Quick Hits

• A coalition of higher education/academic and minority trade associations has filed a lawsuit against President Trump’s executive order on DEI initiatives that imposes contractual consequences on federal contractors and subcontractors.
• The lawsuit alleges that Executive Order (EO) 14398 unlawfully equates DEI with racial discrimination and violates the First Amendment by chilling speech and association on matters of race and diversity.
• The plaintiffs contend EO 14398 is overly broad and unconstitutional, threatening the viability of their missions by compelling compliance through the risk of losing federal contracts.

Led by the National Association of Diversity Officers in Higher Education (NADOHE), the lawsuit names President Trump and more than a dozen federal agencies and their heads, seeking to enjoin enforcement of EO 14398, issued on March 26, 2026, titled “Addressing DEI Discrimination by Federal Contractors.”

The associations’ suit alleges EO 14398 unlawfully equates “DEI” with “racial discrimination” by requiring agencies, within thirty days of March 26, 2026, to insert a mandatory clause, which the complaint labels the “Diversity Ban” into “contracts and contract-like instruments,” including lower-tier subcontracts. Noncompliance risks include contract cancellation, termination, or suspension, and ineligibility for future government contracts and potential liability under the False Claims Act (FCA).

Challenged Executive Order: EO 14398

EO 14398 prohibits contractors from engaging in “racially discriminatory DEI activities,” defined in the executive order as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”

The executive order narrows its scope to race and ethnicity and expressly defines “racially discriminatory DEI activities,” unlike past broader references to “unlawful DEI.” EO 14298 defines “program participation” to include “membership or participation in, or access or admission to: training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities” sponsored or established by a contractor or subcontractor. The executive order targets disparate treatment based on race or ethnicity and does not on its face extend to sex- or gender-based practices, nor to disparate impact theories. 

EO 14398 is one of several executive orders issued by the Trump administration restricting DEI programs and practices by federal contractors, but it notably departs from prior executive orders by providing an express definition of “racially discriminatory DEI activities.” EO 14398 also includes the latest version of the administration’s certification provision, stating that the contractor recognizes “compliance with the requirements of this clause are material to the Government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code” (False Claims Act).”

The clause also requires contractors to provide access to books, records, and accounts for compliance review, to report any known or reasonably knowable subcontractor noncompliance, and to notify the agency if a subcontractor sues and “puts at issue” the validity of the clause.

Separate from the contract clause, EO 14398 directs the Office of Management and Budget (OMB) to issue guidance, and tasks OMB, the U.S. Equal Employment Opportunity Commission (EEOC), and the U.S. Department of Justice (DOJ) with identifying higher‑risk sectors for targeted oversight, and instructs agencies to cancel, terminate, suspend, or refer for suspension or debarment where contractors or subcontractors fail to comply.

EO 14398 requires the Federal Acquisition Regulatory Council (FAR Counci) to amend the Federal Acquisition Regulation (FAR) and, within sixty days, issue deviation/interim guidance to facilitate immediate implementation. On April 17, 2026, the FAR Council issued the anticipated guidance in a memorandum, setting forth an aggressive timeline for implementation.

Legal Grounds Challenging the Executive Order

At the core of the associations’ lawsuit is the allegation that the EO “asserts a legal and moral premise that is fundamentally flawed,” incorrectly claiming that DEI in and of itself is illegal and discriminatory. The associations allege that despite the EO’s efforts to define “unlawful DEI,” EO 14398 is still “overbroad and imprecise” and would broadly and unconstitutionally prohibit activities and practices many see as a competitive advantage and other activities protected by the First Amendment.

These prohibitions threaten the missions, the work, and the long-term viability of the plaintiff organizations, the complaint alleges. Absent an injunction, federal contractors and subcontractors “will be forced to choose between chilling their constitutionally protected expression and risking the loss of federal funds or even criminal prosecution,” the complaint alleges.

Alleged First Amendment Violations and Ultra Vires

The lawsuit brings three counts:

1. First Amendment—Free Speech and Free Association

The associations allege EO 14398 violates the First Amendment by chilling constitutionally protected speech and association on matters of race, ethnicity, diversity, equity, and inclusion. Also, they allege EO 14398 is unconstitutionally overbroad because it sweeps in substantial amounts of protected expression—including lawful discussions of race, academic research, mentorship programs, and professional associations—and deters such expression through threats of contract loss and penalties.

2. First Amendment—Content-Based Restrictions

The associations allege EO 14398 imposes content-based discrimination because it “discriminates against speech and association that relates to race, ethnicity, diversity, equity, and inclusion” while not restricting other expression, and “unlawfully coerces contractors to suppress and punish subcontractors’ speech and association.” They further allege EO 14398 imposes an unconstitutional condition, requiring the associations to “chill their own protected speech and association” or forgo needed federal contracts.

3. Ultra Vires

The NADOHE and the two minority trade associations allege the FCA certification provision of the EO 14398 exceeds the president’s authority and has “[n]o source of law.” Additionally, the associations allege there is no “close nexus” between threatening FCA liability and the Procurement Act’s purpose of promoting efficient government procurement.

Next Steps

The new lawsuit over EO 14398 is the latest challenge to the Trump administration’s executive orders seeking to eliminate DEI in federal contractors and other employers, which have had varying results. In February 2026, the U.S. Court of Appeals for the Fourth Circuit vacated a preliminary injunction against earlier executive orders after focusing on certification text requiring compliance with applicable federal antidiscrimination laws, noting that if officials misinterpret those laws to punish lawful expression, plaintiffs may bring as‑applied challenges. That decision did not validate the administration’s broader enforcement practices or its interpretation of federal antidiscrimination law.

