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The American Arbitration Association (AAA-ICDR®) is launching a first-of-its-kind AI arbitrator this November 2025, designed to handle smaller “documents-only” construction disputes. This change will take small disputes, typically handled on a fixed fee by a single arbitrator, and offer instead AI serving as a finder of fact and law. For an industry where time is money and claims can pile up fast, the promise of innovation claiming to deliver faster, more cost-effective resolutions to modest-sized claims, is an attractive option. But can AI adequately dole out justice and are parties to a construction dispute willing to trade speed for fairness or risk of early AI errors?

The AAA’s Sales Pitch

  • Faster Turnaround: The AAA claims that an AI arbitrator is built to handle high-volume cases quickly, helping contractors, developers, and legal teams resolve disputes without lengthy delays associated with human scheduling. A case schedule is set, written submissions are made, and the AI arbitrator will quickly render its decision.
  • The AI was Trained on Real Construction Cases: The AI arbitrator claims to have been trained on over 1,500 actual AAA-construction awards. The AAA claims that the AI arbitrator reflects the reasoning and standards familiar to industry professionals. Of course, the question is which cases, who won, and whether this bias affects your area of practice?
  • For Now, the AI Arbitrator Has Human Oversight to Ensure Quality: Every AI-generated draft award will be reviewed by experienced human arbitrators to ensure accuracy, transparency, and due process. However, it is unclear how much subjective determination will be implemented by the human overseer who may not be selected by the parties and may have their own biases.
  • The AAA Claims Parties Will Receive Clear, Legally Sound Decisions: The AI arbitrator will be interacted with by using structured legal prompts and conversational AI. The AAA states that the AI arbitrator will deliver decisions that are easy to understand and rooted in solid legal principles.

Does the AAA’s Sales Pitch Match Anyone’s Experience to Date with AI?

Virtually everyone has interacted with AI in some manner, including Google searches, AI chatbot for a store, or creating images on Chat GPT. Many others have used AI in more sophisticated ways to review contracts or generate whole documents or presentations. 

Most parties to a dispute understand there is risk of loss. Their concern is whether the process was “fair” and that often means that their concerns – right or wrong – were heard and considered. The question that individuals in the Construction Industry will have to decide is whether finality and speed are more valuable than the familiarity of working with a human arbitrator. 

What’s Next for the AI Arbitrator?

The AAA may push AI on smaller disputes on the parties. It is unclear whether there is a genuine appetite for this solution. Widespread adoption of this technology, particularly on higher-value claims, will likely take years and seems unlikely. Laws may also need to change because the very narrow bases for overturning an arbitration seem ill-equipped to challenge the model on which an AI was trained. Finally, will an AI need to be tested and licensed by the state bar?

Should You Use It?

Maybe. You might wish to test out the technology on a small dispute over a specification or contract, where both parties seek a quick resolution, and the stakes are low (and where documents are typed rather than in handwriting). When and if the results are unfavorable, a party who has opted to have an AI will have little or no way to redress any questions about the fairness of the process.

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Effective October 27, 2025, Cleveland employers must comply with Ordinance No. 104-2025, which imposes strict requirements on salary transparency and bars inquiries into applicants’ compensation history. For easy reference, collected below are the key provisions of the ordinance and actionable steps for compliance.

Who is covered?

The ordinance applies to any employer with 15 or more employees working within Cleveland’s city limits—including job placement agencies acting on the employer’s behalf. Importantly, the ordinance applies to employment that will be performed in Cleveland regardless of where a business is headquartered or where the applicant is interviewed. Government employers are exempt, except the City of Cleveland itself.

Core requirements

Include salary ranges in job postings. All job advertisements and postings solicited, received, processed, or considered within the City of Cleveland for positions to be performed in Cleveland must display the salary range or scale before applicants apply. This applies across all platforms: company websites, job boards, social media, and any other recruitment channel. Salary is defined broadly and includes wages, commissions, hourly earnings, and other monetary earnings. It also includes benefits.

Stop inquiring about salary history. Employers cannot ask about an external applicant’s current or prior compensation, nor can an employer conduct a search of publicly available records or reports for the purpose of gathering information about an external applicant’s current or prior compensation.

Do not screen or base decisions on salary history. Employers cannot reject applicants based on their prior salary, require that an applicant’s current or prior salary satisfy minimum or maximum salary thresholds, or rely solely on salary history when making hiring or compensation decisions. Retaliation against applicants who refuse to disclose compensation is prohibited.

What is permitted?

Employers may discuss salary expectations for the new position, including unvested equity or deferred compensation. The prohibition covers past compensation only, not forward-looking discussions.

Exceptions to the restrictions include:

  • Voluntary, unprompted disclosure by an applicant of current or prior compensation;
  • Internal transfers and promotions;
  • Incidental disclosure during background checks (if not relied upon solely);
  • Rehired employees where prior salary information exists;
  • Collective bargaining arrangements; and
  • Reliance on salary histories that are authorized by another superseding law.

Enforcement and penalties

Cleveland’s Fair Employment Wage Board (FEWB) administers the ordinance. Complaints must be filed in writing with the FEWB within 180 days of an alleged violation. The FEWB must consider the complaint within 90 days of receipt.

Resolution process. If the FEWB finds, by a preponderance of the evidence, that a violation has occurred, it will notify the employer and allow 90 days to correct deficient practices and provide a credible compliance plan. If the employer complies within this window, the complaint is resolved without penalty.

Civil penalties (if a violation has not resolved within 90 days):

  • First violation (within 5 years): up to $1,000;
  • One prior violation (within 5 years): up to $2,500; and
  • Two or more prior violations (within 5 years): up to $5,000.

Penalties will be adjusted annually for inflation. Employers may appeal to Cleveland’s Director of Finance and then to the Board of Zoning Appeals.

Immediate action items

Review all job postings. Audit positions recruiting in Cleveland across every platform and add salary ranges/scales.

