related Development

• March 19, 2026 (OR federal judge voids Kennedy declaration against gender-affirming care): An Oregon federal judge invalidated the December policy statement issued by Health and Human Services (HHS) Secretary Robert Kennedy, Jr., which declared gender-affirming care for minors “neither safe nor effective” and threatened Medicaid and Medicare funding cuts to providers offering such care, marking a victory for the coalition of 21 states and the District of Columbia that challenged this policy. In their lawsuit, the coalition alleged that the HHS policy statement exceeds the Secretary’s authority, violates the APA, and is contrary to Congress’ prohibition on federal officers exercising control over the practice of medicine.

March 11, 2026 (MA federal judge halts DOE’s applicant data demand): A coalition of 17 states sued the U.S. Department of Education (DOE) alleging its Integrated Postsecondary Education Data System’s (IPEDS) new survey component—which requires higher education institutions to submit seven years of race- and sex-related admissions data on a “rushed” timeline—violates the APA and places unprecedented burdens on higher education institutions, including privacy risks and loss of funding for the failure to comply. 

The new survey—the “Admissions and Consumer Transparency Supplement” (ACTS)—was implemented pursuant to a Presidential Memo directing the DOE to use IPEDS to monitor universities’ compliance with the U.S. Supreme Court’s Students for Fair Admissions v. Harvard University decision, which struck down race-based affirmative action admissions policies. The states argued that the ACTS violates the DOE’s statutory mandate to conduct data collections in an objective and non-partisan manner, and that the ACTS is being used to penalize and investigate institutions of higher education.  Among other things, plaintiffs sought to enjoin the DOE from implementing or enforcing the ACTS against the plaintiff states.

Subsequent Developments

• March 13, 2026 (deadline extended): The court granted the states’ request for a temporary restraining order (TRO) extending the compliance deadline from March 18, 2026 to March 25, 2026. 
• March 19, 2026 (education orgs support states): Several higher education associations filed an amicus brief in support of the states’ request to block implementation of the ACTS, citing “enormous burdens on institutions”; “meaningful risks to student privacy”; and generation of data of “questionable reliability that risks misleading, rather than informing, the public.”
• April 3, 2026 (preliminary injunction issued): Following additional extensions to the deadline, the court issued a preliminary injunction halting enforcement of the ACTS against public institutions in the plaintiff states. While the court found that the data collection, itself, did not exceed the DOE’s statutory authority, it found the plaintiffs were likely to succeed on its claims that the ACTS was adopted in an arbitrary and capricious manner. Among other things, the court noted the “rushed and chaotic manner” in which the ACTS was promulgated, and the DOE’s failure to consider that the agency is “in the process of dismantling itself[.]”
• April 9, 2026 (DOE moves to prevent injunction expansion): The DOE filed a motion urging the judge not to expand the injunction to cover intervening institutions, including private colleges, that filed motions requesting the same relief for their members. The government argued that broadening the block would delay “much-needed transparency” into college admissions as another application cycle approaches.
• April 13, 2026 (judge grants TRO to intervening institutions): The court granted the intervening institutions’ TRO request extending their compliance deadline to April 24, 2026 while prohibiting enforcement of prior deadlines.

Related Development

• March 26, 2026 (DOJ demands applicant data from med schools): The DOJ reportedly launched an investigation into three medical schools focusing on potential race discrimination in admissions. The targeted schools include Stanford University, The Ohio State University, and the University of California, San Diego. According to reports, the DOJ requested seven years of applicant data and internal communications by April 24, 2026, including DEI-related materials, test scores, extracurricular activities, essays, admissions decisions, and demographic information. 

March 13, 2026 (DOJ says transgender restroom ban not discriminatory): The DOJ defended the administration’s decision to ban transgender federal employees from using restrooms that align with their gender identity, asserting that the policy is not unlawful discrimination because it “applies evenly to both sexes regardless of trans-identifying status[.]” The challenged policy was implemented pursuant to EO14168, which directed agencies to require employees to use the bathroom according to their biological sex. The DOJ further sought dismissal for lack of jurisdiction, improper venue, and failure to state a claim. 

Related Development

• The EEOC voted 2-1 to approve a federal sector decision holding that Title VII permits federal employers to maintain single-sex bathrooms and similar intimate spaces, and exclude transgender employees from opposite-sex facilities (see February 26 entry HERE).