The latest lawsuit sets up what is likely to be more litigation and potential court orders halting the enforcement of EO 14398. The lawsuit asks the court to declare the order unlawful and unconstitutional and to enjoin federal agencies (not the president) from implementing or enforcing it. It also pleads an ultra vires claim that EO 14398’s FCA “materiality” clause (Section 3(6)) exceeds presidential authority under the Procurement Act. Employers may wish to track this and other ensuing challenges, as well as further government activity on the executive order(s).

Ogletree Deakins’ Higher Education Practice Group and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Government Contracting and Reporting, Higher Education, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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Quick Hits

• The Supreme Court left intact the Sixth Circuit’s intent-based standard for employer liability for third-party harassment.
• The Sixth Circuit’s ruling diverges sharply from the EEOC’s position, as well as that of almost all other circuits to address the issue.
• Employers in Kentucky, Michigan, Ohio, and Tennessee continue to benefit from the higher bar for employer liability set by the Sixth Circuit, while employers in most other jurisdictions remain subject to a more employee-friendly standard.

Background

In Bivens v. Zep Inc., the Sixth Circuit held that an employer can be liable for customer harassment only if it intended for the harassment to occur or was willfully indifferent to it. In its decision, the Sixth Circuit rejected the negligence standard of coworker harassment applied by the U.S. Equal Employment Opportunity Commission (EEOC) and almost all other federal circuit courts that have considered the issue. According to this standard, an employer is liable if it knew or should have known about the harassment and failed to take immediate and appropriate action. The Sixth Circuit reasoned that customers are not agents of the employer in the same way coworkers are. The court also noted that, under the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, which overruled the Chevron doctrine of judicial deference to reasonable agency interpretation, it was not bound to follow the EEOC’s guidance on the issue.

The Circuit Split Persists

The Supreme Court’s denial of certiorari results in employers and employees being subject to materially different legal standards regarding employer liability for third-party harassment, depending on their geographic location. In the Sixth Circuit—covering Kentucky, Michigan, Ohio, and Tennessee—employees must demonstrate that their employer intended for the harassment to occur or was willfully indifferent to it. However, in the First, Second, Eighth, Ninth, Tenth, and Eleventh Circuits, employees face a lower bar for establishing employer liability.

Key Takeaways for Employers

The Supreme Court’s decision not to intervene reinforces the importance of proactive measures regardless of jurisdiction. Employers may wish to review their written policies and training programs to ensure they clearly address harassment by customers and other third parties and set forth effective complaint procedures. Prompt and effective responses to complaints of harassment continue to serve as best practices, as does ensuring that employees do not face retaliation for reporting such conduct.

Ogletree Deakins’ Workplace Investigations and Organizational Assessments Practice Group will continue to monitor developments and will provide updates on the Employment Law, Kentucky, Michigan, Ohio, State Developments, Tennessee, and Workplace Investigations and Organizational Assessments blogs as new information becomes available.

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Quick Hits

• An employer’s obligation in Germany to pay public holiday surcharges under the TV-L depends on whether a statutory holiday exists at the employee’s regular place of employment.
• Collectively agreed holiday surcharges may cover Easter Sunday and Whit Sunday if the wording of the collective agreement so provides, even though these days are not statutory holidays in many federal states.
• In the private sector, public holiday law is determined by the actual place of work (e.g., the employer’s premises or the home office), although employers may contractually provide that home office or mobile work is excluded on days that are statutory holidays only at the mobile work location—but not at the employer’s main office.

For private-sector employers, the following applies: The prohibition on work under Section 9(1) of the Working Hours Act (Arbeitszeitgesetz (ArbZG))and the continued payment of wages on public holidays under Section 2(1) of the Continued Remuneration Act (Entgeltfortzahlungsgesetz (EFZG))are tied to the place of work, meaning the federal state in which the work is actually performed. This also applies to home office and mobile work, regardless of whether the employment contract designates a different location as the place of work.

Holiday Surcharges Despite a ‘Holiday-Free’ Federal State for Collectively Bound Employers

An employee of a hospital in North Rhine-Westphalia, whose employment relationship was governed by the TV-L, attended a training course in Hesse from November 1 through November 5, 2021, at the employer’s direction. November 1 (All Saints’ Day) is a statutory holiday in North Rhine-Westphalia but not in Hesse. The employee claimed the collectively agreed holiday surcharge for the ten hours worked on that day. The BAG upheld the claim. According to the purpose of the collectively agreed surcharge provision, entitlement to the surcharge is determined by the employee’s regular place of employment, not the actual place of deployment. The parties to the collective agreement assume that the employee’s social environment—with which the employee could spend and enjoy the holiday—is located at the regular place of employment. This approach avoids arbitrary outcomes in cross-state deployments.

Without a Collective Agreement, What Rules Apply in the Private Sector?