Update hiring documents. Remove salary history questions from applications, screening forms, interview guides, and your applicant tracking system.

Train your team. Ensure all hiring staff understand the prohibitions and compliant compensation discussion practices.

Document compliance efforts. Keep records of policy updates and training to demonstrate good faith efforts.

Bottom line

Compliance before Monday, October 27, 2025, requires immediate action steps to align hiring practices with Cleveland’s Ordinance. Most importantly, employers have a 90-day cure window to correct deficiencies and avoid penalties after any FEWB finding of a violation.

Questions?

Many of the expectations in Cleveland’s ordinance are being increasingly adopted nationwide. Our labor & employment team stands ready to assist you with compliance questions, policy updates, or concerns about specific hiring situations. Please reach out if you would like to discuss how the new ordinance affects your organization or if you need assistance with implementation.

The full text of the ordinance as codified is available at Chapter 669 of the Cleveland Codified Ordinances.

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Would it surprise you to learn that one of the most important sections in your construction contract is the one your lawyer will probably spend the least amount of time on? In your lawyer’s defense, lawyers aren’t always privy to the nitty gritty details of a project’s scope of work – details which are often added to a construction contract at the end of negotiations once the substantive legal terms have been blessed. 

However, tellingly, the first question from a construction lawyer negotiating a contract will usually be: what’s the scope of work for this project?  As a surprise to no one: different scopes of work have different risk profiles and may require different contractual approaches and strategies.  But, beyond that, having a well-defined scope of work that clearly identifies, at the outset of the project, the work to be completed, the materials to be used, what’s included in the cost, and, importantly, what’s excluded from the cost, can save all parties involved from headache and heartache down the line.  Disagreements stemming from ill-defined scopes of work can come in many forms ranging from disputes on project cost, timing to completion, and coordination of different scopes of work between contractors.

When renovating or restoring a property, it’s even more important to have a clearly defined scope of work with as much detail as possible.  This is especially true for older buildings that may have existing underlying systems that cannot handle a specific upgrade or are no longer code compliant. These issues often do not appear until after contract execution, and sometimes even later in the progress of the work. 

For example, assume that renovating an existing commercial space into a medical office requires tying new plumbing connections into the existing sewer main to accommodate sinks in the new exam rooms, as well as adding a new employee restroom.  Now, imagine that, after completion of the work, the sewer main continually backs up in the employee restroom because the original sewer main pipe never had the correct slope and now cannot handle the new capacity.  In this scenario, is replacing the original sewer pipe to correct the sewage flow problem the contractor’s responsibility?  More importantly, is the cost for that work already included in the cost of the original contract price?  As the project owner, if you pay for plumbing to be installed in your renovation project, you may assume it’s ultimately the contractor’s responsibility to ensure it operates correctly.  However, most contractors will not agree to be responsible for underlying or unknown conditions at the project.  So, they typically will include an express disclaimer of issues with existing systems in the statement of work, leaving the project owner holding the proverbial bag.  This creates an obvious rift in expectations and reality for the project owner, especially if the scope was not well reviewed or defined. 

Thus, what’s expressly excluded from the scope of work is just as important as what’s expressly included in the scope of work.  Any list of exclusions from the work should be prepared and/or reviewed carefully, as any expressly excluded work will not be priced or contemplated in the contract.  Project owners should take careful consideration of these lists in evaluating bids or quotes for renovation work.  Typically, the true cost differential can be found by an apples-to-apples comparison of the differences, exclusions and assumptions in each scope of work for the quoted price.  

Other important matters to confirm, particularly while renovating existing spaces, is the delivery conditions and assumptions listed in (or relative to) the scope of work.  While not exclusions per se, assumptions and delivery conditions can increase project costs for owners if these assumptions ultimately prove to be incorrect, or the conditions are not met.  It can sometimes be a shock to project owners when they find out that they are ultimately responsible for providing or ensuring certain substrates or tolerances are in place before their general contractor even starts the work.  Failure to meet these requirements and conditions usually results in cost increases and project delays.

While your lawyer surely will work hard to protect you from bad legal terms, only you can conduct the in-depth review of the scope of work, coupled with to your expectations of the project, that is necessary to protect your project from unforeseen costs, delays and disputes that may arise from an ill-defined scope of work in your construction contract.

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The Department of Justice recently released a memorandum titled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.” In this blog post, Hahn Loeser attorneys Matthew Wagner, J. Patrick White, and Matthew Grashoff analyze that memorandum, discuss what it does—and doesn’t—say about what may constitute “unlawful discrimination,” and provide key takeaways for federal contractors and recipients of federal funds going forward.

Executive Order Aftermath

In the aftermath of President Trump signing Executive Order 14173 (the “Order”), titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” numerous questions remained regarding the impact of the Order on federal grantees and contractors. Chief among those questions was what exactly the Order prohibits. The Order requires that the head of each federal agency, in the issuance of any grant or contract, require that each recipient certify that it does not operate any programs promoting “DEI that violate any applicable Federal anti-discrimination laws.” Other sections of the Order state that its intent is to end “illegal DEI and DEIA policies.” However, the Order does not define what “illegal DEI and DEIA” policies are. Because of the lack of clarity from the Order, many contract and grant recipients have been understandably concerned about the prospect of certifying that they are in compliance with applicable federal anti-discrimination laws when it has been unclear what precisely the Order was seeking to proscribe.

DOJ Memo:

At the time, we predicted that it was likely that additional guidance was likely to be released regarding what exactly was prohibited by the Order. On July 29, 2025, we saw the clearest answer about how the Trump administration intends the Order to be interpreted when the U.S. Department of Justice (“DOJ”) Office of the Attorney General released a memorandum titled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination” (the “Memo”), which was directed to “all federal agencies[.]” The Memo’s stated purpose was to clarify “the application of federal antidiscrimination laws to programs or initiatives that may involve discriminatory practices, including those labeled as Diversity, Equity, and Inclusion… programs.” In order to ensure that recipients of federal funds remain in compliance with federal antidiscrimination laws, the Memo “identifies ‘Best Practices’ as non-binding suggestions to help entities comply with federal antidiscrimination laws and avoid legal pitfalls[.]” Importantly, the Memo specifies that these “Best Practices” are not mandatory requirements but rather “practical recommendations to minimize the risk of violations.”