March 16, 2026 (states say HUD guidance prevents housing discrimination enforcement): A group of 15 states and the District of Columbia sued the U.S. Department of Housing and Urban Development (HUD) alleging that guidance issued to state and local Fair Housing Assistance Programs (FHAP) forces states to “jettison their protections against housing discrimination.” Among other things, the guidance threatens to decertify FHAP agencies that enforce protections against housing discrimination based on gender identity or expression; bars FHAP agencies from using funds to “promote gender ideology” or “promote elective abortions”; and prohibits FHAP agencies from pursuing disparate impact liability claims. The plaintiffs seek to permanently enjoin HUD from implementing or enforcing the conditions against the plaintiffs.

March 17, 2026 (4^th Cir. concerned over religious exemption limits): During a hearing involving a Christian university’s decision to terminate a transgender employee, the Fourth Circuit expressed concerns over the potential impact of a decision allowing the school to reject transgender applicants. 

• Concerns centered around a “doctrinal statement” the employee signed upon hire, which stated, among other things, that “the God of creation chooses gender.” The university argued it had no choice but to terminate the employee in order to uphold the statement. The panel questioned the university as to the limits on a doctrinal statement, specifically noting their statement against transgender individuals, and asking if “anything would prohibit a church from having a statement prohibiting interracial marriage or . . . other things” based on protected classes.

• The appeal stems from a lower court’s denial of the university’s motion to dismiss finding that while religious institutions may base hiring decisions on religious preferences, “Title VII does not confer upon religious organizations a license to make those same decisions on the basis of race, sex, or national origin.” The court further found that the “ministerial exception” did not apply to the employee based on the lack of any religious nature tied to her role as an IT helpdesk apprentice.

March 19, 2026 (MA federal judge OKs socioeconomic-based admissions policy): A Massachusetts federal judge dismissed a lawsuit against the Boston School Committee that alleged the admissions policy for three public “exam schools” discriminates against white and Asian-American students. 

• Previously, the First Circuit dismissed a predecessor lawsuit challenging the Committee’s then-existing zip code-based admissions policy, which allocated 80% of seats to students with the highest GPAs in each of the city’s 29 zip codes, starting with lowest median family income zip codes and moving upward. The First Circuit found the plaintiffs failed to show the plan had a “legally cognizable disparate impact” on white or Asian-American students, and that the schools’ intent to reduce racial disparities was insufficient to sustain the claims. 

• The instant challenge involves the Committee’s new admissions policy, under which applicants competed within eight tiers based on five socioeconomic factors from the U.S. Census Bureau (e.g., limited English households, poverty, education attainment, and single parent households) and were awarded “bonus points” for homelessness, being in the foster care system, living in public housing, or attending a high-poverty elementary school. The court reasoned that while the tier system and zip code policies are different, they shared factual similarities that the First Circuit previously rejected as insufficient to demonstrate an equal protection violation.

Related Development 

• The Third Circuit ruled that a school district’s facially race-neutral admissions policy favoring students who lived in certain zip codes might be an unlawful proxy for race because it had the purpose and impact of benefiting students from certain races over others (see February 2 entry HERE).

March 19, 2026 (EEOC settles Planned Parenthood DEI investigation): The EEOC settled a DEI-related class investigation against Planned Parenthood of Illinois for alleged violations of federal anti-discrimination laws. The EEOC’s “reasonable cause findings” include: 

• Mandatory “affinity caucuses” that were segregated by race;
• Racially harassing statements made by a manager;
• Requiring all employees to attend training sessions, which involved “repeated harassing and derogatory statements targeting white employees”;
• Denying white employees the same access to time off that it granted to Black employees.

EEOC Chair Andrea Lucas emphasized that Title VII protections “equally apply to white workers” and “[t]here is no DEI exception to Title VII’s requirements.” 

March 19, 2026 (DOL launches Center for Faith website): The U.S. Department of Labor (DOL) announced the launch of its Center for Faith website, which contains “resources for Americans who may have faced religious discrimination in the workplace” and “information for faith organizations on potential grant opportunities and retirement plans.” Highlighted resources include:

• An interactive map of the United States, which details religious discrimination protections in each state and includes a listing of the state office overseeing religious discrimination.
• A guide for faith organizations to more easily navigate the federal grant process.
• A guide for faith organizations to navigate retirement benefits for their employees. 

March 23, 2026 (DOE initiates two-fold investigation into Harvard): The DOE announced two new investigations against Harvard to determine whether the school “continues to use illegal race-based preferences in admissions despite the Supreme Court’s definitive ruling in Students for Fair Admissions v. Harvard[,]” and to “investigate alleged ongoing antisemitic harassment on Harvard’s campus and the institution’s purported failure to protect Jewish students.” U.S. Secretary of Education Linda McMahon warned, “No one—not even Harvard—is above the law . . . [and] we will vigorously hold them to account to ensure students’ rights are protected.”

