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.