Stop Work Orders Under the Trump Administration’s New Executive Orders and “Pause” of Federal Grants

The first week of the Trump administration has seen a deluge of Executive Orders (EOs) and other federal agency guidance, almost all of which have announced significant policy shifts in diversity, equity, and inclusion (DEI), energy, trade, foreign affairs, immigration, and a host of other areas, as well as the implementation of a hiring freeze.¹ In response to the EOs, some federal government agencies have already directed recipients of federal grants to stop work and cease spending allocated federal funds — termed “stop work” orders. Most recently, in a memorandum issued on January 27, 2025, the acting director of the White House Office of Management and Budget (OMB) instructed all federal agencies to “temporarily pause all activities related to obligations or disbursement of all Federal financial assistance,” pending a government-wide review. While a court has temporarily enjoined the January 27 memo, and the White House has walked back some of its scale, much is unknown about how the Executive Orders and the OMB pause of federal financial assistance will be implemented. Below are some best practices and initial steps federal grantees may consider taking now.

A Flurry of Executive Orders

The new EOs span a variety of policy areas and industries and will likely draw legal challenges in the courts. Many of the EOs call for a pause in spending while the new administration considers its spending priorities.

For example, certain EOs direct agencies to halt the disbursement of funds, including to grantees. An energy-sector EO, Unleashing American Energy, directs agencies to immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 (IRA) or the Infrastructure Investment and Jobs Act (IIJA). The order directs agencies to “review their processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds” to ensure consistency with the order. A later memorandum from OMB, OMB M-25-11 (the OMB Memorandum), clarifies that not all IRA and IIJA spending must pause, but rather only spending that runs counter to the policies espoused in Section 2 of the EO.

Other EOs direct the termination of grants or contracts. President Trump issued an Executive Order titled Ending Radical and Wasteful Government DEI Programs and Preferencing, which seeks to end “illegal and immoral discrimination programs, going by the name ‘diversity, equity, and inclusion’ (DEI).” Section 2 of the order provides that each agency shall within 60 days of the order “terminate, to the maximum extent allowed by law… ‘equity-related’ grants or contracts; and all DEI or DEIA performance requirements for employees, contractors, or grantees.” Thus, grantees and contractors may receive letters from federal agencies due to the directive to terminate “equity-related” grants or contracts. The order also mandates information gathering, requiring each agency to provide the Director of the OMB with a list of all “Federal contractors who have provided DEI training or DEI training materials to agency or department employees” and “Federal grantees who received Federal funding to provide or advance DEI, DEIA, or ‘environmental justice’ programs, services, or activities since January 20, 2021.”

Likewise, on January 21, 2025, President Trump issued an order titled Ending Discrimination and Restoring Merit-Based Opportunity related to what it labels as “illegal discrimination” under longstanding “Federal civil-rights laws [that] protect individual Americans from discrimination based on race, color, religion, sex, or national origin.” As a result, the EO “order[s] all executive departments and agencies (agencies) to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements,” which could result in the termination of grants or contracts under programs deemed “discriminatory,” and “order[s] all agencies to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” The order provides that the U.S. Department of Labor “shall immediately cease” promoting diversity, “[h]olding Federal contractors and subcontractors responsible for taking ‘affirmative action,’” and “[a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” Going forward, each agency must include in every grant or contract award a term conditioning the government’s payment on compliance with federal anti-discrimination laws and requiring the recipient “to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” Section 4 of the order directs agencies to identify “up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.”

The OMB Memorandum: Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs

On January 27, 2025, OMB issued Memorandum M-25-13, directing a temporary pause of agency grant, loan, and other financial assistance programs, which OMB later clarified to only apply to programs “implicated by” President Trump’s recent executive orders. The OMB Memorandum asserts that in 2024, more than $3 trillion of the nearly $10 trillion the federal government spent was in the form of “financial assistance,” and that the new administration is committed to dedicating this financial assistance to furthering its policy goals. To that end, the OMB Memorandum directs federal agencies to, “to the extent permissible under applicable law, temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernment organizations, DEI, woke gender ideology, and the green new deal.” The OMB Memorandum broadly defines “financial assistance” consistent with 2 C.F.R. 200.1 and includes grants, cooperative agreements, loans and loan guarantees, among other forms of assistance, but expressly excludes Medicare and Social Security benefits. The OMB Memorandum also instructs agencies to “pause all activities associated with open NOFOs,” or Notices of Funding Opportunities. The pause becomes effective on January 28, 2025 at 5:00 PM. OMB later clarified that this action is not “a freeze on all Federal financial assistance” but is “expressly limited to programs, projects, and activities implicated by the President’s Executive Orders.”