Specifically, the Memo provides guidance in broad categories of what it terms unlawful conduct. These include:

  • Unlawful Discriminatory Policies and Practices;
  • Unlawful Proxies;
  • Unlawful Segregation
  • Unlawful use of Protected Characteristics; and
  • Unlawful DEI Training Programs.

Unlawful Discriminatory Policies and Practices

The Memo explains that unlawful discriminatory policies and practices are those that result in unlawful preferential treatment, such as when a federally funded entity provides opportunities, benefits, or advantages to individuals or groups based on protected characteristics in a way that disadvantages other qualified persons.

Unlawful Proxies

The Memo outlines certain practices it deems to be “unlawful proxy discrimination.” This includes practices that provide “facially neutral criteria…that function as proxies for protected characteristics” which “violate federal law if [they are] designed with the intention of advantaging or disadvantaging individuals based on protected characteristics.” The Memo provides a handful of examples that could constitute unlawful proxies including (1) cultural competency requirements; (2) lived experience requirements; (3) cross-cultural skills requirements; (4) geographic or institutional targeting; (5) overcoming obstacles narratives; and (6) diversity statements.

As an example provided by the Memo, a scholarship program that targets “financial hardship” is permissible, but a scholarship program that targets an “underserved geographic area” is unlawful if the criterion was “chosen” to increase participation by specific racial groups.

A significant difficulty with this guidance is that it does not explain precisely how a “facially neutral” practice might be interpreted as having been “designed” with an unlawful “intention” and how it is determined whether certain criteria were “chosen” for unlawful purposes. Such determinations typically involve fact-intensive investigation to determine the underlying intent. Federal contractors and grantees should conduct a careful examination of any practices – including descriptions of those practices – to determine if these practices are in fact acting as proxies for unlawful discrimination. 

Unlawful Segregation

The Memo explains that “unlawful segregation” is segregation based on protected characteristics. The Memo provides examples of what constitutes “unlawful segregation,” including training sessions, programs, or activities that separate or restrict access based on a protected characteristic. For example, a DEI training program that requires participants to separate into race-based groups constitutes “unlawful segregation.” The Memo recognizes that there are exceptions to the general impermissibility of compelled segregation; sex-separated athletic competitions and bathrooms are one such exception to the prohibition against segregation based on protected characteristics.

Unlawful Use of Protected Characteristics

The Memo explains that “unlawful use of protected characteristics” occurs when a federally funded entity or program considers a protected characteristic as a basis for selecting candidates for employment, contracts, or program participation. This extends to the selection of vendors or subcontractors as well as program participation such as an internship or scholarship opportunity. The Memo provides three examples of what the DOJ considers to be unlawful practices. These include: (1) race-based diverse slate hiring policies wherein a recipient of federal funds has a policy to interview certain candidates from specific racial groups; (2) sex-based selection for contracts wherein the recipient prioritizes awarding contracts to minority and women owned businesses (“MWBEs”); and (3) race- or sex-based program participation wherein a recipient of federal funds requires that a certain percentage of program participants belong to or come from underrepresented groups.

The Memo’s discussion of the second point appears to be primarily directed toward state-level grant recipients of federal funds. The example given is: “[a] federally funded state agency implements a DEI policy that prioritizes awarding contracts to women-owned businesses, automatically advancing female vendors or minority-owned businesses over equally or more qualified businesses without preferred group status.” But nothing in the Memo suggests that its recommendations for best practices are solely confined to federally funded state agencies. Thus, to the extent that federal contractors or grant recipients utilize goals or targets for MWBEs, such goals are likely considered unlawful by the DOJ. The Memo does not, however, provide guidance for what happens if a grant recipient receives funds from both federal agencies (that prohibit the use of MWBE targets or goals) and state or local agencies (that may lawfully set MWBE targets or goals). Further complicating the matter is that the certification provision requires federal contractors and grant recipients to certify that they do not operate any “DEI programs that violate applicable federal anti-discrimination laws,” which suggests it could implicate conduct beyond any single project. It seems likely that a federal contractor that certifies that it does not engage in unlawful DEI practices (as an entity) would be prohibited from utilizing MWBE targets and goals on a project funded in part by a state or local agency, even if that project does not receive federal funding. This issue remains a developing one, and recipients of federal contracts and grants should continue to monitor changes to stay informed about any additional guidance that may be released.

Unlawful DEI Training

The Memo defines unlawful DEI training programs as those that “through their content, structure, or implementation-stereotype, exclude, or disadvantage individuals based on protected characteristics or create a hostile environment.” The example provided by the Memo is a recipient of federal funds that conducts DEI training that “stereotypes individuals based on protected characteristics” such as the use of terms such as “white privilege” or “toxic masculinity.” While the Memo states in a footnote that federal law permits “workplace harassment trainings that are focused on preventing unlawful workplace discrimination and that do not single out particular groups as inherently racist or sexist,” to the extent that such trainings create a hostile work environment or impose penalties for dissent, they may be considered unlawful by the DOJ.

Key Takeaways

Based on the Memo’s guidance, recipients of federal funds and federal contractors should:

1.    In conjunction with legal counsel, conduct a privileged assessment of DEI policies. Be scrupulous about evaluating the purpose of programs, initiatives, scholarships, and practices and how they are described. Carefully evaluate wording – even facially-neutral wording – to assess if it operates as a proxy for targeting a protected class or characteristic.

