Since January 20, 2025, a number of grant recipients have filed lawsuits challenging the federal government's decisions to withhold funding and/or terminate grant agreements. In many cases, grantees have alleged that the government's actions violated their right to freedom of speech under the First Amendment to the U.S. Constitution. Recipients should be aware that, in responding to these allegations, the government has recently asserted that grant recipients have narrower speech rights than the government acknowledged just a few years ago in similar litigation. Although the government's new legal theory—which would graft limitations on contractors' free speech rights onto grant recipients—has not been uniformly adopted, it may gain purchase as these cases move through the court system.
What did the government say about grant recipients' free speech rights five years ago?
In 2020, the U.S. Department of Justice told a federal court that grant recipients generally had broader free speech rights than federal contractors under existing law.
Here is the context. During his first administration, President Trump issued Executive Order (EO) 13950, which required each funding agency to identify grant programs "for which the agency may, as a condition of receiving such a grant, require the recipient to certify that it will not use Federal funds to promote" one of several listed "divisive concepts" relating to race and sex. See 85 Fed. Reg. 60683, 60687 (Sept. 22, 2020). The EO also required inserting into federal contracts a provision stating that "[t]he contractor shall not use any workplace training that inculcates in its employees any form of race or sex stereotyping or any form of race or sex scapegoating, including" such concepts. Id. at 60685.
Several grant recipients and contractors sued, arguing the EO "require[d] them to censor or cease the trainings that are fundamental to their missions on pain of losing federal funding in the form of contracts and grants, in violation of the Free Speech Clause of the First Amendment." See Santa Cruz Lesbian & Gay Cmty. Ctr. v. Trump, 508 F. Supp. 3d 521, 528 (N.D. Cal. 2020). The court issued a preliminary injunction, and the case was later dismissed after the EO was rescinded. See id. at 540-50; Santa Cruz Lesbian & Gay Cmty. Ctr. v. Trump, No. 5:20-cv-07741, ECF No. 91 (May 19, 2021).
The case is noteworthy today because of the position DOJ took on the legal standards that govern federal grant recipients' and contractors' free speech rights. Although DOJ argued that "the government has broad authority to place conditions on how grant recipients use federal funds," it also stated that "[t]he government's power to regulate its contractors' speech is broader than its power to regulate grant recipients' speech and is generally coextensive with its power over the speech of federal employees." Santa Cruz Lesbian & Gay Cmty. Ctr. v. Trump, No. 5:20-cv-07741, ECF 68 at 12-13 (Nov. 25, 2020) (Defendants' Opp. to Mtn. for Preliminary Injunction) (emphasis added).[1]
In other words, DOJ acknowledged in 2020 that federal grant recipients have broader free speech rights under the First Amendment than federal contractors. DOJ reached this conclusion after surveying the case law (discussed below) addressing grantees' and contractors' First Amendment protections. See id.
Do different legal standards apply to government restrictions on grant recipient and contractor speech?
As DOJ acknowledged in its 2020 brief, courts have generally used different legal standards when assessing whether government actions infringe on the free speech rights of grant recipients vs. contractors. One significant difference has been that, while the Supreme Court has determined the government's interests can sometimes outweigh a contractor's free speech rights, its major cases on grantees' free speech rights have not included such a statement.
For contracts, DOJ cited in 2020 (among others) two cases that require courts to treat contractor speech similarly to federal employee speech, by balancing the government's interests as a contracting party (e.g., effective and efficient service to the public) against the contractor's interest in speaking on matters of public concern. See Pickering v. Board of Ed. of Township High School Dist. 205, Will Cty., 391 U.S. 563 (1968); Bd. of Cty. Comm'rs, Wabaunsee Cty., Kan. v. Umbehr, 518 U.S. 668 (1996). The logic is that there are "similarities between government employees and government contractors" which require a balancing test: while "[t]he government needs to be free to terminate both employees and contractors for poor performance, to improve the efficiency, efficacy, and responsiveness of service to the public, and to prevent the appearance of corruption," there is also the risk that such terminations "in retaliation for speech may chill speech on matters of public concern[.]" Umbehr, 518 U.S. at 674.[2]
For grants, DOJ's 2020 brief cited (among others) two seminal cases which stand for the proposition that federal funding conditions can specify the activities that Congress wishes to subsidize, but cannot leverage funding to regulate speech outside the federal program itself. See Rust v. Sullivan, 500 U.S. 173 (1991); Agency for Int'l Dev. v. All. for Open Soc'y Int'l, Inc. (AID), 570 U.S. 205 (2013). Notably, this line of case law has not applied the Pickering Umbehr balancing test to grant recipients' speech. This may reflect a recognition that the government's relationship to a grantee is fundamentally different from its relationship to a contractor or employee. See, e.g, Forsham v. Califano, 587 F.2d 1128, 1138 (D.C. Cir. 1978), aff'd sub nom. Forsham v. Harris, 445 U.S. 169 (1980) ("The grant is assistance to an autonomous grantee. The grantee is not an arm, agent or instrumentality of the grantor. The employees of the grantee are not federal employees. The torts of the grantee are not federal torts. The property of the grantee is not federal property. The reference to 'an Autonomous grantee' is a core concept, not an incidental observation. In a grant program the federal government gets the advantage of services rendered by someone who is doing his own thing, his own autonomous thing. It is not the same as a government operation in disguise.").
