EXECUTIVE ORDERS & FEDERAL POLICY

Seventh Circuit Panel Challenges Trump Administration to Define Illegal DEI  

• Seventh Circuit grills Trump administration on DEI regulations 

OVERVIEW

On January 30, 2026, a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit heard oral argument in an appeal involving a nationwide injunction blocking enforcement of Trump administration executive orders that restrict diversity, equity, and inclusion (DEI) initiatives tied to federal funding.

During the hearing, judges questioned government counsel on how the administration defines “illegal DEI” under the challenged orders, noting that the executive actions require federal grant recipients and contractors to certify compliance without clearly identifying what DEI practices would violate existing anti-discrimination law.

The case stems from litigation brought by Chicago Women in Trades and other plaintiffs challenging certification requirements imposed under Executive Order 14173, which conditions federal funding on assurances that recipients do not operate DEI programs deemed discriminatory. The federal district court that previously issued the nationwide preliminary injunction found that the certification provisions were likely unconstitutionally vague.

The Seventh Circuit has not yet issued a decision.

LEGAL INTERPRETATION

The appeal focuses on whether the administration’s DEI-related certification requirements tied to federal funding are enforceable under existing constitutional and administrative law standards.

Executive Order 14173 conditions eligibility for certain federal grants and contracts on recipients certifying that they do not operate DEI programs that violate federal anti-discrimination law. The order does not define which DEI practices are unlawful, instead referencing existing civil rights statutes such as Title VI and Title VII.

Federal anti-discrimination law prohibits intentional discrimination and unlawful preferences, while permitting a range of voluntary compliance, outreach, and inclusion efforts. The district court found that the certification requirement likely fails to provide adequate notice of what conduct is prohibited, raising due process concerns under the Fifth Amendment.

On appeal, the Seventh Circuit is reviewing whether the district court properly issued a nationwide preliminary injunction based on the applicable legal standard.

BRIDGE POV

The Seventh Circuit argument highlights a growing disconnect between enforcement mechanisms and legal clarity. The administration has positioned its DEI-related certification requirements as an application of existing civil rights law, yet has not articulated what conduct triggers noncompliance. That lack of definition shifts the compliance burden onto organizations without providing a workable standard.

Civil rights law already sets clear boundaries around discrimination. What is changing is not the law itself, but the use of funding conditions to enforce undefined expectations. When eligibility for federal funding depends on ambiguous certifications, organizations are forced to manage risk without clear guidance on what compliance requires.

Leadership decisions in this environment require discipline. Organizations should not equate funding conditions with illegality as they risk making unnecessary and destabilizing changes. The more sustainable approach is to distinguish clearly between what the law requires, what funding programs condition, and what the organization is prepared to certify and defend.

ACTIONABLE STRATEGIES

1. Ground Programs in Law and Documentation: Review DEI-related initiatives to ensure they are clearly aligned with equal opportunity and nondiscrimination requirements under existing civil rights statutes. Program purpose, eligibility, and design should be documented in plain, operational terms.
   
   

2. Treat Certifications as Governance Decisions: Centralize review of any certification tied to federal funding. Certifications should be evaluated by senior leadership and legal counsel, with clear ownership for assessing risk, accuracy, and downstream exposure.
   
   

3. Separate Legal Compliance from Risk Tolerance: Do not dismantle lawful programs solely in response to uncertainty. Make deliberate decisions about funding participation based on a clear understanding of legal obligations, organizational values, and operational priorities.
   
   

See also: Update on Previously Issued Executive Orders (Issue 6); 17 State AGs File Amicus Brief Defending DEI Programs in Challenges to Trump Executive Order (Issue 32)

WORKFORCE & EMPLOYMENT

Major Enrollment Shift Following Affirmative Action Ban Creates Strategic Recruiting Challenge for Employers 

• Colleges See Major Racial Shifts in Student Enrollment 

OVERVIEW

New federal enrollment data from the first full admissions cycle following the Supreme Court’s 2023 decision ending race-conscious admissions show a significant redistribution of Black and Latino students across higher education. Several highly selective private institutions, including Harvard, MIT, and Stanford, have reported declines in underrepresented minority enrollment.

'At the same time, many of those students have enrolled at less selective public and private institutions, particularly large state flagship universities and strong regional schools. Public flagships in states such as Texas, California, Mississippi, and Louisiana have reported notable increases in Black and Latino enrollment, reflecting a broader shift in where high-achieving students are matriculating.

Researchers have described this pattern as a cascade effect, in which changes at the most selective institutions reverberate across the admissions landscape. Overall college enrollment remains stable, but student populations are now more dispersed across institutional tiers.

These shifts are occurring as many employers continue to rely on a narrow group of elite campuses for early-career recruiting, raising questions about whether long-standing recruiting models align with where talent is now concentrated.

LEGAL INTERPRETATION

The enrollment shifts follow the Supreme Court’s 2023 decisions in Students for Fair Admissions v. Harvard, which held that race-conscious admissions programs at colleges and universities violate the Equal Protection Clause and, for private institutions, Title VI of the Civil Rights Act.