2.    Maintain careful documentation about any changes in programs, practices, and initiatives. The Trump Administration has made it clear that it intends to use the False Claims Act as a basis to enforce the certification provision. Because the violations of the False Claims Act must be made knowingly, documentation that shows what changes were made in an effort to comply with the Order and guidance from the federal government, including from the Memo, could be crucial in showing that a recipient of a federal funds did not, in fact, knowingly violate the law.

3.    Address risks and ensure compliance with anti-discrimination laws. Understand that the Memo outlines the government’s view of what constitutes unlawful discriminatory policies and practices and may differ from how courts interpret those same policies and practices under applicable laws. The Memo provides some insight into the circumstances under which the DOJ may take action relating to certain policies and practices. Seek legal advice from an attorney if you are unsure whether your policies and practices may be considered unlawful.

4.    Stay up to date with any and all guidance issued by the federal government. Because this is a rapidly evolving space, it is important for recipients of federal funds to know what changes are being made so as to avoid any potential legal pitfalls.

Conclusion

As has been the case since the Order was signed, significant gray areas remain in how the Order will be interpreted and enforced. As such, the most responsible action is for continued vigilance as changes continue to occur and announcements continue to be made regarding what is and is not permissible going forward.

Hahn Loeser & Parks will continue to monitor changes announced in the government contracting and grants space to keep our clients and our readers apprised of the latest developments.

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In the July 2025 issue of the Illinois Local Government Lawyers Association Journal, Hahn Loeser attorneys Matthew K. Grashoff, Matthew F. Wagner and J. Patrick White were heavily referenced in the Director’s Column by ILGL President Patricia Johnson Lord, who also serves as Senior Assistant Attorney for the City of Naperville.

At the April 17, 2025, Nuts n Bolts Workshop, an ILGL member asked: “What steps, if any, are ILGL members taking to identify any issues for federal grant eligibility in light of the recent Executive Orders issued by President Trump on diversity, equity, and inclusion?” The question was also discussed during the May 21, 2025 ILGL Labor and Employment Special Interest Group.

An example of a recent grant condition required by the United States Environmental Protection Agency was provided:

Federal Anti-Discrimination Laws (Added 3/25/2025)
By accepting this EPA financial assistance agreement, (A) the recipient agrees that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code; and (B) the recipient certifies that it does not operate any programs promoting Diversity, Equity and Inclusion that violate any applicable Federal anti-discrimination laws.

The representation required by this USEPA grant condition is the result of Executive Order 14173 issued by President Trump on January 21, 2025 entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”. EO 14173 revoked four prior Executive Orders including Executive Order 11246 signed by President Lyndon B. Johnson in 1965 which required federal contractors to adopt affirmative action plans. Under EO 14173, federal contractors must certify that they do not operate any programs promoting DEI that violate Federal anti-discrimination laws.


The day before issuing EO 14173, President Trump issued EO 14151 titled “Ending Radical and Wasteful Government DEI Programs and Preferencing”. While EO 14151 primarily dealt with DEI programs within the federal government, it also required each agency, department, or commission head, within 60 days of issuance of the Order, and in consultation with the Attorney General, the Director of OMB, and the Director of OPM, as appropriate, to “terminate, to the maximum extent allowed by law all. . . ‘equity-related’ grants or contracts; and all DEI or DEIA performance requirements for employees, contractors, or grantees.” (EO 14151, Section 2(b))


President Trump’s Executive Orders 14173 and 114151 (and the numerous other Executive Orders he has signed since taking office for the second time) have had the effect of putting not only federal agencies into a state of confusion and uncertainty, but is also having a direct impact on local government entities.


One of the critical problems identified by those who have studied and written about these issues is the lack of clarity as to what constitutes an “equity-related” grant that would violate Federal anti-discrimination laws. Failure to find the right answer, if there is one, could result in our clients’ loss of federal grant funding as well as civil and criminal liability under the False Claims Act.

GRANT FUNDS
Public bodies that have a construction project which will use both state and federal funding will likely find themselves in a no-win situation. They will be required to comply both with President Trump’s Executive Orders and with state and federal laws and regulations regarding DEI. Since those requirements cannot typically be read to stand together, it will be difficult, if not impossible, to help our clients find a reasonable path forward.
An excellent article about Executive Order 14173 titled: “Executive Order 14173: What it Means for Federal Contractors and Subcontractors”, dated February 11, 2025, was written by Matthew K. Grashoff, and Matthew F. Wagner with the law firm of Hahn, Loeser, & Parks LLP.

The following is an excerpt from Executive Order 14173 which includes the federal contractor and subcontractor certification requirement:
Sec. 3. Terminating Illegal Discrimination in the Federal Government.
* * *
(ii) The Office of Federal Contract Compliance Programs within the Department of Labor shall immediately cease:
(A) Promoting “diversity”;
(B) Holding Federal contractors and subcontractors responsible for taking “affirmative action”; and
(C) Allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.
(iii) In accordance with Executive Order 13279 of December 12, 2002 (Equal Protection of the Laws for Faith-Based and Community Organizations), the employment, procurement, and contracting practices of Federal contractors and subcontractors shall not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws.
(iv) The head of each agency shall include in every contract or grant award:
(A) A term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code; and
(B) A term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.

