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Justice Department Intensifies Scrutiny of Corporate DEI Programs Under False Claims Act
As 2025 came to a close, the Wall Street Journal reported that the U.S. Department of Justice is ramping up its use of the False Claims Act to investigate diversity, equity, and inclusion initiatives at major American companies that conduct business with the federal government.
The investigations target well-known employers across multiple sectors, particularly technology and telecommunications companies, demanding documents and information about workplace diversity programs related to hiring and promotion decisions. The DOJ’s use of civil investigative demands signals that these matters are being treated as potential fraud investigations rather than policy disagreements.
This enforcement approach represents an unprecedented application of the False Claims Act, a law originally enacted during the Civil War to prevent fraud against the government. Traditionally, the FCA has been used to investigate and penalize false payment claims, such as healthcare entities improperly billing federal programs. The DOJ is now advancing a novel theory: that maintaining certain DEI practices while holding federal contracts constitutes fraud against the United States.
The groundwork for this enforcement strategy began on January 21, 2025, when President Trump issued Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The order eliminated DEI policies across the federal government and within government contractors, revoking Executive Order 11246, which had mandated affirmative action in employment from government contractors since 1965.
The executive order requires federal agencies to include specific terms in every contract or grant: contractors must certify they don’t operate DEI programs that violate federal anti-discrimination laws, and must agree that compliance with these laws is “material” to government payment decisions under the False Claims Act.
In February 2025, Attorney General Pamela Bondi issued a memorandum directing the DOJ’s Civil Rights Division to “investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” The memo emphasized scrutiny of how programs operate in practice, not just how they’re labeled.
By May 2025, the DOJ announced an initiative targeting false certification of compliance with civil rights laws when obtaining federal funds. Deputy Attorney General Todd Blanche described the FCA as a “weapon” for pursuing entities that “continue to adhere” to discriminatory policies while receiving federal funding or holding government contracts.
A July 29 guidance memo from Bondi further clarified the application of federal anti-discrimination laws to DEI programs, effectively creating an enforcement roadmap for agency oversight and FCA investigations based on false certification theories.
Despite the aggressive enforcement posture, legal experts note these investigations may face challenges in court. The U.S. Supreme Court established in Universal Health Services, Inc. v. U.S. ex rel. Escobar that the materiality standard under the FCA is “rigorous” and “demanding,” stating that the law is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations.”
For companies with federal contracts or grants, the DOJ’s enforcement approach creates significant compliance risks. Legal experts recommend several immediate actions, including reviewing DEI plans and policies for potentially problematic elements like quotas or preferential treatment based on protected characteristics. Companies should also assess how DEI concepts are operationalized in practice, as investigators are expected to look beyond policy labels to examine whether programs allocate benefits or burdens based on protected characteristics.
Companies should also review internal reporting procedures and prepare for the possibility of civil investigative demands, which can impose significant costs and business disruption even before formal complaints are filed.
As these investigations continue to unfold across multiple industries, government contractors and grant recipients must carefully balance their diversity and inclusion goals with emerging compliance requirements under the current administration’s enforcement priorities.
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9 Comments
This news highlights the increasingly politicized nature of DEI programs. While I support efforts to promote diversity and inclusion, the DOJ’s actions suggest these initiatives have become a partisan battleground. Businesses will need to navigate this carefully.
Yes, it’s unfortunate that something as important as workplace diversity has become so politically charged. Businesses will have to walk a fine line to satisfy both legal requirements and societal expectations.
The DOJ’s focus on DEI practices under the False Claims Act seems like a stretch. While I understand the desire for accountability, this approach could have unintended consequences and undermine important diversity efforts. Businesses will need to tread carefully.
From a legal perspective, I’m curious to see how the DOJ will attempt to establish that DEI practices constitute fraud under the False Claims Act. The statute was intended for a different purpose, so this interpretation seems like a stretch.
Agreed. The DOJ’s legal reasoning here will be closely scrutinized. It will be important to ensure the False Claims Act is not misapplied in a way that undermines legitimate corporate diversity initiatives.
The DOJ’s crackdown on DEI initiatives seems like a concerning overreach. These programs are intended to promote fairness and equal opportunity, not defraud the government. I hope the department’s actions don’t undermine important diversity efforts.
I share your concerns. The DOJ’s use of the False Claims Act in this context sets a worrying precedent and could have a chilling effect on corporate diversity efforts.
This is an interesting development. The DOJ using the False Claims Act to scrutinize corporate DEI practices is certainly a novel approach. I’ll be curious to see how this plays out and what the broader implications might be.
Yes, it’s a bold move by the DOJ. Businesses will need to carefully review their DEI programs and policies to ensure compliance.