On Wednesday, June 10, 2026, a coalition of 20 states and the District of Columbia filed suit in the federal district court for the District of Maryland challenging the actions taken to implement Executive Order (EO) 14398, “Addressing DEI Discrimination by Federal Contractors.” The lawsuit alleges the actions exceed statutory authority and were issued without notice and comment required by Administrative Procedure Act as well as being arbitrary and capricious. A previous lawsuit alleged EO 14398 is unconstitutional.
House Republicans Move to Eliminate OFCCP
House Republicans have proposed a 27% decrease in the Department of Labor’s (DOL) fiscal year (FY) 2027 budget. The bill would eliminate the Office of Federal Contract Compliance Programs (OFCCP) as proposed by the Trump administration for FY2026 as well as FY2027. The Senate had reinstated the budget for the OFCCP last year, providing it with over $100 million.
OMB Proposes New Grant Regulations For All
The Office of Management and Budget (OMB) and over 40 other federal agencies are proposing sweeping revisions to the federal grant process. The new process will allow political appointees to terminate grants “in the interest of the federal agency or pass-through entity,” including when an award “no longer effectuates program goals, federal agency priorities, or the national interest.”
The rule would add “national policy provisions” to prohibit use of federal awards to “fund, promote, encourage, subsidize, or facilitate” what the administration calls “unlawful” diversity, equity, and inclusion (DEI) and gender ideology and to protect children from “transition.” It also would require recipients to affirmatively certify and monitor compliance, with noncompliance being a “material breach.” In addition, the rule would prohibit agencies, pass-through entities, recipients, and subrecipients from using federal awards “to promote or support theories of disparate impact liability based on protected characteristics.”
A less discussed requirement is the fact that recipients and subrecipients must participate in E-Verify just as federal contractors are required to do. Any final “nonconfirmation” notices will have to be reported to the appropriate federal agency.
The proposal is open for comment until July 13.