Attorney General Rayfield Files Lawsuit Challenging Unlawful Trump Administration Mandates on Federal Contractors

Attorney General Dan Rayfield and a coalition of 19 other attorneys general today sued the Trump administration over the addition of new terms to federal contracts that - in the name of purging "diversity, equity, and inclusion" (DEI) from federal contracting - impose unclear and confusing requirements on contractors that may depart from antidiscrimination policies that contractors have followed for decades, and threaten severe penalties on federal contractors without adequate notice of what is prohibited.

"Oregon state agencies use federal contracts to deliver real services to people, food assistance, health care, and housing support," said Attorney General Rayfield. "The Trump Administration's vague, unreasonable mandates threaten to disrupt programs Oregonians depend on and punish contractors for following laws they have complied with for decades. Trump's actions will mean fewer services and more chaos in people's lives, all in pursuit of his narrow political agenda."

In their lawsuit, filed in the U.S. District Court for the District of Maryland, Attorney General Rayfield and the coalition challenge the federal agencies' rushed implementation of President Trump's Executive Order No. 14398. The executive order, issued March 26, 2026, directs federal agencies to adopt new contract terms prohibiting federal contractors - including state agencies and instrumentalities - from engaging in "racially discriminatory DEI activities" in connection with their contract work. The order threatens severe penalties on federal contractors without adequate notice of what is prohibited.

In implementing the executive order, federal agencies took shortcuts around regular procedures designed to promote good government, transparency, and accountability. For example, the agencies failed to invite comments from the public as required by law. Largely because of these shortcuts, contractors have no clear guidance on what the new contract terms require in practice, or whether or how the new requirements differ from existing laws that already prohibit racial discrimination. Contractors that fail to comply face severe penalties, including cancellation of their contracts, exclusion from all future federal contracts, and lawsuits under the False Claims Act. The vague and confusing contract terms impose needless costs on contractors and threaten to chill lawful efforts to prevent, detect, and remedy discrimination.

Oregon and its agencies regularly contract with the federal government, and the coalition states collectively hold existing federal contracts worth billions of dollars. Federal agencies began adding the new terms into contracts in April 2026 and have been directed to modify existing contracts by July 24, 2026. The federal government estimates the order could affect as many as 640,000 contracts and subcontracts nationwide, including more than 160,000 contracts with over 34,000 unique vendors. Oregon state agencies and universities have federal contracts with the U.S. Department of Veterans Affairs, the Army Corps of Engineers, and many other federal agencies.

The coalition alleges that the federal agencies implementing the executive order violated the Administrative Procedure Act (APA) by failing to provide notice to the public or accept comments (as required by federal procurement law), exceeding their legal authority, and neglected to adequately explain or justify the new requirements. The lawsuit asks the court to hold the agencies' actions unlawful and prevent the agencies from imposing the new contract terms.

Joining Attorney General Rayfield in filing the lawsuit are the attorneys general of California, Colorado, Connecticut, District of Columbia, Hawaiʻi, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.