The U.S. Justice Department’s Civil Rights Fraud Initiative to crack down on DEI policies recently secured its first False Claims Act resolution agreement with IBM regarding government claims that the tech giant “knowingly” maintained practices that the United States contends are discriminatory employment practices. This action confirms that the Trump Administration’s anti-DEI enforcement efforts should be taken seriously by any organizations that are actively pursuing DEI initiatives. Board members at companies that have DEI initiatives can examine the IBM settlement and determine if their board needs to recommend adjustments to their company’s employment practices.
“International Business Machines Corporation (IBM) has agreed to pay the United States $17,077,043, inclusive of civil penalties, to resolve allegations that it violated the False Claims Act by failing to comply with anti-discrimination requirements in its federal contracts due to practices the United States contends discriminated against employees and applicants for employment because of race, color, national origin or sex,” the DOJ wrote in a press release.
The release also stated that, “When a company accepts federal funding while engaging in practices that sort, prefer or disadvantage employees on the basis of race or sex, the company is stepping outside the conditions under which the government agreed to contract with them, and we will hold them accountable.”
With this IBM settlement under its belt, the DOJ may continue its anti-DEI enforcement efforts at an accelerated pace. With that in mind, board members might want to consider:
Analysis of the government’s settlement with IBM. Analyzing the IBM settlement will provide board members with answers to how the government made its case against IBM and provide clues that could help companies avoid government scrutiny in the future. Information from the settlement might also assist companies in taking corrective measures (including ending or modifying certain programs and policies) to bring their employment practices into compliance with government standards.
A full-scale board-led review of company employment practices. The board will need to stand behind the company’s employment practices. Communication between the board, CEO, management team and key shareholders would be best to make sure any risks associated with current employment practices are dealt with accordingly. Companies can also reach out to legal consultants if needed.
Full cooperation with DOJ if targeted. When announcing the settlement with IBM, the DOJ said, “IBM took significant steps entitling it to credit for cooperating with the government in its investigation.” Cooperating and making voluntary changes to policies the government objected to likely kept the settlement amount lower than if the company had opted to fight in court.
