Following the January 21, 2025 issuance of the Executive Order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (EO), advisories flooded the legal airwaves warning of the extreme False Claims Act (FCA) risk posed to contractors that maintain “DEI” (diversity, equity, and inclusion) programs. Always the contrarians, we at Qui Notes suggest that while the EO signals DEI-related FCA enforcement by the new administration and creates new targets for would-be relators, the EO may not wind up being the FCA disaster some have predicted.
First, let’s briefly review the EO, which rescinds a series of decades-old executive orders (including one dating back to Lyndon B. Johnson’s administration) relating to affirmative action and DEI. In their place, the EO directs agency heads to implement the administration’s new “anti-discrimination” policy through the federal contracting process. (For more details, see our prior Advisory, which provides a comprehensive summary of the EO.) Citing the FCA, the EO also appears to contemplate relying on that statute to police contractor DEI programs. Specifically, the EO requires that “[t]he head of each agency shall include in every contract or grant award: (A) A term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of [the FCA]; and (B) A term requiring such...
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