Related Developments 

• The government sued Harvard alleging it unlawfully withheld information necessary to determine whether it continues to engage in unlawful race-based admissions policies (see February 13 entry HERE). 
• On March 23, 2026, the DOE issued a Letter of Impending Enforcement Action “for [Harvard’s] continued refusal to provide requested information relating to its admissions process.”

March 23, 2026 (USDA sued over DEI-related funding conditions): A coalition of 20 states and the District of Columbia sued the U.S. Department of Agriculture (USDA) over new DEI-related funding conditions. According to the complaint, the challenged provisions:

• Require certification of compliance with “all applicable Federal anti-discrimination laws, regulations, and policies[,]” without specifying the “policies”;
• Prohibit use of funds to “promote gender ideology,” or towards programs that “deprive women and girls of fair athletic opportunities” or permit “male competitive participation in women’s sports[,]” without explaining prohibited activities;
• Prohibit funds to be directed towards programs that “allow illegal aliens to obtain taxpayer-funded benefits… or provide incentives for illegal immigration[,]” without defining “benefits” or “incentives.”

The plaintiffs allege the conditions are vague and “coercive”; arbitrary and capricious; and unrelated to the federal interest in the underlying programs. The plaintiffs seek to enjoin the USDA from implementing or enforcing the conditions against the plaintiff states. 

On April 13, 2026,the USDA filed an opposition stating that the conditions constitute “classic discretionary agency action not subject to APA review” and that the states can forgo funding if they cannot accept the terms.

March 24, 2026 (EEOC settles COVID vaccine-related lawsuit): The EEOC reached a $15 million conciliation agreement with a global technology company to resolve COVID-19 vaccine-related discrimination claims. During an investigation, the EEOC found reasonable cause to believe the company engaged in religion- and disability-based discrimination against a class of employees by denying their COVID-19 vaccination exemption requests and terminating those who declined the vaccines. Under the agreement, the company will:

• Pay the employees $15 million;
• Review its policies to ensure compliance with Title VII and the ADA;
• Provide annual training to all staff on religion- and disability-based discrimination;
• Report to the EEOC on accommodation requests for three years; and
• Post a notice about EEO rights, which encourages employees to report discrimination.

March 24, 2026 (EEOC sues Dollar General over religious discrimination): The EEOC sued Dollar General for religious discrimination alleging that a Jewish assistant store manager who observed the Sabbath was demoted because his manager “needed an assistant manager who could work Saturdays.” EEOC Birmingham District Regional Attorney Marsha Rucker emphasized that “[d]iscriminating against Jewish workers because of their religion violates the laws that the EEOC enforces. . . . and the EEOC will vigorously enforce Title VII’s protections.”

March 25, 2026 (TX AG targets NFL’s DEI initiatives): Florida Attorney General James Uthmeier penned a letter to National Football League (NFL) Commissioner Roger Goodell sending a “word of caution” on the NFL’s race- and sex-based hiring policies and programs, including those that: 

• Require teams to interview “two minority candidates” for head coach, general manager, and coordinator positions, and “one minority candidate” for other senior executive positions;
• Reward third-round draft picks to teams that “developed minority talent” who later became NFL general managers or head coaches;
• Mandate all teams to employ a female or minority offensive assistant coach; and
• Provide leadership, networking, and advancement opportunities available only to “diverse candidates.”

Attorney General Uthmeier warns that the policies and programs constitute “blatant race and sex discrimination” that is “illegal under Florida law”; asserts that Florida fans “don’t care what color their coach’s skin is”; and requires confirmation by May 1, 2026 that the NFL will no longer enforce any discriminatory policies or programs on Florida teams or risk a civil rights enforcement action.     

Related Developments

• Attorney General Uthmeier filed a lawsuit accusing Starbucks of violating state civil rights laws through its DEI policies (see December 10 entry HERE).
• Attorney General Uthmeier issued a formal opinion stating that any laws requiring race-based state action are presumptively unconstitutional under the Equal Protection Clause and the state constitution (see January 19 entry HERE).