The Court’s ruling prohibits institutions from considering race as a standalone factor in admissions decisions. However, the decision does not bar colleges from considering an applicant’s experiences, background, or individual circumstances, including how race has affected an applicant’s life, so long as admissions decisions are not made on the basis of race itself.

The ruling applies directly to admissions practices at institutions of higher education and does not regulate employer recruiting, hiring, or workforce development programs. Colleges remain legally permitted to pursue diversity through race-neutral means, such as socioeconomic status, geography, first-generation status, and targeted outreach, provided those approaches do not function as proxies for race.

The Court did not impose requirements on employers, nor did it alter existing federal employment discrimination law. The observed enrollment changes reflect institutional responses to the legal constraints imposed by the Court’s decision rather than new legal obligations placed on the private sector.

BRIDGE POV

The enrollment shifts following the Supreme Court’s admissions decision are often misunderstood. The data does not show a retreat from higher education or a decline in ambition. Instead, students are enrolling in different institutions, and the distribution of talent across higher education is changing as a result.

While the law has limited how colleges may consider race in admissions, it has not altered who is qualified, capable, or prepared to succeed. What is emerging is a broader dispersion of high-achieving students across public flagships, regional universities, and private institutions outside the most selective tier.

For employers, this has practical implications. Recruiting models that rely on a narrow set of elite campuses reflect past enrollment patterns more than current ones. If unchanged, there is a risk of overlooking qualified talent as recruiting strategies fail to keep pace with where students are now enrolling.

Organizations that reassess where they look for talent, while maintaining rigorous hiring standards, are better positioned to sustain strong and diverse pipelines required for business growth and expansion.

ACTIONABLE STRATEGIES

1. Reevaluate Core Recruiting Schools: Review campus recruiting priorities to ensure they reflect current enrollment patterns. Public flagships, regional universities, and HBCUs are increasingly important sources of early-career talent.
   
   
2. Maintain Focus on Skills and Performance: Anchor hiring decisions in competencies, readiness, and potential rather than institutional prestige. This supports fair hiring practices and improves access to qualified candidates.
   
   
3. Align Talent Sourcing With Growth Strategy: As organizations expand into new markets and customer segments, ensure recruiting strategies reflect the diversity of the talent and communities needed to support that growth. Broadening where talent is sourced is not a concession. It is a growth lever tied to scale, innovation, and market reach.

CIVIL RIGHTS

Nine States Renew Legal Challenge to Federal Disability Integration Requirements

• Nine U.S. States Attack Section 504 and the Right of Disabled People to Live in their Communities 

OVERVIEW

On January 23 2026, a coalition of nine states, led by Texas, renewed a legal challenge to federal regulations enforcing disability integration requirements under Section 504 of the Rehabilitation Act. The states are challenging rules issued by the U.S. Department of Health and Human Services that condition federal funding on providing services to people with disabilities in the most integrated setting appropriate.

The challenge focuses on federal interpretations that require states to prioritize community-based services over institutional or segregated care for individuals with disabilities. The states argue that these requirements exceed federal authority and constrain state discretion in administering Medicaid and other federally funded programs.

Section 504 prohibits discrimination on the basis of disability in programs receiving federal financial assistance. Federal agencies have long interpreted this obligation to include limits on unnecessary institutionalization, relying on statutory authority and Supreme Court precedent.

The renewed litigation places the scope of federal disability civil rights enforcement back before the courts.

LEGAL INTERPRETATION

The states’ challenge centers on the scope of federal authority under Section 504 of the Rehabilitation Act, which prohibits discrimination on the basis of disability by programs and activities receiving federal financial assistance. Section 504 itself does not prescribe specific service delivery models, but it authorizes federal agencies to issue regulations to enforce its nondiscrimination mandate.

For decades, federal agencies have interpreted Section 504, together with the Supreme Court’s decision in Olmstead v. L.C. (1999), to require that individuals with disabilities receive services in the most integrated setting appropriate to their needs, and to limit unnecessary institutionalization. These interpretations have been incorporated into regulations governing Medicaid and other federally funded programs.

The states argue that recent regulatory actions exceed the statutory limits of Section 504 by effectively mandating community-based service models and conditioning federal funding on compliance with requirements not expressly set out in the statute. They contend that these rules intrude on state authority to design and administer disability services and impose obligations beyond nondiscrimination.

The federal government maintains that the challenged regulations fall within long-standing enforcement authority under Section 504 and are consistent with Supreme Court precedent recognizing that unjustified segregation constitutes a form of discrimination. 

BRIDGE POV

Challenges to long-standing disability integration requirements are not confined to public-sector systems. Because Section 504 applies broadly to any entity receiving federal financial assistance, changes in how integration obligations are interpreted or enforced can have consequences well beyond state agencies.