Making the certification “material” to the government’s payment decisions raises the threat of possible civil or criminal action under the False Claims Act (“FCA”) if the contractor does not comply with the vague requirements of the certification. A person found to have violated the FCA is liable for civil penalties of not less than $5,000 and not more than $10,000 plus 3 times the amount of damages sustained by the government, plus the government’s costs to bring the action. 31 U.S.C. § 3729. In addition, a claim under the FCA may be brought by private individuals on behalf of the government who may share in a portion of the government’s recovery. Criminal penalties may also be sought, including fines and/or imprisonment. 18 U.S.C. § 287.2

Concerns about the use of the False Claims Act in the context of DEI were escalated by a May 19, 2025 Memorandum issued by U.S. Department of Justice through an Assistant Attorney General titled “Civil Rights Fraud Initiative”, which states in part:

The False Claims Act is the Justice Department’s primary weapon against government fraud, waste, and abuse. Liability results in treble damages and significant penalties. It is implicated when a federal contractor or recipient of federal funds knowingly violates civil rights laws-including but not limited to Title IV, Title VI, and Title IX, of the Civil Rights Act of 1964-and falsely certifies compliance with such laws. Accordingly, a university that accepts federal funds could violate the False Claims Act when it encourages antisemitism, refuses to protect Jewish students, allows men to intrude into women’s bathrooms, or requires women to compete against men in athletic competitions. Colleges and universities cannot accept federal funds while discriminating against their students. The False Claims Act is also implicated whenever federal-funding recipients or contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin….

An article regarding the May 19, 2025 DOJ Memorandum can be found on the Hahn, Loeser, and Parks LLP’s website. One of the issues addressed in this article is “…the fact that the Memorandum ‘strongly encourages’ private enforcement of civil rights fraud through whistleblower complaints from members of the public. Whistleblower lawsuits, also known as qui tam lawsuits, allow whistleblowers to sue on behalf of the government for fraud and receive a share of any monetary recovery as an award for coming forward.”

The article bluntly states:
The implications of the Civil Rights Fraud Initiative are that contractors and grantees are now subject to increased risk for fraud investigations for alleged civil rights violations and for falsely certifying compliance with civil rights laws.

There are several cases in litigation relative to President Trump’s Executive Orders which may or may not help local government bodies contend with the pressures of being caught between a rock and a hard place. One of them (Chicago Women in Trades v. Trump et al. 2025 U.S. Dist. LEXIS 70459 ) was brought in the Northern District of Illinois where Judge Kennelly issued a preliminary injunction preventing the U.S. Department of Labor from requiring government contractors and grant recipients to certify that they do not operate any diversity, equity, and inclusion programs that violate antidiscrimination laws. This is the subject of another HLP article found on their website and is still pending.

One Real Life Example:
A municipality in the Chicagoland area recently encountered the problem of being caught between a federal rock and a state hard place in the context of a federal grant for a road project that had both state and federal grant funding. The DCEO (the Illinois Department of Commerce and Economic Opportunity) required the municipality to sign a Business Enterprise Program (BEP) letter consistent with the Business Enterprise for Minorities, Women, and Persons with Disabilities Act (30 ILCS 575/0.01 et seq.) that sets goals for percentages of grant dollars going towards minority, women, and persons with disabilities owned businesses. The representations in that form conflicted with Executive Orders related to DEI programs per guidance provided to the municipality by the federal Office of the Assistant Secretary for Transportation Policy.
What to do? No one knows. The choices? Give up the federal funding or sign what you have to and hope for the best. Poor choices at best.

EMPLOYMENT
On March 19, 2025, the U.S. Equal Employment Opportunity Commission issued two technical assistance documents relative to DEI: “What to Do If You Experience Discrimination Related to DEI at Work” and “What You Should Know About DEI-Related Discrimination at Work.”

The introduction to “What You Should Know About DEI-Related Discrimination at Work”, which is in a Q & A format, states that:
Diversity, Equity and Inclusion (DEI) is a broad term that is not defined in Title VII of the Civil Rights Act of 1964 (Title VII). Title VII prohibits employment discrimination based on protected characteristics such as race and sex. Under Title VII, DEI initiatives, policies, programs, or practices may be unlawful if they involve an employer or other covered entity taking an employment action motivated—in whole or in part— by an employee’s or applicant’s race, sex, or another protected characteristic.

The Q & A notes that Title VII protects not only employees, but also applicants and training or apprenticeship program participants, and in some instances, interns.
The thrust of the guidance from the EEOC seems to be that DEI policies that generally recognize that there are differences among people are probably okay so long as individuals are not segregated into different groups during training or work place programs (based on race, sex, or any other protected characteristics), and so long as people are not in any way treated differently based upon any protected characteristic. The EEOC states that any employment provisions or policies which disparately treat a group of people will not be tolerated, including in hiring; firing; promotion; demotion; compensation, fringe benefits; access to or exclusion from training (including training characterized as leadership development programs); access to mentoring, sponsorship or workplace networking/networks; internships (including internships labeled as “fellowships” or “summer associate” programs); selection for interviews (including placement or exclusion from a candidate “slate” or pool); job duties or work assignments. Bottom-line: no preferential treatment in any way for anyone for any reason.

Of particular concern in the EEOC’s Q & A is the suggestion that employees may be able to allege and prove that a diversity or other DEI-related training caused a hostile work environment.


An article dated March 27, 2025 by the Jackson Walker law firm does a nice job of summarizing the EEOC’s guidance in an article is titled “DEI Under Scrutiny: What Employers Must Know About New EEOC and DOJ Guidance.” The article also makes practical recommendations as to how best to approach EEOC’s guidelines.

USSC REVERSE DISCRIMINATION CASE – AMES V. OHIO DEPARTMENT OF YOUTH SERVICES.
Indirectly related to DEI is the unanimous decision of the U.S. Supreme Court issued on Thursday, June 5, 2025 in Ames v. Ohio Department of Youth Services. 2025 U.S. LEXIS 2198;

23-1039 Ames v. Ohio Dept. of Youth Servs. (06/05/2025)

The plaintiff in Ames was a 20-year employee of the Ohio Department of Youth Services who claimed that she was the subject of reverse discrimination when she was denied a promotion, and was then demoted because she was straight. Plaintiff Ames alleged that the job she applied for and the one she was demoted from were both given to individuals who were LGBTQ.


The federal District court granted defendant’s motion for summary judgment and dismissed the case. 2023 U.S. Dist. LEXIS 44979 ¶35. The dismissal was affirmed by the Sixth Circuit Court of Appeals. 87 F.4th 822 (2023).