March 26, 2026 (new EO targets DEI discrimination by federal contractors): President Trump signed EO14398, Addressing DEI Discrimination by Federal Contractors, which aims to eliminate “racially discriminatory DEI activities” in federal contracting by requiring executive departments and agencies to include in federal contracts on or before April 25, 2026, a clause that requires federal contractors and subcontractors to agree that:

• They will not engage in any “racially discriminatory DEI activities,” which the EO defines as “disparate treatment based on race or ethnicity” in various employment and contracting activities;
• They will provide all information required to ascertain compliance;
• If they fail to comply, the contract may be canceled, terminated, or suspended, and they may be ineligible for future contracts;
• They will report any conduct that may violate this clause, and take remedial measures as directed by the contracting department or agency;
• They will inform the contracting department or agency of any lawsuit filed against the contractor that may affect the validity of this clause; and
• They recognize that compliance with this clause is material to payment decisions for purposes of the False Claims Act (FCA).

The EO also:

• Directs the Office of Management and Budget to issue guidance to agencies to ensure compliance and identify high-risk economic sectors;
• Directs the Attorney General to prioritize potential claims under the FCA against contractors who violate the terms; and
• Directs the Federal Acquisition Regulatory Council to amend Federal Acquisition Regulations to include the above-referenced clause and remove any conflicting provisions.

March 27, 2026 (EEOC sues over COVID vaccine exemption denial): The EEOC sued a hospital alleging it failed to provide a Christian employee with a religious accommodation from its COVID-19 vaccine policy and terminated her in retaliation for requesting the accommodation.

March 30, 2026 (EEOC sues over religious accommodation failure): The EEOC sued a security services company alleging it failed to accommodate an employee’s request to alter his schedule to allow Sunday church attendance leading to his “forced” resignation. 

March 31, 2026 (PA federal judge orders UPenn to comply with EEOC subpoena): A Pennsylvania federal judge ordered the University of Pennsylvania to comply with the EEOC’s subpoena for information related to the agency’s investigation into allegations of antisemitism (see November 18 entry HERE). Among other things, the subpoena sought the identity of witnesses to and victims of the harassment and contact information of employees associated with the university’s Jewish organizations. While the university argued the demand was unconstitutional and compared it to past governmental efforts to compile registries of Jewish communities, the judge said the data request was lawful so long as it did not reveal any employee’s affiliation with a specific organization.  The university appealed the order on April 13, 2026.

April 2, 2026 (DLA Piper settles COVID vaccine religious bias suit): Law firm DLA Piper settled a religious bias lawsuit filed by a Christian former employee alleging the firm terminated him after he refused to receive a COVID-19 vaccine and requested an accommodation to “receive periodical testing” in lieu of the vaccine. Plaintiff claimed the firm denied his request and advised him to seek a remote position within the firm but that none were available to him. The following day, he was terminated after he refused to sign a severance agreement. An Illinois district court previously denied the firm’s motion to dismiss, stating there was insufficient information to determine whether the firm offered a reasonable accommodation.  

April 3, 2026 (EEOC sues over religious accommodation failure): The EEOC sued a mail delivery contractor for the U.S. Postal Service alleging the company refused to accommodate a Christian driver who repeatedly reminded his supervisors that he needed to attend church services on Sundays. While the company eventually hired a replacement driver, it continued to schedule the Christian driver for Sunday shifts leading to his resignation.

April 3, 2026 (former EEOC officials support BigLaw wins against Law Firm EOs): A group of former high-ranking EEOC officials filed an amicus brief in support of four BigLaw firms’ respective summary judgment victories, which voided the executive orders targeting each firm (Law Firm EOs). The brief was filed in light of the administration’s consolidated appeal to overturn the four separate district court decisions that invalidated each Law Firm EO. The brief argues that Section 4 of each Law Firm EO—which directed the EEOC to “review the practices of representative large, influential, or industry leading law firms for consistency with Title VII”—“directs the EEOC to conduct investigations in a manner that directly conflicts with the processes Congress established for the agency.” 

Specifically:

• Title VII does not authorize investigations until a charge is filed alleging the employer engaged in an unlawful employment practice. However, the EOs direct investigations of “large law firms” for which charges had not been filed.
• Title VII requires that charges and investigations remain confidential. However, the EEOC broadcasted the investigations by sending public letters to 20 named law firms (see HERE).

“By conducting that investigation without the filing of a charge, and by publicizing it through a press release,” the brief continues, “Chair Lucas violated the procedures Congress established.”