The decisive factor for whether working on a public holiday violates the prohibition on employment under Section 9 of the ArbZG is solely the actual place of work—the location where the work is actually performed. If this location is in a federal state that observes a statutory holiday, the prohibition on employment applies (BAG, decision of April 16, 2014 – Ref. No. 5 AZR 483/12). This also applies when the employee’s residence is designated as the place of work or the employee works remotely. If employees are assigned a place of work in a federal state that observes a statutory holiday, the duty to work ceases (Section 9(1) of the ArbZG) and the employee is entitled to continued pay (Section 2(1) of the EFZG), even if the employer’s main office is in a state without a holiday. Conversely, the duty to work continues if the employer’s main office observes a holiday but the assigned place of work does not. If the employee nevertheless does not work in such a case, no claim for continued pay under Section 2(1) of the EFZG arises, because this provision covers only statutory holidays at the actual place of work. The employer’s obligation to pay remuneration in this scenario may only arise under other legal bases.

Contractual provisions that aim to circumvent the statutory entitlement to continued pay on public holidays are incompatible with the mandatory nature of this entitlement as set out in Section 12 of the EFZG and are therefore void to that extent (BAG, decision of October 16, 2019 – Ref. No. 5 AZR 352/18).

Whit Sunday—Holiday Surcharge Without a Statutory Holiday?

A long-serving employee of a bread and bakery products company in North Rhine-Westphalia claimed the 200 percent surcharge provided in the framework collective agreement (Manteltarifvertrag (MTV))for work performed on Easter Sunday and Whit Sunday, after the employer had only paid the standard Sunday surcharge (50 percent). The MTV explicitly referred to “major holidays (New Year’s Day, Easter, May 1, Whitsun, and Christmas).” The BAG ruled in the employee’s favor, holding that Easter Sunday and Whit Sunday are also covered, even though they are not statutory holidays under state law (BAG, decision of February 24, 2021 – Ref. No. 10 AZR 130/19). In common usage, the respective Sunday is the central day of Easter and Whitsun. It would therefore be far-fetched to interpret “Easter” and “Whitsun” as including Monday but not Sunday. The collectively agreed holiday surcharge is therefore also payable for work on Easter Sunday and Whit Sunday.

Key Takeaways

For holiday surcharges under the TV-L, the decisive factor is whether a statutory holiday exists at the employee’s regular place of employment—business trips do not change this. In the private sector, by contrast, the actual place of work determines the outcome, including the home office. However, employers may contractually exclude home office or mobile work on days that are statutory holidays only at the mobile work location, but not at the employer’s main office.

Employers cannot circumvent continued pay under Section 2(1) of the EFZG by simply not scheduling work on public holidays. The entitlement to continued pay for a specific holiday lapses only if the exemption from work follows a holiday-independent pattern, such as a fixed shift schedule. This is particularly relevant in industries with variable work scheduling, such as delivery services.

Ogletree Deakins’ Berlin and Munich offices will continue to monitor developments and will post updates on the Cross-Border, Germany, Leaves of Absence, and Wage and Hour blogs as additional information becomes available.

Daniela Schumann is a senior associate in the Berlin office of Ogletree Deakins.

Lela Salman, a law clerk in the Berlin office of Ogletree Deakins, contributed to this article.

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The proposed rule, titled “Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave,” would further address the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The proposed rule is set to be published in the Federal Register on April 23, 2026.

This is a breaking development, and Ogletree Deakins’ Wage and Hour Practice Group will provide further reporting.

Quick Hits

• Virginia Governor Abigail Spanberger recently signed SB 170, which prohibits an employer from enforcing a noncompete covenant with an employee who is discharged and not offered severance, unless the employer discharged the employee for cause.
• The Virginia General Assembly passed a different bill to ban noncompete covenants with healthcare professionals, but the governor has not signed it yet.
• Virginia continues to limit the use of noncompete covenants with “low-wage” workers.

Senate Bill (SB) 170, which Governor Abigail Spanberger signed on April 13, 2026, amended Virginia’s law on noncompete covenants. SB 170 does not apply to covenants entered into before July 1, 2026.

Under the amended law, noncompete covenants will be unenforceable if an employer discharged an employee without providing severance pay, unless the employer discharged the employee for cause. As of July 1, 2026, any severance benefits or other monetary payments that will support enforcement of a noncompete covenant must be disclosed to the employee at the time the covenant is executed. The law is silent as to the amount of the severance benefits or other monetary payments that will be required.

The amended law does not change the statutory definition of a noncompete covenant. In January 2026, the Court of Appeals of Virginia addressed the extent to which that definition includes customer and employee nonsolicitation covenants, holding (i) a customer nonsolicitation covenant that restrains an employee from directly soliciting a customer does not fall within the scope of the law’s restrictions, but (ii) a customer nonsolicitation covenant that prevents employees from accepting unsolicited business from a customer does fall within the scope of the law’s restrictions, and likewise, (iii) an employee nonsolicitation covenant also falls within the scope of the law’s restrictions.

The amended law does not define the term “cause,” which is subject to varying legal interpretations. It is unclear how courts will interpret “cause” under the amended law. Employers should consider how the manner in which an employee is separated from employment will affect enforceability of the employee’s noncompete covenants. Employers also may wish to consider defining “cause” in agreements, although it is not clear what weight courts will give such a definition.

The new severance requirement will layer on top of—and will not replace—Virginia’s existing ban on noncompete covenants for “low-wage” employees. “Low-wage” employees under Virginia law are those (i) who earn less than the average weekly wage in Virginia, currently $1,507.01 per week or $78,364.52 per year, or (ii) who are classified as nonexempt under the Fair Labor Standards Act (FLSA).

