Imagine you're sitting in a conference room with a group of administrators and staff across various schools and departments, discussing budgetary constraints, campus resources, and student group initiatives—a day like any other in higher ed. The discussion veers to budgets and anticipated programming for various student affinity groups—The Asian Pacific American Student Association, the Student Organization of Latinos, and the Black Law Students Association, for example.
Is it legally risky to fund programming by student groups that promote diversity, equity, and inclusion (DEI) goals? More broadly, is it legally risky to fund any DEI programming? These questions are now critically important for institutions of higher education (IHEs) in light of the policy and enforcement priorities of the current Trump administration expressed in Executive Order 14173 (the Executive Order or EO).
In October 2023, on the heels of the Students for Fair Admissions U.S. Supreme Court decision, we previewed here a largely untested threat that could arise for IHEs that accept federal funding—the possibility that IHEs continuing to consider DEI in admissions could face astronomical damages for potential federal False Claim Act (FCA) violations. Now, given the current administration's Executive Orders concerning DEI, the threat of FCA liability for engaging in DEI efforts is far less remote. The current administration's sights are set on more than just DEI considerations in admissions.
In the wake of Students for Fair Admissions, it was clear that IHEs should take care to eliminate the consideration of race in admissions practices and applicant decisions. However, DEI efforts, in general, are facing increased scrutiny and potential legal exposure. On its face, the Executive Order applies to federal contractors, subcontractors, and grant recipients. For such parties, the Executive Order directs federal agency heads to "include in every contract or grant award" terms requiring the counterparty to (i) agree that "compliance in all respects with all applicable Federal anti-discrimination laws is material to the government's payment decisions"; and (ii) "certify that it does not operate any programs promoting DEI." EO 14173 § 3(b)(iv)(A)-(B). The Executive Order also extends to "Encouraging the Private Sector" to end DEI, explicitly calling out "institutions of higher education with endowments over 1 billion dollars" as an "enforcement priority." EO 14173 § 4(b)(iii).
At the federal level, we can expect forthcoming efforts to implement the Executive Order's directives. A February 5, 2025, memorandum from Attorney General Pam Bondi to Department of Justice employees first clarified that "the Department of Justice's Civil Rights Division will investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds." The memorandum further clarified that the administration reads Students for Fair Admissions broadly ("[e]ducational agencies, colleges, and universities that receive federal funds may not 'treat some students worse than others in part because of race'").
On February 14, 2025, the U.S. Department of Education (the Department) further elucidated its position in its Dear Colleague Letter guidance (February 14 Dear Colleague Letter). Specifically, the Department set out to "clarify and reaffirm the nondiscrimination obligations of schools and other entities that receive federal financial assistance from the [Department]." The February 14 Dear Colleague Letter outlined conduct the Department considers to be unlawful and prohibited under federal antidiscrimination laws and the breadth of the Supreme Court's holding in Students for Fair Admissions. In sum, the Department's position is that "treating students differently on the basis of race to achieve nebulous goals such as diversity, racial balancing, social justice, or equity is illegal under controlling Supreme Court precedent." More specifically, the Dear Colleague Letter provided examples of the kinds of programs the Department regards as violative of federal antidiscrimination law, which we discuss in greater detail here.
Dear Colleague Letters do not carry the force of law, but they provide important insights into how this administration intends to enforce applicable federal laws, and the February 14 Dear Colleague Letter promises forthcoming legal guidance. Broadly, the February 14 Dear Colleague Letter advises all IHEs "to (1) ensure that their policies and actions comply with existing civil rights law; (2) cease all efforts to circumvent prohibitions on the use of race by relying on proxies or other indirect means to accomplish such ends; and (3) cease all reliance on third-party contractors, clearinghouses, or aggregators" that may facilitate using race in a prohibited way.
In addition to keeping watch on the federal guidance, it is also important to remember that at the state level, there may be significant variance in the enforcement of existing and future DEI laws and regulations.
In the example above, a colleague across the table from you may interpret the conversation as engaging in promoting DEI ideals, which may be perceived as a potential violation of antidiscrimination laws under the Executive Order. These concerns may be elevated if the IHE receives federal funding through contracts or grants.
And if the IHE has signed a federal contract or grant award with the contemplated new language, then should it be concerned about FCA liability under a false certification theory by virtue of maintaining affinity programs?
These questions may introduce FCA exposure, particularly under the FCA's whistleblower qui tam provisions that allow private individuals to stand in the shoes of the government to vindicate false claims. In other words, routine budget discussions, among other activities, may become fertile ground for an FCA whistleblower case against the IHE based on an assertion that the federal funding recipient is falsely certifying compliance with federal antidiscrimination laws despite engaging in perceived unlawful DEI activities.
Although FCA qui tam actions are currently facing constitutional challenges in the courts, they remain a potent risk of which IHEs should be aware. An FCA claim could come with steep financial consequences, including treble damages plus significant penalties that range up to approximately $28,000 for each false claim.
This remains an evolving and uncertain space, but IHEs should begin to take steps to assess and mitigate risk in a few ways:
- Review your IHE's internal and external-facing publications and materials concerning statements and initiatives related to DEI. Know what your materials say, and assess the IHE's mission, values, and risk tolerance for promoting DEI-related initiatives.
- Review the IHE's federal funding sources, including current and contemplated federal contracts or grants. As most IHEs receive federal funding in some capacity, maintaining DEI programs and/or funding DEI initiatives, regardless of the funding source, presents a legal risk.
- Keep an eye on the states. We previously reported on efforts at the state level to curb or eliminate DEI programs here. Certain states, however, have spoken out against dismantling DEI programs here. We can expect more state-level reactions and regulations in the evolving DEI space.
Venable is continuing to monitor this regulatory landscape concerning DEI, antidiscrimination, and potential FCA liability. IHEs with questions regarding DEI, addressing internal or whistleblower concerns, and reviewing and assessing campus policies, programming, or procedures should contact the authors of this article or any lawyer in Venable's Labor and Employment Group.