The U.S. Department of Justice (DOJ) recently announced that IBM agreed to pay $17,077,043 to resolve allegations that it violated the False Claims Act (FCA) in connection with its diversity, equity, and inclusion (DEI) hiring and employment practices. This resolution — the first under the DOJ’s Civil Rights Fraud Initiative — underscores heightened regulatory scrutiny of DEI policies when tied to federal contracting obligations.

Background

According to the DOJ’s press release, IBM was alleged to have:

• Maintained employment and hiring practices that the government contended discriminated based on race, color, national origin, or sex, in violation of anti-discrimination requirements embedded in federal contracts.
• Used what the DOJ described as a “diversity modifier” linking bonus compensation to achievement of demographic targets.
• Implemented practices like “diverse interview slates,” adjustments to interview criteria based on protected characteristics, demographic goals for business units, and selective training and development offerings limited to certain groups.

The government took the position that such practices, if they influenced employment decisions with respect to protected characteristics, could amount to noncompliance with federal contract clauses requiring nondiscrimination. IBM cooperated with the investigation, made early disclosures, and voluntarily modified or terminated certain programs — factors credited in reaching settlement. Crucially, the settlement...

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