Meanwhile, the Virginia General Assembly also passed SB 128, which would ban noncompete covenants for healthcare professionals, including any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work. The governor recommended certain amendments to this bill, which the General Assembly will consider when it reconvenes on April 22, 2026, to consider vetoes and proposed amendments from the governor.

Next Steps

Employers should review their restrictive covenant terms and practices for employees in Virginia, both to modify their agreements to comply with existing law and to realign their practices consistent with the amended law’s requirements. The amended law is likely to require changes in current agreements for those forms to be enforceable (when executed on or after July 1, 2026). Employers may choose to replace existing noncompete covenants with new ones for the purpose of ensuring consistent treatment of employees, and potentially also to gain greater confidence that the clauses are enforceable because they meet the specific requirements contained in the amended law.

The amended law does not affect the enforceability of nondisclosure agreements. But these changes in the law are always good opportunities for employers to reevaluate their overall approach to protecting their trade secrets, other confidential information, and goodwill.

It is now more critical than ever to carefully draft restrictive covenants in Virginia. Virginia courts already decline to selectively remove the unenforceable parts of restrictive covenants, and as of July 1, 2026, an employee will be entitled to bring a civil action against an employer that attempted to enforce a noncompete clause in violation of the law.

Ogletree Deakins’ Washington, D.C., and Richmond offices will continue to monitor developments and will post updates on the Healthcare, Unfair Competition and Trade Secrets, and Virginia blogs as additional information becomes available.

In addition, information is available on the Ogletree Deakins Client Portal, including the Virginia jurisdiction page. Snapshots and updates are available for all registered client users. Detailed information and updated policies are available for Premium and Advanced subscribers. For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

Caroline H. Cheng is a shareholder in Ogletree Deakins’ Washington, D.C., office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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Quick Hits

• New clause FAR 52.222-90 declares contractor compliance “material” to the government’s payment decisions, creating direct False Claims Act liability for contractors who maintain prohibited programs.
• Agencies must bilaterally modify existing contracts to include the new clause by July 24, 2026, and if a contractor refuses, agencies are told to consider whether the contract should be terminated for convenience.
• Prime contractors must flow the clause down to all tiers and report any subcontractor’s “known or reasonably knowable” violations to the contracting officer.

While EO 14398, issued in March 2026, set the policy stage, this new memorandum provides the technical architecture and aggressive deadlines that federal contractors and subcontractors must navigate immediately.

Below, we break down the most critical developments that move this from a policy statement to an active compliance requirement.

1. The ‘Materiality’ Trap: False Claims Act Exposure

Perhaps the most significant legal development in the FAR Council’s guidance is in the text of the new clause, FAR 52.222-90(b)(6). It states that compliance with the race-based diversity, equity, and inclusion (DEI) discrimination ban is “material to the Government’s payment decisions” for purposes of 31 U.S.C. 3729(b)(4).

By explicitly linking DEI activities to the False Claims Act (FCA), the government has created significant litigation risk. Any contractor that maintains programs that meet the broad definition of “racially discriminatory DEI activities” could face treble damages and significant civil penalties.

But the FAR guidance is only half the equation. The EO itself supercharged the enforcement mechanism by directing the attorney general not only to consider bringing affirmative FCA actions against noncompliant contractors, but also to ensure “prompt review” of civil actions brought by private persons under 31 U.S.C. 3730(b)(1). In practical terms, Section 4(d)(ii) of the EO instructs the government to render a decision on whether to proceed with a qui tam (whistleblower) suit within the sixty-day seal period “to the maximum extent practicable.”

2. Aggressive Implementation Deadlines

The timeline for implementation is remarkably short, yet the scope of coverage is massive. Government data from fiscal year (FY) 2025 shows 160,508 prime contracts awarded to more than 34,000 unique vendors that meet the new clause’s scope and geographic conditions, with a maximum estimated universe of more than 642,000 awards when subcontracts are included. All of those are potentially subject to these new requirements, and the deadlines leave little room for internal review of existing programs:

• April 24, 2026: Agencies must begin using the new clause in all new solicitations and resulting contracts.
• April 27, 2026: Agencies are required to update their class deviations for parts 9, 12, 22, and 52.
• July 24, 2026: Agencies must work to modify existing contracts to include the new clause.

Notably, open solicitations already in the pipeline are not grandfathered: agencies must amend them under FAR 1.107(d) to incorporate the new clause, meaning contractors currently in the middle of a bid process may find these requirements inserted during the procurement process.

3. The ‘Bilateral’ Ultimatum for Existing Contracts

The guidance takes a firm stance on existing work. Contracting officers “must make every effort” to bilaterally modify existing contracts to include the new clause.

Crucially, the guidance provides a roadmap for contractors that refuse. If a contractor will not agree to the modification, the contracting officer is instructed to consider whether the contract should be terminated for convenience because it no longer meets the agency’s needs. This effectively forces contractors to accept these new terms or risk losing their federal contract. Further, contractors weighing whether to request modifications to the clause language during a bid process may also want to note that the FAR Council’s memorandum notes that “agencies must request approval from the Council before adopting FAR text that differs from the Council’s model deviation text.” This provision seemingly decreases the likelihood that the government would negotiate the language. There is one narrow exception worth noting: modification of contracts with a final expiration date no later than December 31, 2026, is left to contracting officer discretion.

4. Scope and Geographic Boundaries

The scope of the new clause is broad in many respects, but it does contain meaningful boundaries that contractors may want to use to map against their operations.