On June 5, 2025, in a unanimous opinion by the U.S. Supreme Court written by Justice Ketanji Brown Jackson, the U.S. Supreme Court vacated the Sixth Circuit’s decision and remanded the case “for application of the proper prima facie standard.” 2025 U.S. LEXIS 2198 at ¶13. At issue in the U.S. Supreme Court’s decision was the lower courts’ application of an additional criteria required to establish a prima facie case of discrimination in an employment case by which a plaintiff who is a member of a majority group who claims reverse discrimination must also allege “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority”. 2025 U.S. LEXIS 2198, ¶2.


The Ames decision will make it easier for plaintiffs to pursue claims of reverse discrimination in those federal circuits, including the Seventh Circuit, that applied the background circumstances requirement. Disposing of cases at the summary judgment stage will obviously be more difficult. It will be interesting, however, to see the ultimate outcome of the Ames case since at least some of the facts described in the District Court’s decision appear to be very strong in support of plaintiff’s claim of discrimination, most notably that the individuals who made the employment decisions plaintiff complained of had no knowledge of plaintiff’s sexual orientation or the sexual orientation of the individual who was promoted to the job she wanted.

Note from the Author: An Update on the Executive Orders Impacting DEI was the subject of one of the presentations at the ILGL Spring Seminar held online the afternoons of June 12 and June 13, 2025. This timely and very informative session was presented by J. Patrick White and Matthew Wagner of Hahn Loeser & Parks LLP. Employment issues affected by recent developments in DEI were also discussed by Marron Mahoney of Laner Muchin during the Labor and Employment Law Update presentation at the ILGL Spring Seminar.

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On June 9, 2025, the U.S. District Court for the Northern District of California issued a preliminary injunction in San Francisco A.I.D.S. Foundation, et. al. v. Trump, 25-cv-01824-JST (N.D. Cal.), enjoining three of the nine provisions of Executive Orders 14151, 14173, and 14168.  Specifically, the Court enjoined the named defendants from enforcing (1) the provision of Executive Order 14151 that requires the termination of all “equity-related” contracts and grants, and (2) provisions of Executive Order 14168 requiring the termination of all funding for any programs that “promote gender ideology.” Although this recent opinion and corresponding preliminary injunction applies narrowly to only the specific plaintiffs and the specific government agencies in the case, it provides insight into how courts are addressing challenges to these Executive Orders.

The plaintiffs in the case are a group of nonprofit organizations that provide healthcare, social services, and advocacy for LGBTQ communities—many specifically serving transgender individuals—and that rely heavily on federal funding to carry out their missions. The plaintiffs challenged Executive Order Nos. 14151 and 14173, which we have previously reported on, as well as 14168, which we do not discuss here. 

After determining that the plaintiffs lacked standing to bring some of their challenges, including to the Enforcement Threat Provision of Executive Order 14173 (EO 14173), the Court addressed the Termination Provision of Executive Order 14151 (EO 14151) and the Certification Provision of EO 14173. 

The Court found that the plaintiffs were likely to succeed on the merits of their challenge to the Termination Provision of EO 14151, which directs agencies to terminate funding for all “equity-related grants or contracts,” for being impermissibly vague under the Fifth Amendment. Under the Fifth Amendment, speakers are protected from arbitrary and discriminatory enforcement of vague standards. The Court reasoned that the vagueness of the language “equity-related” and the lack of any definition is likely to inhibit the exercise of freedom of expression because it provides no guidance to grantees as to how they can modify their expression to avoid termination or from even assessing what grants are implicated. The Court also found that the plaintiffs demonstrated a likelihood of success on their claim that the Termination Provision violates the constitutional Separation of Powers as applied to certain grants the plaintiffs receive based on the premise that only Congress has the power to rescind grant funding.

The Court declined to grant a preliminary injunction with respect to the Certification Provision of EO 14173, which requires contractors and grantees to certify that they do not operate any programs promoting DEI that violate any federal anti-discrimination laws. The Court found that the plaintiffs did not demonstrate a likelihood of success on the merits for their First Amendment claim because the Certification Provision implicates the operation of programs that both promote DEI and “violate any applicable Federal anti-discrimination laws.” The Court reasoned that, while the First Amendment may protect speech that advocates for violation of law, it does not protect activities that directly violate anti-discrimination law. The Court likewise held that the plaintiffs did not demonstrate a likelihood of success on the merits for their Fifth Amendment Due Process claim for the same reason: that the government is targeting only DEI activity that violates federal antidiscrimination laws and not DEI activity in general.   

The Court’s order provides temporary relief only to the named plaintiffs in the lawsuit. All other federal government contractors and grantees remain subject to enforcement. Hahn Loeser will continue to monitor this issue closely and provide updates as they become available.

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Case Overview: Orion Mgt., Inc. v. Kaeka, 2025-Ohio-1047 (9th Dist. 2025)

In a recent Ohio Ninth District Court of Appeals decision, homeowners who experienced significant property damage from both a fallen tree and inadequate contractor work were left without the protection of Ohio’s Consumer Sales Practices Act (CSPA). In Orion Management, Inc. v. Kaeka, the court clarified how the enactment of Ohio’s Home Construction Service Suppliers Act (HCSSA) carved out a significant exception to consumer protections.

The Facts

After a tree crashed through homeowners’ newly purchased home, they hired a contractor to repair the damage. The project was delayed for over two months, during which the tarps covering the exposed roof shifted and tore, causing further water damage to the home. Frustrated by the lack of progress and worsening conditions, the homeowners instructed the contractor to halt work and provide a bill for services rendered. When the homeowners failed to pay the bill, the contractor filed a mechanic’s lien and sued for breach of contract. In response, the homeowners counterclaimed, alleging, among other things, violations of the CSPA and HCSSA.

The trial court found the CSPA did not apply because the contract involved construction services rather than a consumer transaction. At trial, the homeowners prevailed on their HCSSA counterclaim, with the jury awarding them $118,848.37 in damages.

