$17 Million DOJ Settlement Highlights FCA Risk Tied To Alleged DEI Discrimination

April 15, 2026

What's New

The Department of Justice announced a $17 million civil settlement under the False Claims Act, alleging a federal contractor’s DEI related employment practices violated nondiscrimination requirements over a period exceeding seven years. DOJ alleged the contractor:

• Used protected characteristics in compensation decisions, including “diversity modifiers” linking incentive pay to demographic targets;
• Used race, color, national origin, and sex as interview eligibility criteria through “diverse slate” initiatives; and
• Restricted access to certain training, mentoring, leadership-development, and educational opportunities based on race or sex.

Notably, DOJ cited the Equal Opportunity clause formerly required by Executive Order 11246 and Title VII of the Civil Rights Act as legal authorities, despite neither being historically used to trigger FCA liability.

What It Means

The announcement signals DOJ’s willingness to use the FCA—traditionally a procurement fraud tool—to pursue alleged employment discrimination theories.

DOJ characterized this as the first resolution under its Civil Rights Fraud Initiative, reflecting FCA use to pursue alleged civil rights violations in federal contracting. DOJ also credited the contractor’s cooperation and voluntary remediation, including terminating and modifying allegedly unlawful policies and practices, showing that prompt corrective action may factor in settlement discussions even where DOJ seeks significant monetary relief.

For federal contractors, the settlement warns that DOJ may scrutinize legacy DEI practices, including those later discontinued, where contractors certified compliance with nondiscrimination requirements.

What You Should Do

Contractors should review current and legacy DEI-related employment practices for potential exposure. If potential issues are identified, consider prompt, documented remediation. CWC’s DEI Risk Assessment Package may help identify and mitigate risk.

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