The clause applies to contracts and subcontracts at any tier “for which the place of delivery or performance is in the United States.” This geographic limitation is significant. Contractors with overseas operations, international supply chains, or foreign subsidiaries performing work outside the United States are not covered by this clause for that work. For multinational contractors, this distinction creates a clear dividing line.

Similarly, the clause only applies to contracts valued over the micro-purchase threshold (currently $15,000). While this exception may not matter for many government contracts, it does mean that smaller procurements could fall outside the clause’s reach.

5. Subcontractor Surveillance Obligations

The new guidance places an affirmative “policing” burden on prime contractors regarding their supply chains:

• Mandatory Flow-Down: The clause must be included in subcontracts at any tier, including those for commercial products and commercial services, for which the place of delivery or performance is in the United States.
• Duty to Report: Contractors are legally required to report a subcontractor’s “known or reasonably knowable” conduct that may violate the clause to the contracting officer, and to take any remedial actions directed by the contracting officer.
• Notice of Litigation: If a subcontractor sues a prime contractor and the validity of the DEI clause is at issue in any way, the prime contractor must inform the contracting officer.

6. Definitions: Adopted Wholesale, Not Interpreted

One thing the FAR Council notably did not do was narrow or clarify the EO’s definitions. The definitions of “racially discriminatory DEI activities” and “program participation” in FAR 22.2201 are adopted verbatim from Section 2 of the EO. That means “racially discriminatory DEI activities” continues to be defined as “disparate treatment based on race or ethnicity” across recruitment, employment, contracting (including vendor agreements), program participation, and resource allocation. “Program participation” includes training, mentoring, leadership development programs, educational opportunities, clubs, associations, and similar opportunities sponsored by the contractor or subcontractor.

7. Enforcement and Noncompliance: What Contractors Can Expect

The government’s own Paperwork Reduction Act (PRA) filings offer a nuanced picture of how it expects enforcement to play out in practice. The government estimates that approximately 1 percent of covered awards will trigger some form of enforcement activity in any given year. There are three distinct categories of activity, each with very different implications for contractors:

• Books and records requests under paragraph (b)(2): These are the most significant. The government can request information, reports, and access to a contractor’s books, records, and accounts related to compliance.
• Subcontractor violation reports under paragraph (b)(4): These are notifications a prime contractor must file when it becomes aware of a subcontractor’s known or reasonably knowable noncompliance.
• Litigation notices under paragraph (b)(5): These are notifications required when a subcontractor brings a lawsuit in which the validity of the clause is at issue.

Even before PRA approval, agencies may require contractors to submit existing records regarding compliance “in connection with individual investigations,” including investigations initiated by the U.S. Equal Employment Opportunity Commission (EEOC) or the U.S. Department of Justice (DOJ). The guidance also states that agencies “should expect” contractors to proactively alert contracting officers to potential violations or lawsuits relating to the clause.

Noncompliance with FAR 52.222-90 is now a formal basis for both debarment under FAR 9.406-2 and suspension under FAR 9.407-2. This transforms what might otherwise be a risk limited to a single contract into an existential threat across the contractor’s entire federal contracting portfolio.

8. Sector-Specific Scrutiny on the Horizon

Finally, contractors may want to note a provision in the executive order that has not yet been activated but could significantly raise the stakes for certain industries. Section 4(b) directs the director of the Office of Management and Budget (OMB), in coordination with the attorney general, the assistant to the president for domestic policy, and the EEOC chair, to “identify economic sectors that pose a particular risk” of entities engaging in racially discriminatory DEI activities and to issue additional guidance for those sectors. No sectors have been identified yet, but contractors in industries with historically prominent DEI programs may want to anticipate heightened scrutiny.

Contractor Takeaways

This guidance transforms DEI compliance from a corporate social responsibility consideration into a primary legal, financial, and debarment risk. Contractors may wish to consider action on several fronts.

• First, consider auditing internal programs, including reviewing DEI initiatives, mentorship programs, vendor diversity requirements, and resource allocation practices against the codified definition of “disparate treatment” based on race or ethnicity. The definitions are broad, and the FAR Council has declined to provide interpretive guardrails.
• Second, consider mapping exposure. The geographic limitation (U.S. place of performance) and the micro-purchase threshold exception mean the clause does not apply uniformly across all operations. Contractors with mixed domestic and international portfolios may want to identify precisely which contracts and subcontracts are covered.
• Third, consider evaluating supply chain readiness. The subcontractor flow-down and reporting obligations mean that a subcontractor’s violation could quickly become a prime contractor’s problem. Contractors may want to update subcontract templates and establish internal reporting protocols.
• Fourth, the whistleblower dimension is an important factor. The combination of the FCA materiality clause and the EO’s qui tam acceleration provisions creates a potent private enforcement mechanism that does not depend on government resources or priorities.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance Practice Group, Government Contracting and Reporting Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Ethics / Whistleblower, Government Contracting and Reporting, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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Quick Hits

• The minimum wage in the U.S. Virgin Islands will increase to $12.00 per hour starting April 24, 2026,
• The increase is part of recent amendments enacted in January 2026 that call for annual increases to the minimum wage rate each year until 2028 and call for potential future adjustments by the Virgin Islands Wage Board after 2029. 
• Employers may want to review and update their wage schedules and plan for future increases to comply with the amendment to the territory’s wage and hour laws. 

