The U.S. Department of Justice has reached its first settlement under its Civil Rights Fraud Initiative, marking a significant step in the agency’s use of the False Claims Act to address alleged civil rights violations by entities receiving federal funds.
The approximately $17 million settlement, announced in April 2026, involved IBM, a federal contractor, and resolved allegations that its employment practices took protected characteristics into account in ways inconsistent with federal anti-discrimination requirements tied to government contracts.
The DOJ alleged that the company’s conduct could give rise to liability under the False Claims Act, which allows the government and private whistleblowers to pursue claims on the government’s behalf where an entity falsely certifies compliance with legal requirements tied to federal funds.
The matter was resolved without an admission of liability.
Application of the False Claims Act to workplace practices
The Civil Rights Fraud Initiative, announced in 2025, is designed to use existing False Claims Act mechanisms to address alleged civil rights violations.
Under this framework, liability may arise where an organization represents that it is complying with federal anti-discrimination laws but is alleged to have engaged in practices that conflict with those obligations.
In the employment context, that can include situations where workplace policies or decisions are alleged to involve differential treatment based on protected...
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