The Department of Justice’s First Case Aimed at Targeting Diversity, Equity and Inclusion
Bayan Biazar, Associate
On April 10, 2026, the U.S. Department of Justice (“DOJ”) announced a settlement with International Business Machines Corporation (“IBM”) that resolved allegations that IBM violated the False Claims Act (“FCA”) by failing to comply with anti-discrimination requirements in its federal contracts (the “Settlement”). This Settlement marks the first instance where the DOJ has utilized the FCA to combat what it considers to be unlawful diversity, equity, and inclusion (“DEI”) practices after the DOJ announced its intent to utilize the FCA as such in May of 2025. This development, which employers receiving federal funding or operating as government contractors should especially be aware of, reflects the DOJ is holding true to its commitment to utilize the FCA to combat allegedly unlawful DEI practices in the private sector.
A New Enforcement Theory Under the FCA
In May of 2025, the DOJ indicated in a memorandum that it would utilize the FCA as a part of its “Civil Rights Fraud Initiative” (“Initiative”) to combat illegal DEI practices utilized by federal contractors and recipients of federal funds. The FCA imposes civil liability on “any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval from the federal government.”
As addressed in a previous post,[1] the DOJ indicated it would enforce its Initiative by taking legal action, pursuant to the FCA, against federal contractors who misrepresent their compliance with federal anti-discrimination laws as a result of their DEI practices. Though we have addressed how the DOJ may pursue its Initiative in a prior post, we had yet to see a federal contractor suffer ramifications as a result of the Initiative until the Settlement. The Settlement demonstrates that the DOJ is holding true to the Initiative and expanding how it evaluates compliance with federal law by focusing on whether employers’ internal policies align with the representations they make when seeking or receiving federal funds.
The Settlement
The DOJ’s first application of this strategy for achieving the goals of the Initiative came through the Settlement. Leading up to the Settlement, the DOJ alleged IBM violated the FCA by knowingly maintaining employment practices that discriminated against applicants and employees based on race, color, national origin, or sex, despite certifying to the government that it complied with the anti-discrimination requirements in Title VII of the Civil Rights Act of 1964. According to the DOJ, IBM’s alleged unlawful practices included tying bonus compensation to demographic targets, requiring diverse interview slates, establishing demographic hiring or promotion goals, and limiting certain training or advancement opportunities based on protected characteristics. IBM agreed to pay $17,077,043 to resolve these allegations.[2]
The Settlement represents the first public settlement under that Initiative and provides insight into how the DOJ may evaluate DEI-related practices going forward.
Key Risks and Unresolved Questions for Employers
The Settlement demonstrates that the DOJ is prepared to pursue FCA liability based on alleged inconsistencies between an employer’s certifications and its internal DEI policies. For employers, the potential exposure is significant given the FCA’s provision for treble damages and statutory penalties if liability is established.[3] The FCA’s whistleblower provisions further increase risk by allowing private individuals to bring claims on behalf of the government and share in any recovery in qui tam actions.[4]
At the same time, the scope of what may constitute an impermissible DEI practice remains unclear. The allegations in the IBM matter reflect a broad view of what may be considered unlawful consideration of protected characteristics, extending to hiring, promotion, compensation, and training decisions.
Employer Considerations
The DOJ’s use of the FCA in this context reflects its intent to extinguish DEI practices it believes violate federal anti-discrimination law. Although this theory has not yet been fully tested in the courts, the Settlement signals that the DOJ is prepared to pursue similar claims and seek monetary recoveries against federal contractors it believes are instituting DEI practices that violate federal anti-discrimination laws.
Employers that receive federal funding or are subject to federal contracting requirements should carefully review their policies and practices to ensure alignment with applicable anti-discrimination laws and the certifications they make to the government. Campbell Litigation is available to assist employers in evaluating these developments and ensuring compliance with evolving federal requirements.
[1] https://www.rockymountainemployersblog.com/blog/2025/5/29/department-of-justice-to-use-the-false-claims-act-to-combat-dei.
[2] https://www.justice.gov/opa/pr/ibm-pays-17-million-resolve-allegations-discrimination-through-illegal-dei-practices.
[3] See 31 U.S.C. § 3729(a).
[4] A qui tam action is a lawsuit filed by a private citizen or private citizens on behalf of the government.