On May 18, the Department of Justice issued a memorandum stating that it will use the False Claims Act (FCA) to target recipients of federal funds (including contractors) that the agency determines engage in providing diversity, equity and inclusion (DEI) preferences that violate federal civil rights laws. This continues the Trump administration’s efforts to eliminate the use of DEI policies in federal contracting or by the recipients of federal funds and requires contractors to certify compliance with federal civil rights laws. Contractors should review their policies and practices to identify potential risks arising from the new administration’s focus on DEI practices in federal contracting.
The DOJ memorandum, signed by Deputy U.S. Attorney General Todd Blanche, cites the agency’s commitment to enforcing federal civil rights laws and ensuring equal protection under the law and using the FCA as a primary tool for enforcement actions against violators of those laws. The memorandum notes that the FCA is implicated when a contractor or recipient of federal funds certifies compliance with federal civil rights laws while “knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin.” The memorandum follows Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” issued in January, which revokes a long-standing executive order that required contractors to engage in affirmative action for protected groups of employees. The executive order also directs agencies to include a clause in future contracts and grants that requires the recipient to certify that it “does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”
The memorandum creates the Civil Rights Fraud Initiative, which is charged with using the FCA to investigate and pursue claims against any federal funds recipient that the agency determines has knowingly violated federal civil rights laws (the civil prong of the FCA expands the definition of “knowing” to include not just actual knowledge, but instances of deliberate ignorance or reckless disregard for the truth or falsity of the information). The memorandum states that the initiative will be co-led by the DOJ Civil Division’s Fraud Section (which enforces the FCA) and the Civil Rights Division (which enforces civil rights laws). As part of its mandate, the attorneys assigned to the initiative are to engage with other federal agencies that enforce federal civil rights requirements for contract or grant recipients, such as the Departments of Health and Human Services, Education and Labor, as well as the DOJ’s Criminal Division, which would ostensibly bring charges under the FCA’s criminal prong. The memorandum acknowledges the agency’s inability to identify all instances of fraud and calls upon the public to assist in this effort through the FCA’s qui tam provisions, which allow private individuals to sue on behalf of the government.
The memorandum underscores the new administration’s efforts to remove DEI programs and policies from federal contracting and its enforcement threat against contractors the agency determines are maintaining – explicitly or otherwise – DEI programs or policies that violate federal civil rights laws. While Executive Order 14173 signals the administration’s plans to target DEI programs that violate civil rights laws through an explicit contractor certification, the memorandum reflects the agency’s allocation of dedicated resources to investigate and bring enforcement actions against contractors it determines are maintaining DEI programs that violate those laws. DOJ’s commitment of resources to harness the FCA to enforce civil rights laws with respect to DEI programs therefore heightens compliance risks for contractors. And while the FCA may be the primary and most convenient basis for bringing an action, federal contractors also face the risk of prosecution under numerous other federal statutes, including 18 U.S.C. § 241 (often referred to at the Conspiracy Against Rights statute).
In light of the DOJ memorandum, federal contractors should prioritize an internal review of existing DEI programs and assess potential claims that those programs violate federal civil rights laws, whether as a term of a contract or as part of a certification during the performance of a contract. Contractors should identify any programs or policies (such as codes of conduct, employee inclusion programs or supplier diversity programs) that could implicate DEI initiatives, analyze the degree to which they could be deemed unlawful under federal civil rights laws and consider making revisions to address potential compliance risks under those laws. The memorandum strikes an aggressive enforcement tone, noting that despite the administration’s direction to contractors to remove DEI programs violative of civil rights laws, many contractors continue to “adhere to racist policies and preferences – albeit camouflaged with cosmetic changes that disguise their discriminatory nature.” Given this language, contractors should ensure that they engage in a thorough review that documents an assessment of compliance risks and specific actions taken to mitigate those risks.
Our Government Contracts and White Collar Defense & Investigations groups have significant experience identifying and addressing compliance risks faced by federal contractors, including those addressed in the DOJ memorandum. We will provide additional updates on the administration’s efforts related to FCA enforcement actions involving DEI programs maintained by federal contractors.
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