For employers, disability inclusion is not a new obligation or an evolving standard. It is a settled civil rights requirement that touches workforce policy, benefits design, facilities, and vendor relationships. What stands out in this litigation is the renewed effort to narrow the scope of integration as a civil rights principle tied to federal funding.

Organizations that rely on federal funds, contracts, or reimbursement should pay close attention to how these challenges are framed. Even if the law ultimately remains unchanged, periods of uncertainty can affect compliance planning, risk assessment, and operational decisions. Treating disability inclusion as static or peripheral creates exposure when enforcement priorities are contested.

Leadership clarity matters most when legal frameworks are  under pressure. Companies that maintain consistent standards around accessibility, accommodation, and inclusion are better positioned to manage risk, sustain workforce trust, and avoid reactive shifts driven by litigation rather than law.

ACTIONABLE STRATEGIES

1. Review Disability Compliance Through a Funding Lens: Identify where Section 504 obligations attach across operations, including benefits, facilities, vendor arrangements, and any federally funded programs. Ensure compliance frameworks are current and documented.
   
   
2. Align Disability Inclusion With Governance and Risk Oversight: Elevate disability inclusion and accessibility to the same governance and risk structures that oversee other civil rights obligations. This includes regular review by legal, compliance, and senior leadership
   
   
3. Maintain Consistent Standards Despite Legal Challenges: Avoid treating ongoing litigation as a signal to pause or narrow disability inclusion efforts. Stable, well-documented practices reduce exposure and prevent reactive decision-making if enforcement expectations fluctuate.

CIVIL RIGHTS

HRC Advances Federal Employee Healthcare Challenge to EEOC 

• Human Rights Campaign Foundation Takes Next Step in Class Action Litigation Against Trump Administration, Files Complaint with EEOC Over Prohibition on Gender-Affirming Healthcare Coverage for Federal Employees  

OVERVIEW

On February 3, 2026, the Human Rights Campaign filed a complaint with the Equal Employment Opportunity Commission as part of a class action challenge to changes in federal employee healthcare coverage affecting gender-affirming care. The complaint challenges a Trump administration policy excluding most coverage for gender-affirming medical care under federal employee health plans.

HRC alleges that the coverage exclusion unlawfully discriminates against transgender federal employees in violation of Title VII of the Civil Rights Act, which governs compensation and benefits as terms and conditions of employment. The filing represents the administrative phase of a broader class action effort and may proceed to federal court if not resolved through the EEOC process.

By advancing the challenge through the EEOC, the dispute is framed as an employment discrimination matter subject to established federal civil rights standards rather than a general healthcare policy dispute.

LEGAL INTERPRETATION

The complaint, filed by the Human Rights Campaign as part of a class-based challenge, asks the Equal Employment Opportunity Commission to assess whether recent changes to federal employee healthcare coverage comply with Title VII of the Civil Rights Act. Title VII prohibits discrimination in compensation, terms, conditions, and privileges of employment, including employer-provided health benefits.

Under existing law, employment benefits that treat employees differently based on protected characteristics may constitute unlawful discrimination unless the employer can demonstrate a lawful justification. Federal courts and the EEOC have previously recognized that discrimination based on transgender status may fall within Title VII’s prohibition on sex discrimination, particularly following the Supreme Court’s decision in Bostock v. Clayton County.

The EEOC has jurisdiction to investigate complaints alleging discriminatory benefits practices and may pursue administrative remedies if it determines that a violation has occurred. Filing a complaint initiates the agency’s investigatory process and does not itself resolve the legality of the challenged policy.

BRIDGE POV

Health benefits are part of the terms and conditions of employment and are governed by the same nondiscrimination standards as hiring, promotion, and compensation. Coverage decisions affecting gender-affirming care raise employment law questions when they determine whether certain employees can access medically necessary treatment through their workplace benefits.

By advancing this challenge through the EEOC, the issue is being evaluated under Title VII rather than as a general healthcare policy dispute. The focus is whether exclusions related to gender-affirming care operate differently for transgender employees and therefore implicate federal nondiscrimination protections.

Benefits changes that remove or restrict coverage for specific categories of care, particularly when applied broadly and without individualized assessment, carry legal and workforce risk. Organizations that apply clear governance and legal review to benefit design are better positioned to manage that risk and maintain trust when benefit policies are challenged.

ACTIONABLE STRATEGIES

1. Review Gender-Affirming Care Coverage Through an Employment Law Lens: Assess whether exclusions or limitations related to gender-affirming care affect certain employees differently and whether those effects raise Title VII considerations. Treat these reviews the same way other compensation and benefits decisions are evaluated.
   
   

2. Apply Legal and Executive Oversight to Benefits Changes: Ensure changes to healthcare coverage, particularly those affecting specific forms of care, are reviewed by legal and senior leadership before implementation. Documentation and clarity matter when benefits decisions are challenged.
   
   

3. Prepare for Administrative Scrutiny: EEOC complaints often shape expectations before any court ruling. Be prepared to explain how benefit design decisions were made, what alternatives were considered, and how nondiscrimination obligations were addressed.