The OMB Memorandum explains that “[t]his temporary pause will provide the Administration time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities.” Beyond the energy-, DEI-, and affirmative action-related Executive Orders discussed above, the OMB Memorandum specifically flags four more Executive Orders as illustrative of the new administration’s policies:

• Protecting the American People Against Invasion, requiring the faithful execution of immigration laws
• Reevaluating and Realigning United States Foreign Aid, requiring a 90-day pause in foreign development assistance
• Putting America First in International Environmental Agreements, withdrawing the U.S. from the Paris Agreement under the United Nations Framework Convention on Climate Change and announcing a policy against burdening the U.S. in the negotiation of any international agreement
• Enforcing the Hyde Amendment, forbidding federal funding and promotion of elective abortion

The OMB Memorandum instructs agencies to determine whether paused federal financial assistance implicates an issue covered by these seven Executive Orders. OMB is accordingly instructing all agencies that provide federal financial assistance to complete a spreadsheet by February 7, 2025 providing information regarding all programs that have funding or activities planned through March 15, 2025, such as:

• Does this program provide federal funding to nongovernmental organizations supporting or providing services, either directly or indirectly, to removable or illegal aliens?
• Is this program a foreign assistance program, or provide funding or support activities overseas?
• Does this program provide funding that is implicated by the revocation and recission of the U.S. International Climate Finance Plan?
• Does this program include activities that impose an undue burden on the identification, development, or use of domestic energy resources (including through funding under the Inflation Reduction Act of 2022; and the Infrastructure Investment and Jobs Act)?
• Does this program provide funding that is implicated by the directive to end discriminatory programs, including illegal DEI and “diversity, equity, inclusion, and accessibility” mandates, policies, programs, preferences, and activities, under whatever name they appear, or other directives in the same EO, including those related to “environmental justice” programs or “equity related” grants?
• Does this program promote gender ideology?
• Does this program promote or support in any way abortion or other related activities identified in the Hyde Amendment?

The OMB Memorandum ends with three instructions to agencies. First, agencies must “assign responsibility and oversight” over each federal financial assistance program to a senior political appointee to ensure alignment with administration policy priorities. Second, agencies must “review currently pending Federal financial assistance announcements to ensure Administration priorities are addressed, and, subject to program statutory authority, modify unpublished Federal financial assistance announcements, withdraw any announcements already published, and to the extent permissible by law, cancel awards already awarded that are in conflict with Administration priorities.” Third, agencies must “ensure adequate oversight of Federal financial assistance programs and initiate investigations when warranted to identify underperforming recipients, and address identified issues up to and including cancellation of awards.”

Best Practices

In light of these wide-ranging pronouncements, recipients of federal financial assistance should consider the following best practices to both react to already announced changes and prepare for continuing developments in this space.

Monitor the News, Agency Guidance, and Communications. The onslaught of EOs and the flurry of agency communications and directives has created an overwhelming sense of upheaval, with grants and other financial assistance in flux on an unprecedented scale. That said, the scope and boundaries of these orders remain uncertain and there will almost certainly be legal challenges. It is important to remain vigilant in monitoring the release of new agency guidance, regulations, lawsuits challenging these orders, and news of enforcement actions, all of which could change the breadth and meaning of these orders and their impact on your organization. Federal grantees should in particular monitor guidance from their funding agencies, as well as from OMB, the U.S. Equal Employment Opportunity Commission (EEOC), the Office of Personnel Management, and the U.S. Department of Labor.

