On May 19, the Department of Justice (DOJ) announced the launch of the Civil Rights Fraud Initiative, which will use the federal False Claims Act (FCA) to pursue claims against recipients of federal funds that knowingly violate federal civil rights law.
This follows a series of executive orders and actions taken by this administration related to "illegal DEI [diversity, equity and inclusion]." As you may recall, on January 21, President TrumprescindedExecutive Order 11246 by issuing a new executive order titled "Ending Illegal Discrimination and Restoring Merit-Based Opportunity" (Order). Previously, EO 11246 had imposed race and gender-based affirmative action obligations and non-discrimination requirements on certain federal contractors (affirmative action obligations applicable to veterans and the disabled are statutory, and therefore not impacted by the rescission of EO 11246).
The Order asserts that preferences based on race or sex can violate civil rights laws and mandates a streamlined contracting process that emphasizes compliance with anti-discrimination laws. The implications of this shift are profound. Under the Order, instead of the prior obligations imposed under EO 11246, all federal contracts and grants will now be required to include a clause mandating that the contractor or grant recipient agrees that they do "not operate any programs promoting DEI [diversity, equity and inclusion] that violate any applicable Federal anti-discrimination laws." The Order also requires that contractors and grant recipients agree that the clause is "material to the government's payment decisions" for purposes of the FCA, 31 U.S.C. § 3729 et seq.
The Civil Rights Fraud Initiative is also in line with Attorney General Pam Bondi's February 5 memo directing that the Department of Justice (DOJ) develop an enforcement strategy to target illegal DEI programs, which we wrote about here.
To prepare for an increase in civil rights-related investigations and suits, we suggest that contractors and grant recipients:
- Broadly review any policies and procedures that touch on DEI issues, could be interpreted to promote antisemitism, or discuss gender in the context of athletic participation or bathroom usage, to ensure they do not run afoul of applicable federal anti-discrimination law.
- Fully revise those policies and procedures that violate federal anti-discrimination law, beyond simply relabeling such policies.
Below, we discuss the Civil Rights Fraud Initiative in more detail and provide practical advice.
The Civil Rights Fraud Initiative
The Civil Rights Fraud Initiative will be co-led by the Civil Division's Fraud Section and the Civil Rights Division, each of which will identify a team of attorneys to "aggressively pursue this work together." In addition, all 93 U.S. Attorney's Offices nationwide are required to identify an Assistant U.S. Attorney responsible for this initiative.
Deputy Attorney General Todd Blanche also directed those offices to engage with DOJ's Criminal Division and other federal agencies that enforce civil rights requirement for recipients of federal funding – including the Departments of Education, Health and Human Services, Housing and Urban Development, and Labor – as well as "establish partnerships with state attorneys general and local law enforcement to share information and coordinate enforcement actions."
The memo concludes that DOJ, by itself, cannot identify all instances of "civil rights fraud," and therefore strongly encourages whistleblowers, or "relators," with knowledge of discrimination by recipients of federal funding to either: (1) file suits themselves under the FCA'squi tamprovisions, which allow for relators to share in any monetary recovery; or (2) report those violations to DOJ.
What Should Contractors and Grant Recipients Do Now?
As many have recommended over the past few months, recipients of federal funding should review their policies and procedures, whether related to hiring, promotion, training, retention, or supply chain, to ensure they do not run afoul of applicable federal anti-discrimination law. It is anticipated that there will be litigation over the coming months regarding what types of practices are violative; it will be important to stay abreast of these developments. In the meantime, the Trump administration has given some guidance, with the Equal Employment Opportunity Commission (EEOC) and DOJ recently issuing guidance about unlawful DEI-related discrimination.
Also, it is important that, to the extent any such policies are potentially violative, recalibration of those policies goes beyond simply relabeling. The Blanche Memo states that DOJ views the initiative as necessary in part because "many corporations and schools continue to adhere to racist policies and preferences – albeit camouflaged with cosmetic changes that disguise their discriminatory nature."
Further, DOJ will not be focused solely on DEI issues. For example, the Blanche Memo states that a university that accepts federal funds could violate the FCA if it "encourages antisemitism, refuses to protect Jewish students, allows men to intrude into women's bathrooms, or requires women to compete against men in athletic competitions." The memo continues, stating that the FCA is implicated when grant recipients and contractors
certify compliance with civil rights laws [which is now mandated by EO 14173] while knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through [DEI] programs that assign benefits or burdens on race, ethnicity, or national origin.
Prepare for Increased FCA Activity
As Bass, Berry & Sims attorneys Denise Barnes and Scott Gallisdorfer explained in a Law360 article published earlier this year, there may be challenges to the government or a relator bringing a suit on the basis of promoting DEI policies and programs, but this heightened attention to these issues by DOJ will likely result in an increase in the number of civil rights-related investigations and suits in the coming years.
As with most DOJ initiatives, like the Civil Cyber-Fraud Initiative, the DOJ will work collaboratively with its agency partners to identify issues and potential investigative targets. One can expect that the mere promotion of this Initiative will likely result in an increase in whistleblower complaints in this space over time. In other words, businesses will likely encounter additional enforcement activity in this area regardless of whether the underlying allegations have merit.
Also, after the DOJ announces a new focus or priority, it takes time for those types of whistleblower complaints to be filed by relators. We likely will not see an uptick in these types of civil rights-based FCA cases for at least a year or so. And, again, the government will likely face exposure to various elements of the FCA in bringing those cases, particularly with respect to falsity.
For now, recipients of federal funds, whether grants or contracts, should work with stakeholders as well as employment, government contract, and investigative counsel to carefully and objectively review their DEI-related policies to ensure there are no elements that arguably violate federal anti-discrimination laws. Companies should also consider documenting their assessment of those practices and rationale for those findings and take whatever remedial action is necessary to further reduce their civil rights and FCA exposure.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