Related Links

• Perkins Coie: Law Firm EO and Memorandum Opinion  
• Jenner & Block: Law Firm EO and Memorandum Opinion
• Wilmer Hale: Law Firm EO and Memorandum Opinion
• Susman Godfrey: Law Firm EO and Memorandum Opinion

Related Developments

• On February 16, 2026, two law professors sued the EEOC seeking documents related to the agency’s March 17 public letters sent to 20 named law firms and law firm “settlement agreements” resulting from the letters (see February 9 entry HERE).
• On April 13, 2026, the EEOC agreed to produce “all responsive, non-exempt records to Plaintiffs by May 15, 2026.”

April 6, 2026 (EEOC releases FY 2025 Performance Report): The EEOC released its FY 2025 performance report and FY 2027 performance plan. Performance highlights include:

• Securing $660 million for 17,680 victims of employment discrimination;
• Recovering $55 million as a result of systemic investigations;
• Responding to nearly 270,000 inquiries (9% increase from FY 2024);
• Processing 88,201 new discrimination charges;
• Resolving 90,743 discrimination charges (4% increase from FY 2024);
• Reducing private sector charge inventory by 4% from FY 2024.

Highlighted “important civil law enforcement work” includes:

• Rooting out “unlawful race and sex discrimination,” including those related to DEI-related programs, policies, and practices;
• Protecting American workers from anti-American discrimination;
• Defending the “binary nature of biological sex and women’s rights to single-sex spaces”; and
• Protecting workers from religious bias and harassment.

April 6, 2026 (8^th Cir. allows Iowa’s anti-LGBTQ+ schoolhouse law to proceed): The Eighth Circuit vacated a preliminary injunction that blocked an Iowa law that prevents K-6 educators from teaching students about gender identity and sexual orientation, and requires school officials to notify parents if their child requests to use chosen pronouns or asks for a gender-affirming accommodation. While the lower court found the law likely violated the First Amendment based on parts that were unconstitutionally vague and overbroad, the panel stated that the lower court erred in determining that the law as a whole would likely violate the First Amendment. 

April 6, 2026 (DOJ obtains settlement over anti-American job posting): The DOJ announced a settlement with a New Jersey-based IT staffing firm over allegations that the company “violated the Immigration and Nationality Act (INA) when some of its recruiters posted job advertisements for positions in the United States that included citizenship status restrictions” that effectively “excluded U.S. citizens and Permanent Residents from consideration for desirable employment opportunities while favoring those with H-1B or other temporary visas.” Without admitting liability, the company agreed to:

• Pay $255,420 in civil penalties;
• Pay $58,000 to the charging party;
• Train its recruiters and hiring personnel on the INA’s requirements; and
• Revise its recruitment policies to prohibit discrimination based on national origin, immigration status, citizenship, and other legally protected characteristics.

Related Development

• The DOJ announced a settlement with a Virginia-based company that allegedly posted artificial intelligence-generated job advertisements that included language restricting consideration to certain foreign applicants (H-1B, OPT, or H-4 visa holders) (see February 23 entry HERE). 

April 10, 2026 (DOJ’s first FCA settlement under Civil Rights Fraud Initiative): The DOJ announced the first FCA resolution under its Civil Rights Fraud Initiative, which targets federal contractors who fail to comply with anti-discrimination requirements in federal contracts (see May 19 entry HERE). The settlement resolves allegations that IBM’s DEI policies discriminated against employees and applicants based on race, sex, and other protected factors by:

• Tying “bonus compensation to achieving demographic targets”;
• Taking race, color, national origin, or sex into account in decisions to hire, transfer, or promote through the use of “diverse interview slates” and “diverse sourcing” practices;
• Developing race and sex demographic goals for business units and taking race, color, national origin, or sex into account to achieve progress towards those goals; and
• Offering training, mentoring, and leadership opportunities to employees based on race, color, national origin, or sex.

Without admitting liability, IBM agreed to pay $17 million to the administration, and also “undertook voluntary remedial measures, including the termination and/or modification of various programs and practices at issue.”

Takeaways

As the current administration continues to keep employer DEI practices under the microscope, employers can ensure compliance with federal, state, and local anti-discrimination laws by taking the following steps:

• Conduct a DEI legal risk audit to ensure all employees are afforded equal opportunities;
• Schedule training for Executives, Board Members, and Managers on DEI Legal Issues to keep your team up-to-date on the DEI legal landscape; and
• Stay tuned for forthcoming installments of our DEI Legal Developments Spotlight.

---

If you have any questions related to any developments or their impact on your organization, or would like to conduct an audit of your organization’s efforts to ensure all employees and applicants are afforded equal opportunity in the workplace, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100 or 619.292.0515.