Why did the government conclude that these different legal standards afford greater free speech rights to grant recipients than to contractors?
DOJ's 2020 conclusion that the Rust/AID framework for grants is more protective of free speech rights than the Pickering/Umbehr balancing test for contracts may have reflected the fact that, under the latter, "even termination because of protected speech may be justified when legitimate countervailing government interests are sufficiently strong." Umbehr, 518 U.S. at 675 (emphasis added). The Supreme Court has also stated that "[d]eference is … due to the government's reasonable assessments of its interests as contractor," including "its interest in being free from intensive judicial supervision of its daily management functions[.]" Id. at 678 (italics removed). (Note that when the government restrains future speech, as opposed to acting in response to prior speech, the government may need to meet a higher standard to show its interests outweigh the free speech rights. See United States v. Nat'l Treasury Emps. Union, 513 U.S. 454, 468 (1995)).
One might also note the more general and long-standing concern that balancing tests can result in courts "balancing away" constitutional rights, particularly in fraught cases. See, e.g., Konigsberg v. State Bar of Cal., 366 U.S. 36, 62 (1961) (Black, J., dissenting, joined by Warren, C.J., and Douglas, J.) (rejecting a "balancing test" because "the idea of 'balancing' away First Amendment freedoms appears to me to be wholly inconsistent with the view, strongly espoused by Justices Holmes and Brandeis, that the best test of truth is the power of the thought to get itself accepted in the competition of the market."); Crawford v. Washington, 541 U.S. 36, 67-68 (2004) (Scalia, J., opinion for the Court) (noting that, "[b]y replacing categorical constitutional guarantees with open-ended balancing tests, we do violence to their design," in part because "[v]ague standards are manipulable," especially in "politically charged cases").
What is the government saying about grant recipients' free speech rights now?
DOJ has taken a different position in recent litigation, arguing that a federal grant recipient is subject to the Pickering/Umbehr balancing test typically applied to contractors.
In April 2025, the President and Fellows of Harvard College, several labor unions, and various other organizational plaintiffs sued several funding agencies in relation to freezes on and terminations of $2.2 billion in federal grant funds. See President & Fellows of Harvard Coll. v. United States Dep't of Health & Hum. Servs., No. 25-cv-10910, 2025 WL 2528380, at *1 (D. Mass. Sept. 3, 2025). One of their arguments is that "the funding decisions were made in response to Harvard's refusal to capitulate to Defendants' content and viewpoint-based demands and its subsequent decision to file a lawsuit, in violation of the First Amendment[.]" Id.
In response, DOJ argued that the Pickering/Umbehr balancing test applied, stating that "[t]he First Amendment rights of government contractors—including non-personal services contractors, such as Harvard—are circumscribed to the same extent as those of government employees." President & Fellows of Harvard Coll. v. United States Dep't of Health & Hum. Servs., No. 25-cv-10910, ECF No. 186 at 32 (June 16, 2025). DOJ stood by this position in a subsequent filing, referring to Harvard as "an independent contractor[.]" See id., ECF No. 223 at 14-15 (July 14, 2025).
How have courts responded to the government's new position on grant recipients' free speech rights?
In the Harvard case, the court considered and rejected DOJ's argument "that Harvard, as a recipient of federal grant funding, is a 'government contractor' and, as such, its First Amendment rights 'are circumscribed to the same extent as those of government employees,'" including via application of "the balancing test announced in Pickering v. Board." President & Fellows of Harvard Coll. v. United States Dep't of Health & Hum. Servs., No. 25-cv-10910, 2025 WL 2528380, at *22 (D. Mass. Sept. 3, 2025). The court reasoned that DOJ had "point[ed] the Court to no binding authority … to support the notion that a private research university becomes a government 'contractor' for First Amendment purposes by accepting the government's invitation to apply for and thus collaborate on federal research grants." Id. "In the absence of clear precedent," the court stated it would "not adopt such a rule, particularly given that the First Amendment right to and protection of academic freedom is squarely in play." Id.