The Ninth District Holding

On appeal, the Ninth District Court of Appeals held that the CSPA does not apply to home construction service contracts, even when the work involves rebuilding after property damage rather than new construction, and that the HCSSA exclusively applies to those contracts.[1] The court noted that the Ohio legislature enacted the HCSSA to address residential construction specifically and to provide a tailored framework for governing home construction suppliers.[2]

The Consumer Sales Practices Act

Ohio’s Consumer Sales Practices Act (CSPA), enacted in 1972, prohibits suppliers from committing unfair, deceptive, or unconscionable acts or practices in connection with consumer transactions.[3]A “consumer transaction” is broadly defined but specifically excludes “transactions involving a home construction service contract as defined in section 4722.01 of the Revised Code.”[4]

The CSPA prohibits deceptive practices such as misrepresenting goods or services[5] and unconscionable practices that take advantage of consumers’ vulnerabilities or involve excessive pricing.[6] When violations occur, consumers may recover actual economic damages plus up to $5,000 in noneconomic damages, or—if the violation was previously declared deceptive or unconscionable—rescission or treble (triple) damages (or at least $200), plus up to $5,000 in noneconomic damages, or appropriate relief through a class action.[7] Courts may also award attorney fees against suppliers who knowingly violate the CSPA.[8]

Prior to 2012, the CSPA governed residential construction contracts. However, the Ohio legislature enacted the Home Construction Service Suppliers Act (HCSSA) to establish specialized laws for construction services, removing these transactions from CSPA coverage.

The Home Construction Service Suppliers Act

Ohio’s Home Construction Service Suppliers Act (HCSSA), enacted in 2012, specifically governs contracts for home construction services equal to or exceeding $25,000.[9] It defines “home construction service” as “the construction of a residential building, including the creation of a new structure and the repair, improvement, remodel, or renovation of an existing structure.”[10]

The HCSSA generally prohibits suppliers from engaging in a wide range of deceptive, unfair, or substandard business practices.[11] It also requires that most home construction service contracts be in writing and include specific information such as the parties’ contact details, address where service is to be performed, description of the work and goods to be furnished, anticipated start and end dates, estimated costs, copy of the supplier’s certificated of insurance, and dated signatures of the parties.[12] Cost-plus contracts are exempt from many of these writing requirements.[13]

Like the CSPA, when a violation of the HCSSA occurs, the homeowner may seek recission of the contract, or actual economic damages with up to $5,000 in noneconomic damages.[14] Courts may also award attorney fees against suppliers who knowingly violate the HCSSA.[15] Importantly, homeowners suing under the HCSSA are not entitled to recover treble damages, a remedy that is available under the CSPA.

The Construction Exception’s Broad Reach

The Ninth District’s interpretation of “home construction services” was notably broad, rejecting arguments that the HCSSA should only apply to new construction.[16] The court held that restoration work after property damage constitutes “construction” within the meaning of the statute, even when rebuilding existing structures.[17] This interpretation means that homeowners dealing with a broad range of renovations and repairs may find themselves outside CSPA protection, even when contractors engage in practices that would clearly violate the CSPA in other contexts.

Practical Considerations for Homeowners

The decision highlights the importance of:

  • Careful contract drafting when working with construction contractors
  • Understanding which legal protections apply to specific transactions
  • Seeking legal counsel early when construction problems arise

While Ohio consumers retain broad CSPA protections for most transactions, home construction services costing $25,000 or more fall under the HCSSA, which offers more limited remedies. The HCSSA does not provide for treble damages, a key remedy available under the CSPA. Understanding which consumer protection laws apply to your specific situation is crucial for protecting your rights and obtaining appropriate remedies when things go wrong. Hahn Loeser’s Construction Team is well-equipped to assist contractors. For CSPA or HCSSA questions or concerns, please contact Construction Partner Aaron S. Evenchik.

[1] Orion Mgmt., Inc. v. Kaeka, 2025-Ohio-1047, ¶ 33 (9th Dist. 2025).

[2] Orion Mgmt., Inc. v. Kaeka, 2025-Ohio-1047, ¶ 32 (9th Dist. 2025).

[3] R.C. 1345.02(A), 1345.03(A).

[4] R.C. 1345.01(A).

[5] R.C. 1345.02(B).

[6] R.C. 1345.03(B).

[7] R.C. 1345.09.

[8] R.C. 1345.09(F).

[9] R.C. 4722.01(C).

[10] R.C. 4722.01(B).

[11] See R.C. 4722.03.

[12] R.C. 4722.02(A)(1-9).

[13] R.C. 4722.02(C), 4722.03(B).

[14] R.C. 4722.08.

[15] Id.

[16] See, Orion Mgt., Inc. v. Kaeka, 2025-Ohio-1047, ¶ 25-32 (9th Dist. 2025).

[17] Id. at ¶ 33.

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The U.S. Department of Justice (DOJ) launched the Civil Rights Fraud Initiative (the “Initiative”), which was announced on May 19, 2025 via Memorandum from Deputy Attorney General, Todd Blanche, and a related press release (the “Memorandum”). The Initiative is a coordinated enforcement effort by various DOJ components and other federal agencies to investigate and prosecute alleged civil rights violations committed by recipients of federal funds.

The Memorandum announces that DOJ intends to treat civil rights noncompliance as a form of fraud giving rise to DOJ’s right to investigate and pursue claims under the False Claims Act (“FCA”). As stated in the Memorandum, the FCA is implicated when federal funding recipients or contractors knowingly violate civil rights law and falsely certify compliance with such laws. The FCA is also implicated when a federal grantee knowingly engages in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (“DEI”) programs that assign benefits or burdens on race, ethnicity, or national origin, even if such programs are “camouflaged with cosmetic changes that disguise their discriminatory nature.” 