The Virgin Islands Minimum Wage Act, Act No. 9069, which was signed into law by Governor Albert Bryan Jr. on January 23, 2026, amends Title 24, Chapter 1, Section 4 of the Virgin Islands Code, increasing the minimum wage, which has been set at $10.50 per hour since 2018. The act also extends the timeline for future adjustments.

Minimum Wage Rate Increase

Act No. 9069 establishes a new set of annual phased increases in minimum wage rates over three years: 

• April 24, 2026: $12.00 per hour
• June 1, 2027: $14.00 per hour
• June 1, 2028: $15.00 per hour

Tipped Tourist Service and Restaurant Employees

Tipped tourist and restaurant employees must still be paid at a rate not less than 40 percent of the minimum wage rate, meaning their minimum wage rate will increase to $4.80 per hour on April 24, 2026.

The Virgin Islands Code allows for the Virgin Islands Wage Board to adjust the minimum wage for tipped “tourist service and restaurant employees” to a rate not greater than 45 percent of the minimum wage or less than the federal minimum wage for tipped employees. The Act adds “whichever is greater,” ensuring that tipped employees receive the higher of the scheduled minimum wage or the applicable federal rate.

Future Adjustments

The act also extends the timeline for future adjustments to the minimum wage rates under the Virgin Islands Code. Beginning after December 31, 2029, and each subsequent year after, the Virgin Islands Wage Board will consider adjustments to the minimum wage. According to the code, the new rate may be “equal to not more than 50 percent of the average private, nonsupervisory, nonagricultural hourly wage as determined by the Wage Board for the previous November, rounded to the nearest multiple of five (5) cents.” At no time may the minimum wage be less than the effective federal minimum wage. 

New Employer Poster

The Virgin Islands Department of Labor (VIDOL) has issued an updated poster reflecting the new minimum wage rates for April 24, 2026. The poster further reminds employers that employees are entitled to overtime pay at time and a half of their regular rate for all hours over eight hours in a single day, hours over forty hours in a week, or any hours on the sixth and/or seventh consecutive days of work. Rates differ for tipped tourism and restaurant employees.

The poster also reminds employers that they are required to maintain and retain records of employees’ hours worked for up to three years and that they must provide those records to the VIDOL when requested.

Next Steps

Employers in the Virgin Islands should take note of the new minimum wage rate and may want to review their existing wage schedules and payroll systems to ensure compliance. The VIDOL emphasized that compliance is mandatory and that employers may be fined up to $2,500 for violations.

Ogletree Deakins’ St. Thomas office will continue to monitor developments and will provide updates on the Hospitality, U.S. Virgin Islands, and Wage and Hour blogs as additional information becomes available.

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Quick Hits

• In March 2026, ICE published a fact sheet identifying new Form I-9 substantive errors which were previously held out to be technical violations.
• Substantive errors, which cannot be corrected during an I-9 audit, pose a significant financial burden on employers with fines ranging from $288 to $2,861 per form violation.
• Internally auditing Form I-9s can help reduce potential exposure in the event of an audit.

Failure to properly prepare a Form I-9 could expose employers to significant civil and criminal penalties.

Employers are required to verify the identity and employment eligibility of employees hired on or after November 6, 1986, using an Employment Eligibility Verification, also known as the Form I-9. Homeland Security Investigations (HSI) conducts administrative inspections of employers’ compliance with this requirement, beginning with the service of a Notice of Inspection (NOI). The NOI provides employers with three business days to produce all Form I-9s requested along with additional documentation, including but not limited to, an employee roster and tax/payroll data.

During the inspection process, the auditor locates technical or procedural failures on the Form I-9s produced and affords employers with ten business days to make corrections. The technical violations are minor, correctable errors in Form I-9 completion that do not relate directly to an employee’s authorization to work. At the conclusion of the inspection process, the auditor will also note substantive violations when issuing the written notification of its findings. Substantive violations are serious, noncorrectable errors in Form I-9 which thereby directly relate to and question the employee’s authorization to work. Note, if technical violations are left uncorrected during the inspection process, they become substantive violations.

In recent years, HSI increased its Form I-9 inspections, with a key focus on the construction, agriculture, manufacturing, and hospitality industries. Coinciding with this increase in inspections, ICE released a Form I-9 Inspection Under Immigration and Nationality Act § 274A fact sheet identifying substantive and technical violations associated with the preparation of the Form I-9. Notably, when compared to prior guidance, ICE’s newly published fact sheet reallocated some errors from the technical box to the substantive box. Below please find breakdowns specifically identified in the new fact sheet, detailing the errors based on section, noting where the reallocation occurred.

Key Takeaways

With the introduction of newly-designated substantive errors combined with increased inspection activity, there is an increased potential for exposure to employers flowing from the preparation of Form I-9s. As published in the Federal Register, substantive violation fines range from $288 to $2,861 per Form I-9. Employers may want to conduct an audit of their Form I-9s to demonstrate compliance with federal law.

Ogletree Deakins’ Immigration Practice Group will continue to monitor developments and will publish updates on the Immigration blog as additional information becomes available.

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Quick Hits

• The DOJ extended the deadline for compliance with the rules on website accessibility for most state and local governments from April 24, 2026, to April 27, 2027.
• HHS has not yet acted to provide an additional extension on its website compliance regulation for “recipients” subject to the Rehabilitation Act, but may yet extend that May 2026 deadline.
• The additional year also lengthens the implied “grace period” that state and local government websites had to conform to the website accessibility rule.

