Compliance Stuff

On June 10, 2026, nineteen states and the District of Columbia filed suit in the District of Maryland seeking to halt implementation of Executive Order 14398, which was issued on March 26, 2026. The order requires federal agencies to insert a mandatory contract clause into all contracts, subcontracts, and “contract-like instruments” prohibiting contractors from engaging in “racially discriminatory DEI activities.” Compliance with the new clause is an express condition of eligibility to contract with the federal government, and consequences for noncompliance specifically include contract cancellation, exclusion from future federal contracts, suspension, and False Claims Act (FCA) liability . Filed as Maryland v. Hegseth , the complaint comes just two months after the administration announced its first False Claims Act resolution under the Civil Rights Fraud Initiative, a $17 million settlement with IBM. The IBM Settlement In April, IBM agreed to pay $17,077,043 to resolve allegations t...

Aside from potential legal trouble, new obligations could spark business and operational friction Executive Order 14398 represents a significant expansion of the government’s enforcement posture on DEI and creates an environment where the cost of delay could substantially exceed the cost of preparation, Andrew Turnbull of Morrison Foerster writes. Contractors should consider implementing certain steps to mitigate risks related to these new requirements. Federal contractors and subcontractors face sweeping new obligations under Executive Order 14398 that prohibit them from engaging in “racially discriminatory DEI activities” and requires reporting any “reasonably knowable” violations by subcontractors . The FAR Council has already issued a mandatory contract clause, FAR 52.222-90 . Agencies have begun inserting it into new solicitations, targeting a completion date of July 24 for modifying existing contracts. Enforcement is not waiting. With a $17 million DOJ DEI settlement already on...

On June 11, 2026, the U.S. Small Business Administration (SBA) published a proposed rule that would f ormally remove from its 8(a) Business Development Program regulations the rebuttable presumption of social disadvantage for members of certain racial and ethnic groups and replace it with a new eligibility test centered on whether an applicant has been harmed by unlawful discrimination, including illegal diversity, equity, and inclusion (DEI) programs. 00:00 24:53 In doing so, the proposed rule appears to flip the old presumption on its head, allowing the existence of the prior presumption to serve as evidence of discrimination against those who were excluded from it. Quick Hits The proposed rule replaces the old eligibility framework with a new test requiring applicants to show that a governmental or private entity discriminated against or was biased against their racial, ethnic, or cultural group, and that such discrimination caused them material harm. The rule explicitly identifie...