In early 2025, President Trump signaled his intent to end diversity, equity, and inclusion (“DEI”) programs in the federal government. As part of that policy, President Trump signed Executive Order (“EO”) 14173, which took aim at “illegal DEI” in federal contracting. Since then, contractors have sought to understand what constitutes illegal DEI. The Department of Justice (“DOJ”) recently provided the first concrete example of practices that it alleges to be illegal DEI. On April 10, the DOJ announced that it had reached a settlement with IBM Corporation to resolve allegations that IBM violated the False Claims Act (“FCA”) by failing to comply with anti-discrimination requirements of IBM’s federal contracts. The settlement agreement provides insights into how the DOJ may use the FCA and other theories to pursue claims of illegal DEI against federal contractors.
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