As federal policy pivots under the current administration, nonprofit organizations face mounting compliance challenges around diversity, equity, and inclusion (DEI) programming. In a discussion hosted by Venable, partners George Constantine and Robin Burroughs offered a deep dive into the legal, operational, and reputational risks tied to inclusive workplace and programmatic initiatives. Drawing from recent executive orders and agency guidance, the speakers unpacked what these developments mean for nonprofits committed to advancing equity without running afoul of antidiscrimination laws.
Executive Orders and Employment: DEI Practices Under Federal Scrutiny
Burroughs began by clarifying that “executive orders do not change existing laws,” but “they can significantly influence how those laws are enforced and how programs are administered.” One such order, Ending Illegal Discrimination and Restoring Merit Based Opportunity, rescinds key federal DEI mandates for federal contractors and grant recipients, including affirmative action requirements for contractors, and “required agency heads to encourage the private sector to end illegal DEI preferences through developing a strategic enforcement plan.” This sets the tone for broader enforcement against DEI practices that federal agencies deem “discriminatory and illegal.”
Burroughs emphasized that affinity groups, mentorship programs, and even DEI training are now under increased scrutiny by the Equal Employment Opportunity Commission (EEOC) and Department of Justice (DOJ) for all employers. “If you have a Black employees affinity group and limit its programming or its meetings or its leadership to be only people who consider themselves to be Black employees, that is something that the EEOC would consider discriminatory,” she said. Such practices, she added, can be perceived as discriminatory “regardless, even if you are doing it in the interest of trying to highlight some voices that are traditionally not heard.” These shifts are already reshaping internal policies for employers, particularly those receiving federal funding.
Nonprofit Programs and Section 1981: The Fearless Fund Effect
Turning to nonprofits’ outward-facing programs, Constantine highlighted the growing legal risks tied to race-based scholarships, awards, and affinity events. “There have been a lot of decisions on a very preliminary basis on the theory that under Section 1981 of the Civil Rights Act, these activities were contrary to law,” he said, pointing to the high-profile Fearless Fund case. In that matter, the Eleventh Circuit held that grant criteria limited to women-owned Black businesses likely violated federal contract law, a ruling that could ripple across philanthropic and nonprofit sectors.
Constantine advised organizations to reassess their programs’ eligibility criteria, noting that grants and scholarships carry the highest legal exposure. He further cautioned nonprofits about federal grant certifications, which now require them to affirm they “do not operate any programs promoting diversity, equity, inclusion that violate any applicable federal anti-discrimination laws.” Signing such a certification, he said, “opens the door to potential False Claims Act claims.”
Strategic Adjustments: Balancing Risk and Mission
With legal interpretations evolving rapidly and enforcement priorities shifting, both speakers stressed proactive risk management. Burroughs recommended a “review of your policies and practices and your training documents,” emphasizing that “the term DEI is definitely under scrutiny right now.” Yet she cautioned against superficial rebranding: “You can’t just go through your website and delete the phrase DEI and put something else in its place.”
Constantine echoed the need for careful, mission-aligned adaptations: “How key are some of these activities to your mission?” he asked. “And how important is it for you to continue that, balanced against the risks … of being brought into a litigation or having scrutiny from the federal government?” He advised tailoring language and structures to withstand legal tests while preserving the spirit of inclusivity. As nonprofits recalibrate in this environment, the panel urged organizations to “stay abreast,” conduct internal audits, and seek legal counsel when navigating gray zones between compliance and commitment.
Watch the full webinar here to learn more. If you or your organization have questions about the changing landscape for inclusive programs, contact the presenters or visit Venable.com to learn more about our Nonprofit Organizations Group.