In an interim final rule published on April 20, 2026, in the Federal Register, the DOJ justified this deadline based on the significant burdens associated with compliance, along with confusion about some of the provisions. The final rule, issued in April 2024, had given two (or three) years for state and local governments to bring their websites into compliance with the Web Content Accessibility Guidelines (WCAG), version 2.1.

The new deadlines for compliance under this Title II of the Americans with Disabilities Act (ADA) regulation are April 26, 2027, for most governmental entities, and April 26, 2028, for smaller governmental entities.

Will there be a similar reprieve under the Rehabilitation Act regulation due to be effective in early May 2026?

The actions come without any similar reprieve yet granted under a Rehabilitation Act regulation issued by the U.S. Department of Health and Human Services (HHS) that requires compliance in early May 2026 for most “recipients of federal financial assistance” and May 2027 for smaller “recipients.” Because nearly all Title II entities are also deemed “recipients,” a failure to extend the HHS deadline would effectively undermine this extension.

Key Takeaways

The one-year reprieve provides state and local governments with additional time to get their websites, mobile applications, and other electronic information into conformance with WCAG.

The one-year reprieve may also provide additional time for the many entities that act as vendors to state and local government of websites, mobile applications, and other electronic information to bring their products into conformance with WCAG.

As welcome as the reprieve may be, it is not the suspension of, or significant amendment to, the regulation that many had hoped for. Had the administration intended to suspend this regulation, as it has done with many others, this would have been a good opportunity to do so. But, with the additional time, suspension or amendment is certainly possible.

The additional year lengthens the implied “grace period” that state and local government websites had to conform to WCAG. State and local governments sued during the implied “grace period” for lack of website accessibility could argue that the regulation’s compliance period sets the deadline for their compliance.

It remains uncertain what will happen to the May 2026 deadline for a very large group of private sector “recipients” under the Rehabilitation Act.

Ogletree Deakins’ Disability Access Practice Group will continue to monitor developments and will post updates on the Disability Access, Healthcare, and Higher Education blogs as additional information becomes available.

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Quick Hits

• Starting no later than January 3, 2028, the FAMLI program will provide most Maryland employees with up to twelve weeks of paid leave for certain family and medical reasons, with a possible additional twelve weeks of leave for parental bonding, per application year.
• The program is funded through employer and employee payroll contributions, which will commence on January 1, 2027, and be administered by the MDOL’s FAMLI Division.
• The final regulations address, among other things, the claims process and paid leave benefits.

Background on the Law and Final Regulations

As discussed in further detail in Part I of this series, Maryland enacted the FAMLI program in 2022, to provide most employees with up to twelve weeks of paid family and medical leave (plus up to twelve additional weeks for parental leave) within a twelve-month period. After several legislatively mandated delays, employer and employee contributions are set to begin on January 1, 2027, with benefits commencing no later than January 3, 2028.

The MDOL’s final regulations, effective March 30, 2026, are organized into five chapters—General Provisions, Contributions, Equivalent Private Insurance Plans (EPIPs), Claims, and Dispute Resolution—and largely preserve the proposed regulatory framework with certain refinements. The final regulations can be found in Title 9, Subtitle 42 of the Code of Maryland Regulations, COMAR 09.42.01-.05.

Key provisions of the regulations related to the claims process and paid leave benefits are summarized below. Part I of this series addressed important definitions, the creation of online employer accounts, and mandatory notices. Part III covers EPIPs and dispute resolution.

Applications, Supporting Documentation, and Claim Updates

Eligible employees may file an application for benefits within sixty days before the anticipated start date of leave and no later than sixty days after the start date. The sixty-day filing deadline may be waived for good cause, up to one year from the commencement of leave.

The final regulations detail the required documentation for each type of qualifying event, including certification(s) from licensed health care providers for medical conditions, proof of relationship for bonding and caregiving, and confirmation of active-duty service for qualifying exigencies. A claimant applying for uniformed services caregiving leave must also provide documentation from the United States government establishing the service member’s status. The FAMLI Division may require claimants to attest that the information in their applications is true and that there are no disqualifying criteria.

Employers have five business days to respond to notice of an employee’s submitted claim application. If no employer response is received within that period, the claim application is deemed to be complete. If the employer challenges eligibility, the Division or EPIP will investigate, after which the claim is treated as complete. The Division may also request supplemental data from the employer. If benefits are approved and issued and an employer subsequently provides disqualifying information after the five-day window, the recipient retains benefits already received, but continuation of benefits will cease, and job and anti-retaliation protections apply only for the period from approval to revocation.

Employees must update material information within ten days, or as soon as practicable with good cause, including changes to the basis, start date, duration, or end date of leave, or whether the claimant has begun to receive workers’ compensation or unemployment insurance benefits. Failure to update may result in delay, underpayment, overpayment, or denial of benefits. Claims may also be withdrawn; if leave has already begun, only the actual leave taken will count against the employee’s FAMLI balance for the application year.

Duration and Timing of Leave

Employees may receive up to twelve weeks of FAMLI benefits and leave per employer per application year, with a potential additional twelve weeks where a claimant’s initial period of their own medical leave is followed by bonding leave, or vice versa, within the same year.

Bonding leave must be taken within twelve months of the birth or placement of a child. Leave may also be used in anticipation of the placement of a child for the purposes of attending court appearances, legal and placement agency appointments, counseling and medical appointments, and travel, provided they are substantiated by required documentation.

