Lockheed Martin’s Compensation Program leads to $29.5 million settlement involving DOJ False Claims Act Allegations in Trump Administration’s Effort to Address Illegal DEI
Jeanne Melberg, Associate
On November 3, 2026, the Department of Justice (DOJ) announced that Lockheed Martin agreed to pay approximately $29.5 million to resolve allegations that Lockheed violated the False Claims Act by falsely certifying compliance with federal anti-discrimination requirements while maintaining employment practices that considered race or sex in compensation, hiring promotion and professional development decisions.
Background
The False Claims Act (FCA)[1] is a federal statute originally enacted in 1863 in response to defense contractor fraud during the American Civil War. On March 26, 2026, President Trump issued Executive Order (“EO”) 14398, titled “Addressing DEI Discrimination by Federal Contractors.” It focuses on ending racial discrimination in American society, including DEI activities, “in which employees, applicants, or contracting parties are treated differently, separated, or singled out based on their race or ethnicity, rather than treated equally and objectively based on their merit and without regard to their immutable characteristics.” [2] This settlement seems to be in line with the Trump Administration’s continued efforts to end illegal DEI. [3]
Compensation Adder
Lockheed allegedly considered race and sex in compensation, hiring, promotion, and development decisions. Lockheed started an incentive program in 2021 called “Compensation Adder” or “Comp Adder”. Comp Adder awarded the top 20% of Lockheed’s employees with a pay increase over and above the annual company-wide increase. The DOJ and Equal Employment Opportunity Commission (“EEOC”) alleged that Lockheed used Comp Adder in ways that pressured managers to replace white employees with minority employees. Managers were initially instructed to nominate employees based on merit and performance. According to the DOJ’s allegations, Lockheed analyzed the racial and sex composition of the selections to identify statistical outliers. Human resources personnel allegedly pressured business leaders with flagged selections to change their nominations based on race, including removing non-minority employees and adding minority employees who managers had not initially selected.
The Settlement
The DOJ settlement consisted of $22 million, which includes $10 million in restitution. The EEOC Employment Compensation Fund will pay more than $7.5 million to over 1,000 employees. A former Lockheed Martin vice president brought the matter to light by filing a qui tam[4] action, effectively “blowing the whistle” on behalf of the federal government. He will receive $4.4 million for his contribution to uncovering the alleged scheme.
Lockheed Martin’s settlement is the fourth DEI-related FCA settlement announced by the DOJ this year. The previous three settlements involved IBM, Deloitte, and Accenture.
Employer Considerations
The DOJ has shown no signs of slowing down in uncovering these alleged unlawful DEI practices. Companies that contract with the federal government would be wise to audit their own pay, bonus, promotion and hiring process for any DEI programs, statistical adjustments, or Comp-Adder type incentives. Management and H.R. training on discrimination, FCA, and federal equal opportunity requirements would also minimize risks of legal and financial exposure. Campbell Litigation will continue to monitor the DOJ’s efforts as it relates to enforcement of the EO addressing illegal DEI.
[1] See 31 U.S.C.§§3729-3733
[2] Exec. Order No. 14398, 91Fed. Reg. 16147 (March26, 2026).
[3] See our previous blog article, https://www.rockymountainemployersblog.com/blog/2025/5/29/department-of-justice-to -use-the-false-claims-act-to-combat-dei.
[4] A qui tam action is a lawsuit filed by a private citizen or private citizens on behalf of the government.