The U.S. Department of Justice has stepped up its attack on workplace DEI programmes. Reuters reports the DOJ is now using the False Claims Act to investigate employers it believes are running unlawful diversity policies, a move with clear implications for UK-based multinationals with operations 1090 in the US.
The political drive started back in January when President Trump took office. The White House framed the move as part of a wider push against what it called ‘woke ideology,’ arguing that DEI programmes unfairly advantage some groups at the expense of others and have no place in federally funded workplaces. Trump then signed an executive order requiring federal contractors and other recipients of government funds to certify that they do not have illegal DEI programmes in place, and that they understand those certifications are material to receiving federal money.
The DOJ followed this up on 30 July with formal guidance to all federal fund recipients, setting out examples of what it regards as unlawful DEI. That guidance was issued under its new Civil Rights Fraud Initiative, making clear that certifications would be policed aggressively and could give rise to False Claims Act liability.
It now appears the DOJ has begun taking action. Sector press reports that the DOJ has been sending Civil Investigative Demands - formal requests for documents and testimony - to federal contractors and grantees about their DEI practices and quotes officials saying that false or misleading diversity certifications will now be treated in the same way as fraudulent billing or procurement claims. That represents a significant escalation in how DEI is policed in the U.S.
For UK-based multinationals with operations in the U.S., that’s a real compliance risk. Employees and even private citizens are now being encouraged to blow the whistle and bring claims if they believe an employer is breaching those rules.
So, let’s get a view on this. Cara Crotty is a partner at law firm Constangy based at their Columbia office is in South Carolina and is co-chair of the firm’s DEI and contractor compliance practice groups. Earlier Cara joined me by video-link to discuss the issue:
Cara Crotty: “Federal law prohibits employers from using protected characteristics, like race, gender, religion, national origin, as a basis for making employment decisions. President Trump issued an executive order on his second day in office that requires federal contractors and other recipients of federal funds to certify two things: one, that they do not have illegal DEI in place and, two, that they are acknowledging that their payment from the government is conditional on understanding the materiality of that certification. So if a contractor, or other recipient of federal funds, has a DEI policy that would violate that provision, that discriminates in some way, then there's a potential that the False Claims Act could apply and result in significant monetary liability. In addition, the Department of Justice started a Civil Rights Fraud Initiative that encourages employees and private citizens to file qui tam actions, or whistleblower lawsuits, against employers that are violating those provisions, that have illegal DEI, and so it strongly encourages and incentivizes employees to report their employers to the federal government.”
Joe Glavina: “What are the kinds of employer statements or actions which could create a legal risk in the US, Cara?”
Cara Crotty: “Any kind of statement that indicates the employer has a quota or a preference for individuals based on a protected characteristic could certainly get an employer in hot water and raise the risk here in the US. So statements around goals that are expected or required to be achieved, especially by a certain date and time, could be construed to be a quota, or that the employer has adopted an illegal preference and will be using protected characteristics when they're making employment decisions. So most US employers are abandoning diversity goals altogether but an employer would certainly want to avoid creating the perception that any protected characteristic is being used in making an employment decision. So if an employer decides to retain goals - which are not necessarily unlawful - but any statements around diversity goals should make it clear that protected characteristics are not being taken into account when making decisions and that employment decisions are based on legitimate job-related criteria and not protected characteristics.”
This is an issue that Cara and her colleagues have been flagging with their clients in recent weeks and it is clearly a very important also for multinationals with a presence in the US, so something UK-based HR teams should be alive to. Given its importance we will be coming back to this later in the month when you’ll get the chance to hear the full interview with Cara so do watch this space.
