Department of Justice to Use the False Claims Act to Combat DEI
Department of Justice to Use the False Claims Act to Combat DEI
Brett A. Whitley, Associate
The Rocky Mountain Employer has been tracking how the Trump Administration has taken aim at “diversity, equity, and inclusion” (“DEI”) policies and initiatives since President Trump issued several Executive Orders targeting the same in the first few days of his term.[1] Outside of the obligations communicated in such Executive Orders, it was not exactly clear how the Trump Administration intended to achieve its anti-DEI objectives. However, on May 19, 2025, United States Deputy Attorney General Todd Blanche indicated in a memorandum[2] that the Department of Justice (“DOJ”) would utilize the False Claims Act (“FCA”)[3] as a part of its “Civil Rights Fraud Initiative” (“Initiative”) to combat illegal DEI initiatives utilized by federal contractors and recipients of federal funds.
How Executive Order 14173 and the Initiative Work Together to Combat DEI Initiatives
Early this month, President Trump’s Executive Order 14173 (“EO 14173”) titled, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” took effect.[4] Like the Initiative, EO 14173 addresses federal contractors and recipients of federal funds. Specifically, EO 14173 provides that “federal contractors and subcontractors shall not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws” during their employment, procurement, and contracting practices. Similarly, EO 14173 requires that the heads of federal contracting agencies “include in every contract or grant award: a term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable federal anti-discrimination laws.”
The FCA applies to federal contractors, as it imposes civil liability on “any person who ... knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” Hypothetically, a federal contractor could knowingly present a false claim for payment from the federal government (“Government”) by misrepresenting its compliance with a statutory, regulatory, or contractual requirement to the Government. Importantly, liability under the FCA results in a penalty of between $5,500.00 to $11,000.00, plus three times the amount of damages which the Government sustained because of the misrepresentation.
As an example, if a federal contractor has a program promoting DEI, yet executes a contract for payment from the Government that states otherwise, there is a risk that the Government, through the Fraud Section of the DOJ, or even an individual (pursuant to the qui tam provision of the FCA) could attempt to use the FCA to seek damages (which are uncapped) against that federal contractor for making a material misrepresentation to the Government in order to obtain payment from the Government.
However, similar to EO 14173, the Initiative’s utilization of the FCA seems focused on illegal DEI policies and initiatives. Specifically, Deputy Attorney General Blanche’s memorandum states the “Initiative will utilize the [FCA] to . . . pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws.” Consequently, it is possible that a federal contractor or recipient of federal funds that operates a legal DEI program would not be subject to FCA liability, as it would be able to certify as true to the Government that it is not operating illegal programs promoting DEI in the course of making a claim for payment from the Government. Nonetheless, EO 14173 and the Initiative will likely have a chilling effect on federal contractors who operate legal DEI programs by causing some contractors to end their legally-ran DEI programs for fear of having to potentially defend an FCA claim or be subjected to some government investigation to determine if the DEI program is legal.
Employer Considerations
Colorado employers receiving federal funds through contracts with the Government should remember that, per its plain language, the memorandum communicating the Initiative is premised on using the FCA to pursue claim against them to the extent they knowingly violate federal civil rights laws, such as Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, or the Americans with Disabilities Act. Programs promoting DEI can be legally compliant with these laws as long as these programs do not engage in illegal discriminatory practices like the use of hiring quotas or preferential treatment based on one’s race, national origin, religion, etc.
Colorado employers receiving federal funds that have programs promoting DEI that are legally compliant can still enter into Government contracts for payment without violating the FCA and otherwise comply with EO 14173. However, it will be necessary for such employers to thoroughly and proactively audit their DEI programs with the help of legal counsel, like Campbell Litigation, before assuming they are not at legal risk under the FCA or through a federal investigation.
[1] https://www.rockymountainemployersblog.com/blog/2025/1/30/the-trump-administration-brings-attack-on-illegal-dei-policies-to-the-private-sector.
[2] https://www.justice.gov/dag/media/1400826/dl?inline=&utm_medium=email&utm_source=govdelivery.
[3] 31 U.S.C. § 3729 et seq. (Generally, a false claim occurs when persons or companies knowingly submit a demand for money or property, that includes a material misrepresentation, directly to the federal government or to a contractor, grantee, or other recipient if the money is to be spent on the government’s behalf and if the government provided any of the money demanded or if the government reimburses the contractor or grantee.)
[4] The White House, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, https://www.whitehouse.gov/presidential-actions/2025/01/ending-illegal-discrimination-and-restoring-merit-based-opportunity/ (last visited Jan. 28, 2025).