One of President Trump’s first actions as his second term opened was a public campaign to eradicate diversity, equity and inclusion from the public and private sectors. That pledge got a significant shot in the arm last week.
Tech giant IBM on Friday agreed to pay the federal government $17 million in what is considered a first-of-its-kind settlement stemming from the newly created “Civil Rights Fraud Initiative” of the U.S. Department of Justice. The department created the unit last year to root out private companies’ DEI initiatives that the government deemed fraudulent, leveraging the False Claims Act.
The DOJ alleged that IBM violated federal contracting requirements that prohibit discrimination in hiring and employment based on a candidate or employee’s race, color, national origin or sex, and that it “knowingly maintained practices that the United States contends were discriminatory employment practices,” according to the DOJ.
Specifically, the department says IBM used a “diversity modifier” to consider demographic targets in bonus allocation; prioritized diverse interview slates based on race and sex; used such characteristics in its pursuit of demographic employment goals for business units; and factored race and sex into the availability of certain training and development opportunities.
The settlement includes the stipulation that “this agreement is neither an admission of liability by IBM nor a concession by the United States that its claims are not well-founded.”
In a statement to CNN, an IBM spokesperson says the company’s “workforce strategy is driven by a single principle: having the right people with the right skills that our clients depend on.”
The Civil Rights Fraud Initiative’s work is among several fronts through which the federal government is working to constrict corporate DEI strategies. Earlier this year, for instance, the U.S. Equal Employment Opportunity Commission issued a letter to the nation’s 500 largest companies, emphasizing that organizations that use factors like race or sex to make employment decisions are at risk of being sued by the federal government under Title VII of the Civil Rights Act. At the same time, the EEOC is moving forward with Title VII claims against both Nike and Coca-Cola related to DEI initiatives.
“I urge Corporate America to reject identity politics as its solution to society’s ills,” wrote EEO Chair Andrea Lucas in the February letter. “The only lawful way to stop discrimination on the basis of race or sex is to stop discriminating on the basis of race or sex.”
Also in February, a three-judge appellate panel overturned a lower court’s finding that struck down Trump’s anti-DEI executive orders. It’s a ruling that Littler’s David Goldstein suggests casts “substantial uncertainty” on conversations around DEI practices in federal contractor hiring. As a result, he urges employers to carefully and continuously audit compliance with federal policies.
Executive orders have been a significant avenue through which the administration has sought to crack down on DEI. Late last month, for instance, the administration issued another EO related to DEI—at least the 10th in the last 15 months.
The order requires that all federal contracts be updated by April 25 of this year to indicate agreement with six principles related to the prohibition of “racially discriminatory DEI activities.” It mandates federal agencies cancel non-compliant contracts and suspend contractors or subcontractors for failure to comply, which could render them illegible for any future federal contracts.
In a legal alert on the order, law firm Epstein Becker Green noted that the language used in the EO is broad enough that it could create “compliance concern for federal contractors and subcontractors,” urging them to “immediately undertake” concrete steps like ensuring compliance with this other recent EOs on DEI.
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