Review Your Organization’s Programs. Organizations should promptly review their internal policies, procedures, trainings, and programs to cross-check for compliance with broader grantee- and contractor-wide mandates, such as those related to DEI, as well as applicable industry- or program-specific orders, such as those dealing with energy, immigration, or foreign development funding. Organizations with a DEI program in place should consult with qualified outside counsel (under privilege) to conduct a self-audit of DEI programs and activities. While some aspects of DEI programs may not be implicated by the new policies, counsel can help to identify elements that the administration could view as problematic. At the same time, disability and veteran-related requirements remain in place, as do state and local laws. Notably, OMB’s January 27, 2025 memorandum announcing the federal grant pause signaled potential future enforcement action, directing all federal agencies to “ensure adequate oversight of Federal financial assistance programs and initiate investigations when warranted to identify underperforming recipients, and address identified issues up to and including cancellation of awards.” In other words, a key first step will be a robust internal self-audit of programming and compliance.

Review Grant or Other Financial Assistance Agreement Terms. For grant recipients, the terms of the grant will be key to defining the actions federal agencies may take in response to Executive Orders and other guidance. Pay careful attention and take note of the following types of clauses to ascertain what rights the agency has to pause, alter, or terminate payment obligation or the agreement generally:

• Stop work clause
• Changes clause
• Conditions for payment
• Termination clause
• Disputes clause

It is possible that a suspension of funds could amount to a breach of a federal financial assistance agreement entitling the recipient to some remedy under the terms of the grant or other agreement. For example, 2 C.F.R. 200.305(b)w(6) instructs that “[p]ayments for allowable costs must not be withheld at any time during the period of performance,” except in specified circumstances. Review of the grant or other financial assistance agreements will provide an initial understanding of the parties’ rights and obligations.

Promptly Review Any Stop Work or “Pause” Order. “Stop work” orders or any communications pertaining to the “pause” announced by OMB should be analyzed carefully and promptly. The precise impact of any such order may depend on the terms of your funding agreement, but agencies may resist reimbursement of avoidable costs incurred after the stop or pause date. (OMB has clarified that “[a]ny payment required by law to be paid will be paid without interruption or delay.”) Work with counsel to determine appropriate mitigation steps — and don’t forget to notify subcontractors and other parties implicated by any order.

Keep a Record of Costs Related to Any Changes, Including Stop Work or Termination. A stop work or termination is a jarring event, and not all costs can be ceased immediately. Grantees and other recipients of federal financial assistance may consider whether to file a request for budgetary change or other claim for costs incurred relating to the stop work order. To prepare for any potential claims, grantees should carefully track and account for any costs incurred following the stop work order or termination. This accounting can be provided to legal counsel in support of the preparation of a claim.

Seek Agency Clarification and Consult With Outside Counsel. The negative repercussions identified in many of the new EOs and lack of clear guidance may prompt organizations to overcorrect, but some provisions may be necessary to remain in compliance with other U.S. federal or state laws. Organizations should seek further clarification and guidance from agency partners as well as counsel to avoid risks of misunderstanding the current directions and legal obligations.

Be Careful With Certifications. The scope of the Trump administration’s new Executive Orders and agency attempted implementation, including the OMB Memorandum, will initially present a legal gray area subject to interpretation. In many instances, whether a program is within the scope of an Executive Order’s or agency’s directives will be a factual question that merits careful consideration regarding how to frame or describe existing work or programs. All those accepting federal financial assistance should be thoughtful and deliberate when responding to agency certification requests, especially when they are being asked to certify compliance with nebulous or undefined terms. With respect to this legal and factual analysis and strategy, outside counsel can conduct a privileged review of your organization’s operations and provide guidance. Outside legal counsel can provide guidance regarding the meaning of the orders, monitor new legal developments, determine whether to challenge the terms of the orders, and defend any agency investigations.

Conclusion

The Trump administration’s early issuance of numerous new policies requires organizations to carefully self-audit existing programs, monitor for new agency guidance, review the terms of existing grants and other financial assistance agreements, keep a record of costs, and remain in compliance with new contractual terms. The legal landscape is highly uncertain and organizations must remain nimble, clarify new requirements and seek documented changes to any agreements, and seek privileged legal guidance in navigating these uncharted waters.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.