Other courts have not addressed the issue in the same fashion, however.
A district court in Maryland declined to rule on the matter earlier this year, given the preliminary stage of proceedings. See Nat'l Ass'n of Diversity Officers in Higher Educ. v. Trump, 767 F. Supp. 3d 243, 276 n.6 (D. Md. 2025), opinion clarified, 769 F. Supp. 3d 465 (D. Md. 2025). That court explained:
For purposes of preliminary injunctive relief, for the reasons explained below, Plaintiffs have shown a likelihood of success on the merits of their First Amendment claims as to contractors and grantees—the latter in part because of application of the test set forth in AID, 570 U.S. at 206, 133 S.Ct. 2321[]. The Court need not and does not decide whether (or to what extent) the Pickering burden-shifting and balancing components of the Wabaunsee County analysis apply to government grantees, as opposed to contractors.
Id.
In another case, a magistrate judge in Idaho applied the Pickering/Umbehr framework to a subrecipient's First Amendment challenge to the Idaho Council on Domestic Violence and Victim Assistance's (ICDVVA) revocation of federal grant funds. See Idaho Anti-Trafficking Coal. v. Somerton, No. 1:24-cv-00526, 2025 WL 1104040, at *3 (D. Idaho Apr. 14, 2025). The magistrate judge reasoned that "Pickering applies to entities, like Plaintiff, who enter contracts with the government to provide services to the public," whereas "[t]he cases where the Ninth Circuit has refused to apply Pickering, by contrast, have involved licensing or permitting schemes." Id. at *4. The magistrate judge rejected the subrecipient's arguments that "its relationship with ICDVVA is not 'akin' to an employer-employee relationship because (i) Plaintiff is not performing government services, (ii) ICDVVA did not monitor Plaintiff intensively, and (iii) the funds ICDVVA provides to Plaintiff only make up part of Plaintiff's budget." Id.
What is the takeaway for federal grant recipients?
The main takeaway is that the federal government appears to be staking out a new interpretation of preexisting case law that, if adopted by the courts, would narrow the understanding many grant recipients have of their First Amendment free speech rights.
It remains to be seen in how many other cases funding agencies will raise this argument, the extent to which courts will adopt it, and whether the application of a standard traditionally associated with independent contractors will meaningfully change the outcomes of cases involving federal grant recipients. Recipients considering potential First Amendment claims relating to funding agency grant determinations should monitor such cases as they continue to develop and consult with counsel for guidance as appropriate.
Finally, even if an organization does not wish to directly litigate, federal grant recipients should remain mindful of developments in this area, how such developments might impact their organization, and steps that might be available to mitigate such impacts. Venable's Government Contracts and Grants Practice will continue to monitor these developments (consider subscribing for updates at https://www.venable.com/insights/subscription-center) and is always available to discuss these issues, their impacts, and options to mitigate.
For questions on federal grant or contract matters, contact Scott S. Sheffler, Diz Locaria, or Chris Griesedieck of Venable's Government Contracts Practice.
[1] DOJ's 2020 filing is available at https://www.courtlistener.com/docket/18599972/santa-cruz-lesbian-and-gay-community-center-v-trump/.
[2] Multiple courts have applied Pickering/Umbehr to corporate entities that hold contracts with the government, rather than limiting the test to individual "independent contractors" whose work is similar to that of federal employees. See, e.g., AH Aero Servs., LLC v. Heber City, 601 F. Supp. 3d 1157, 1172-73 (D. Utah 2022) (rejecting the argument "that when the Supreme Court extended the Pickering test to 'independent contractors' in Umbehr, the Court meant only 'independent contractors performing tasks that would otherwise be performed by public employees'"); Planned Parenthood Ass'n of Utah v. Herbert, 828 F.3d 1245, 1259 (10th Cir. 2016); Oakes Farms Food & Distribution Servs., LLC v. Adkins, No. 23-13847, 2025 WL 2658447, at *4 (11th Cir. Sept. 17, 2025); Roger Whitmore's Auto. Servs., Inc. v. Lake Cnty., Illinois, 424 F.3d 659, 667 (7th Cir. 2005); Alpha Energy Savers, Inc. v. Hansen, 381 F.3d 917, 923 (9th Cir. 2004); Safepath Sys. LLC v. New York City Dep't of Educ., 563 F. App'x 851, 856 (2d Cir. 2014) (unpublished). The cases have not been uniform on such issues, however. See, e.g., 41 North 73 West, Inc. v. Cnty. of Westchester, New York, No. 08-cv-4523, 2009 WL 10740050, at *8 (S.D.N.Y. Sept. 29, 2009) (unpublished) (collecting cases scrutinizing relationship between plaintiff and government before applying Umbehr).