Executive Order 14173 (“EO 14173”), which we have previously reported on, is specifically mentioned in the Memorandum. The Certification Provision of EO 14173 requires contractors and grantees to certify that they are in compliance with all federal anti-discrimination laws and to affirm that they do not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws. It is readily apparent from the Memorandum that DOJ intends to treat violations of EO 14173’s certification requirements as the basis for fraud investigations and claims brought under the FCA.  Exposure to FCA claims raises the stakes for recipients of federal funds because, among other things, violations of civil rights laws and EO 14173’s certification requirements may subject the recipient to treble damages and significant penalties.   

Notably, the Memorandum “strongly encourages” private enforcement of civil rights fraud through whistleblower complaints from members of the public. Whistleblower lawsuits, also known as qui tam lawsuits, allow whistleblowers to sue on behalf of the government for fraud and receive a share of any monetary recovery as an award for coming forward.

The implications of the Civil Rights Fraud Initiative are that contractors and grantees are now subject to increased risk for fraud investigations for alleged civil rights violations and for falsely certifying compliance with civil rights laws. It remains unclear how DOJ will interpret alleged violations of civil rights laws and how forcefully DOJ will enforce these laws. Hahn Loeser will continue to monitor this issue closely and provide updates as they become available.

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We recently wrote about the preliminary injunction entered by the U.S. District Court for the Northern District of Illinois, blocking the Department of Labor from enforcing certain provisions of Executive Orders 14173 and 14151, both of which limit or prohibit federal grants or programs relating to “illegal,” “unlawful,” and “immoral” diversity, equity, and inclusion (“DEI”). The case in Illinois is one of several cases we have reported on that are pending in various District Courts around the country relating to Executive Orders 14173 and 14751. In light of the rapidly changing legal landscape with respect to DEI, federal contractors and grantees are asking how the various court rulings affect each other and what the current state of the law is with respect to these Orders.

We are currently tracking five lawsuits that may impact the enforcement of Executive Orders 14173 and 14151.  Each of the lawsuits challenges the constitutionality of the Executive Orders in U.S. District Courts in California, Illinois, Pennsylvania, Maryland and the District of Columbia. To date, only the courts in Maryland and Illinois have issued rulings affecting the enforcement of the Executive Orders. The remaining courts are likely to issue rulings in the coming months as those cases progress, and we will continue to provide timely updates.

In previous posts we reported on the nationwide preliminary injunction granted by the District Court in Maryland that was later stayed by the Fourth Circuit Court of Appeals. The stay allows the government to enforce the Executive Orders while the appeal of the preliminary injunction is pending before the Fourth Circuit. 

Meanwhile, the District Court in Illinois has granted a preliminary injunction that is limited to the Department of Labor. Specifically, the Department of Labor may not enforce the “Certification Provision” of Executive Order 14173, which requires a federal contractor or grantee to certify that it does not operate any programs “promoting DEI that violate any applicable Federal anti-discrimination laws.”  The preliminary injunction also enjoined the Department of Labor from enforcing the “Termination Provision” of Executive Order 14151, which requires the termination of equity-related grants, but this injunction applies only to the Plaintiff, Chicago Women in Trades, and only as to one of its five grants.  As to all other federal contractors and grantees, the Termination Provision is currently enforceable.

The current status of Executive Order 14173 is that it is fully enforceable by the federal government except only that the Department of Labor may not require a contractor or grantee to make certification that it does not operate any programs “promoting DEI that violate any applicable Federal anti-discrimination laws.”  The Order included a 90-day period in which contractors were allowed to continue under the prior regulations, but that 90-day period has now expired. Federal contractors should expect updated guidance from the Office of Federal Contract Compliance Programs (OFCCP), but currently no guidance has been published.

For now, federal contractors and grantees should be prepared to comply with the Executive Orders and direction from OFCCP as it comes out. Hahn Loeser & Parks will continue to monitor this issue and provide updates as they become available

US Department of Justice - Washington DC
The United States Department of Justice, also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United States.

On April 23, 2025, the United States Department of Justice announced that it is rescinding the January 31, 2022 Notice of Report on Lawful Uses of Race or Sex in Federal Contracting Programs (the “2022 Report”). The April 23 announcement (the “Announcement”) does not clarify what practices or activities constitute inappropriate DEI programs.  Rather, the Announcement functions to remove the 2022 Report as a citable resource that litigants and federal agencies can rely upon in support of sex- and race-based considerations.

Background: the 2022 report

On January 31, 2022, the Justice Department issued a report of its review of substantial evidence – including research studies and evidence given at Congressional hearings – that demonstrated pervasive discriminatory barriers that “impede the full and fair participation of businesses owned by women and people of color in government contracting.” Of special significance to federal contractors, the 2022 Report found that a “substantial body of statistical evidence … [demonstrated] significant disparities in the amount of public contracting dollars going to businesses owned by women or people of color as compared to their availability for such contracts.” The 2022 Report (which is available here) found that the evidence supported the “compelling interest in the continued use of federal programs that contain remedial measures to eliminate discriminatory barriers to contracting opportunities for businesses owned by women and people of color.”

The April 23, 2025 Announcement

Effective as of April 23, 2025, the Justice Department has rescinded the 2022 Report.  According to the Announcement, which was issued on April 10 but not published until April 23, 2025, the 2022 Report “is no longer considered an accurate reflection of the current laws, executive orders, and federal court jurisprudence concerning the constitutionality of using race or sex in federal government programs.”  The Announcement also states that the rescission is consistent with Executive Order 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing”) and Executive Order 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”), which directed the immediate termination of unlawful “DEI” programs throughout the federal government, including in contracts with the federal government and contracts supported by federal grants.

The Announcement does not make any changes to existing federal law or regulations. However, the effect of the Announcement is to eliminate the 2022 Report as evidence that courts and governmental agencies can rely on to support eliminating discriminatory barriers in federal contracting. 

Hahn Loeser will continue to monitor this issue closely and provide updates as they become known.