A licensed health care provider must document the time period required for the serious health condition of the employee, their family member, or a service member. If the family member for whom the employee is caring dies, benefits continue until seven days after the death or the previously approved end date, whichever is sooner, and the covered individual must provide notice of the death to the state within seventy-two hours. In essence, the final regulations provide for a form of bereavement leave that was not explicitly contemplated in the FAMLI statute.

Leave may be taken on a continuous or intermittent basis. Claimants approved for intermittent leave must submit benefit requests within five business days of leave being taken unless good cause can be shown. Intermittent leave may not be taken in increments of fewer than four hours unless the claimant’s scheduled shift is shorter. Benefits will not be issued for requests that significantly exceed the expected duration and frequency listed on the medical certification without an updated certification. Approved intermittent leave applications expire after one year, and a new claim application is required if the employee continues to need leave for the qualifying event.

Benefit Calculations: Continuous and Intermittent Leave

The final regulations establish a two-tier wage replacement formula for continuous leave. If the claimant’s average weekly wage is 65 percent or less of the state average weekly wage, benefits equal 90 percent of the claimant’s average weekly wage. For claimants earning above that threshold, benefits are the sum of 90 percent of the claimant’s average weekly wage up to 65 percent of the state average weekly wage and 50 percent of the amount above that threshold, up to the maximum weekly benefit amount.

For intermittent leave, one “week” of benefits equals the number of hours worked during the highest-earning quarter of the previous four completed calendar quarters divided by thirteen. The hourly benefit rate is calculated by dividing the weekly benefit amount by those average hours, and benefits are paid for actual hours of intermittent leave taken. The benefit amount for intermittent leave is calculated using the state average weekly wage and maximum weekly benefit amount in effect on the anchor date. On or before January 1 of each year, every open and active intermittent leave claim will be readjusted based on the new maximum weekly benefit amount.

Coordination With Other Benefits

The final regulations allow for the reduction of FAMLI eligibility by an employee’s federal Family and Medical Leave Act (FMLA) use if the FMLA leave also qualified for FAMLI, the employer notified the employee of their potential FAMLI eligibility, and the employee did not apply.

For alternative FAMLI purpose leave or AFPL (i.e. employer-provided leave specifically designated as a separate bank of time off for medical leave, family leave, qualified exigency leave, or under a disability policy, that is not leave provided under an EPIP), an employer may require concurrent use if the leave meets all of the following criteria: it is specifically designed to fulfill a FAMLI purpose, it is paid, it is not accrued, it is not subject to repayment, it is not available for general purposes, and it is available without a requirement to exhaust another form of leave. The employer must provide advance written notice of this requirement. Similar to FMLA, if the employee is notified of required concurrent use and fails to apply for FAMLI, the employee’s FAMLI’s eligibility is reduced by the amount of APFL taken. When both FAMLI and AFPL are used concurrently, FAMLI is primary and AFPL may supplement up to 100 percent of the employee’s average weekly wage. The employer may deduct the full amount of time taken from the recipient’s AFPL balance even if the recipient received only partial wage replacement. Importantly, an employee’s decision to use AFPL concurrently does not negate job protection or anti-retaliation provisions.

General-purpose paid leave (i.e., employer-provided paid leave, such as general paid time off, personal leave, vacation leave, or sick leave, that is not AFPL or leave provided under an EPIP) may not be required to be substituted for FAMLI leave. It may supplement FAMLI benefits only by mutual written agreement between the employer and the employee; however, the employee may use paid sick leave before FAMLI benefits without such an agreement.

Employees generally may not receive FAMLI benefits while receiving unemployment insurance benefits or workers’ compensation wage replacement, except for permanent partial disability benefits.

Payments, Overpayments, and Fraud

The first benefit payment must be issued within five business days after approval of a complete claim application or the start of leave, whichever is later, with subsequent payments at least every two weeks. If there is an overpayment, a written notice will be sent to the claimant, and the claimant has thirty days to agree to repay or request a waiver. Repayment may be sought for erroneous payments, willful misrepresentation, or where a claim is rejected after benefits were paid. Waivers may be granted where there was no knowingly false statement, nondisclosure, or misrepresentation, or where repayment would be against equity and good conscience or would otherwise be administratively inefficient. If a waiver is denied, the claimant may file a request for reconsideration. If an EPIP seeks monetary reimbursement of an overpayment, it must notify the Division simultaneously with its notice to the claimant.

If fraud is proven after benefits were approved and issued, any benefits paid are treated as an overpayment, and job and anti-retaliation protections do not apply.

Next Steps

The final regulations took effect on March 30, 2026. Employers may wish to begin preparing for the contribution obligations beginning January 1, 2027, and for the commencement of benefits no later than January 3, 2028. This may involve reviewing available paid leave benefits under existing policies and plans and determining if adjustments may be desirable.

Ogletree Deakins’ Baltimore office will continue to monitor developments and will provide updates on the Leaves of Absence and Maryland blogs as additional information becomes available.

In addition, the Ogletree Deakins Client Portal provides subscribers with timely updates on state family and medical leave laws, including Maryland’s FAMLI program. Premium-level subscribers have access to comprehensive Law Summaries and updated policies; Snapshots and Updates are complimentary for all registered client users. For more information on the Client Portal or a Client Portal subscription, please email clientportal@ogletree.com.

Please see Part I (online account and mandatory notices) and Part III (EPIPs and dispute resolution) of this series for further information.

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