Civil rights conditions are moving from directives into grant terms

What happened

Two developments in the past ten days point in the same direction from opposite ends.

On September 17, 2026, the U.S. District Court for the District of Massachusetts granted summary judgment to eight states in California v. U.S. Department of Education (No. 1:25-cv-10548). Judge Angel Kelley vacated the Department's February 5, 2025 directive, "Eliminating Discrimination and Fraud in Department Grant Awards," which instructed staff to review grants and terminate those that promoted diversity, equity, and inclusion initiatives. The court held the directive arbitrary and capricious and contrary to the statutes governing the Teacher Quality Partnership and Supporting Effective Educator Development programs and to the General Education Provisions Act. The court granted declaratory relief and vacatur. It did not order any grant reinstated; claims over individual terminations had already been dismissed as belonging in the Court of Federal Claims.

On September 23, 2026, the comment period closed on the Department's proposed amendments to the Education Department General Administrative Regulations (EDGAR), published August 24 (Docket ED-2026-OPEPD-2542). The proposal would add a new 34 CFR 75.500(f) requiring grantees to ensure that "hiring, admissions, promotions, and compensation practices under the grant are based on merit and high standards, without regard to race, color, religion, sex, national origin, or proxies thereof," with limited exceptions for religious organizations and government-ordered remedial action. It would also clarify the Secretary's authority to terminate discretionary awards "for convenience," broaden the information the Department may weigh in continuation decisions, and permit a competitive preference for applicants that propose to charge less than their negotiated indirect cost rate.

Why this development is significant

The court's central criticism was definitional. The directive, it found, "fails to define the scope of programs it prohibits," and the record lacked evidence that the term DEI had a meaning settled enough for agency staff or grantees to apply. That reasoning constrains informal, undefined directives. It is not a ruling that the government cannot attach nondiscrimination conditions to federal funds, and the court did not reach the constitutional claims.

The EDGAR proposal reads as the regulatory version of the same policy. Instead of an internal memorandum, it would place a stated standard in codified grant regulations that apply to new discretionary awards and state-administered formula grants. The phrase "or proxies thereof" is the part compliance staff should study most closely. Title VI and Title VII already prohibit intentional discrimination on these bases. A proxy standard would reach facially neutral criteria that the Department views as substitutes for protected characteristics, and the proposal does not define what counts as a proxy.

The termination for convenience provision matters as much as the merit provision. If finalized, it would give the Department a basis to end discretionary awards that no longer align with its priorities without first establishing noncompliance, which changes the risk calculus for every multi-year project.

What it means for institutions

The California decision addresses one directive, in a case brought by eight states. It does not restore terminated grants, it may be appealed, and it does not prevent the Department from adopting a properly reasoned rule. Institutions should not read it as a signal that grant-related civil rights scrutiny is receding.

If the EDGAR amendments are finalized in something close to their proposed form, civil rights compliance will become a term of each award rather than only a matter for OCR investigation. That shifts work toward sponsored programs offices, which often have little contact with the Title VI, Title IX, or equal opportunity functions. It also means that a program design choice, such as a selection criterion for a grant-funded fellowship or an eligibility rule for a stipend, could be questioned as a grant compliance issue before any complaint is filed.

For PK-12 districts, the reach into state-administered formula grants is the larger concern. State education agencies would carry the condition into subgrant agreements, and districts should expect new assurance language to arrive through their state rather than directly from the Department.

What compliance leaders should review

1. Inventory active and pending Department of Education awards, including subawards received through state agencies, and identify every grant-funded activity that involves hiring, admissions, selection of participants, promotion, or compensation.
2. For each activity, document the selection criteria and the legitimate program purpose each criterion serves. Criteria that correlate closely with a protected characteristic warrant the most careful review under a proxy standard.
3. Establish a standing review channel between sponsored programs, counsel, and the civil rights or equal opportunity office, so that grant terms and assurances are read by someone who administers nondiscrimination requirements.
4. Plan for a termination for convenience: continuation or transition of grant-funded staff, obligations to participants, data retention, and communications.
5. When a final rule is published, compare the final text of 75.500(f), including any definition of "proxies" and any change to the exceptions, against current practice before accepting the first award issued under it.
6. If the institution held grants terminated under the February 2025 directive, confirm with counsel whether any remedy remains available, given that the court did not order reinstatement and individual termination claims belong in the Court of Federal Claims.

What remains uncertain

The Department has not announced whether it will appeal the September 17 decision, and the appeal period remains open. No final EDGAR rule has been published, and the Department may revise the proposal in response to comments. Whether a final rule would define "proxies," how it would align with existing Title VI and Title VII standards, and how it would apply to continuation funding on existing awards are open questions. Litigation over any final rule is likely, and its outcome cannot be predicted from the California decision alone.

Sources

• Memorandum and Order on Cross-Motions for Summary Judgment, California v. U.S. Department of Education, No. 1:25-cv-10548-AK, ECF No. 176 (D. Mass. Sept. 17, 2026)
• U.S. Department of Education, Education Department General Administrative Regulations, Notice of Proposed Rulemaking, Docket ED-2026-OPEPD-2542, Federal Register (Aug. 24, 2026)