On August 25, 2026, the Department of Justice (DOJ) announced a $21.5 million settlement with Deloitte LLP and four affiliated entities to resolve allegations that the company violated the False Claims Act (FCA). The DOJ alleges that Deloitte falsely certified compliance with anti-discrimination requirements in federal contracts while utilizing DEI-related practices that led to race- and sex-based employment decisions. The case was brought under the DOJ’s Civil Rights Fraud Initiative, which was launched in May 2025 with the goal of using the FCA to pursue claims against organizations that receive federal funding while knowingly violating federal civil rights laws. The settlement provides a clear reminder for all federal contractors about the risks of making contract-related compliance certifications regarding EEO practices without appropriate investigation and review.
Interestingly, the DOJ’s FCA false certification argument is based on FAR clause 52.222-26, the FAR clause related to the now-revoked Executive Order 11246 which required that federal contractors take affirmative action based on race and sex. The same FAR clause also broadly prohibited employment discrimination based on protected classes. The DOJ alleges that Deloitte certified compliance in their federal contracts, while at the same time knowingly undertaking practices that discriminated against applicants and employees based on race or sex, and failed to treat employees without regard to race or sex.
The alleged discriminatory practices go back to January 1, 2017, and include allegations regarding multiple employment practices that this Administration has alleged violate federal civil rights laws, such as:
The settlement agreement includes specific information about these practices, which provides useful insight into practices that may draw the attention of the DOJ. For example, the DOJ alleges that Deloitte created and communicated race- and sex-based workforce composition goals for business units. Business units also allegedly received a summary each month that tracked the goals, where progress toward each goal was highlighted in green, yellow, or red. The DOJ alleges that the existence of these goals resulted in the company taking race or sex into account when making employment decisions.
Deloitte’s senior leaders were also allegedly evaluated on their contribution to helping the company achieve these goals, and for a period of at least two years, their compensation was allegedly impacted if their business unit did not reach the goals. The settlement specifically quotes internal communications from the company’s National DEI Office indicating that the goals were “intended to drive behavior change,” which the DOJ alleges are evidence the goals were intended to impact hiring decisions.
The settlement also alleges that promotions were also impacted by the establishment of goals. Business units were allegedly assigned goals for the racial and sex composition of their yearly class of Partners, Principals and Managing Directors (PPMDs). The settlement alleges that the company tracked candidates by race and sex, and when the demographic composition met their goals, directed managers to try and maintain that same demographic composition throughout the process of down selecting candidates for promotion.
The DOJ contends specific violations related to Deloitte’s staffing of federal contracts. The settlement alleges that goals were set for the demographic makeup of employees who were staffed on federal contracts, as well as setting a goal to make equal the percentage of what the company called Under Represented Minorities (URMs) and non-URMs who were understaffed or “on the bench.” A report was allegedly provided to staffing managers that included the race and sex of available employees, with the recommendation of staffing the employees that would help meet those goals.
Lastly, the settlement alleges that Deloitte offered training, mentoring, and leadership development opportunities to employees on the basis of race or sex. Programs designed to positively impact participants’ promotion and compensation opportunities were allegedly offered only to individuals of certain races or sexes.
The settlement includes a $21.5 million payment by Deloitte. Like other FCA settlements, Deloitte was credited under DOJ’s Guidelines for Taking Disclosure, Cooperation, and Remediation into Account in False Claims Act Matters, Justice Manual Section 4-4.112 for cooperating.
The settlement also states that it does not preclude the Equal Employment Opportunity Commission (EEOC) from investigating and litigating claims against Deloitte, including those that include the same conduct alleged in this settlement. While not mentioned in the DOJ settlement, the Florida and Indiana Offices of Attorney General separately issued statements revealing that claims were also brought against Deloitte under each state’s equivalent of the FCA, and Deloitte will pay $1.2 million under each of these state settlements.
This is the second DEI-related FCA settlement under the DOJ’s Civil Rights Fraud Initiative, with the first being an April 2026 $17 million settlement with IBM. Taken together, these two settlements are a powerful reminder to federal contractors of the importance of careful review of any contractual certifications related to DEI or EEO activities. This includes prior contractual certifications tied to Executive Order 11246 and other federal civil rights laws and current certifications regarding compliance with the affirmative action provisions under Section 503 of the Rehabilitation Act (Section 503) and the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA), as well as new contract certifications under recent Executive orders, such as Executive Order 14398. Under the FCA, it is the certification itself that creates the possible exposure – not whether the government can show an actual violation of federal civil rights laws.
Federal contractors can, and should, take steps to determine whether they can truthfully certify their compliance with all required EEO-related contract certifications. Reviewing written policies is not enough – evaluating actual hiring, promotion and termination decisions for risk is a key component of a well-developed compliance strategy.
Employers need to understand the qui tam, or whistleblower, provision of the FCA, which creates risk from individuals bringing a claim, not just the government. Qui tam suits allow a private party, known as a relator, to file suits for false claims against the government. The relator then receives a percentage of money that the federal government recovers.
The DOJ settlement, as well as the two state resolutions, all began from a qui tam complaint filed in Texas in April 2025 by the group The American Alliance for Equal Rights (AAER). AAER’s founder Edward Blum also created the group Students for Fair Admissions, whose case resulted in the landmark 2023 Supreme Court decision that struck down affirmative action in college admissions. Beyond academic admissions, AAER has filed numerous cases targeting race-conscious programs and policies. As outlined in the settlement, the relator in this case will receive $4.3 million.
The large monetary recovery by the whistleblower will likely fuel similar lawsuits against other federal contractors. In addition, employers need to recognize that an FCA whistleblower need not be an employee or applicant directly impacted by any DEI-related or other employment practices.
Employers should be mindful that it is not just federal agencies that pose a risk for FCA enforcement but also states. The relator here also brought the state claims in Indiana and Florida, resulting in significant settlements under state law as well. As a result, even employers who are not federal contractors may face investigations into their employment practices if they hold state contracts.
Employers should also note that the timeline referenced in this case starts in 2017 – well before January 2025 when this Administration announced its position on the types of DEI activities that it believes violate federal law. Many employers took the step of conducting self-audits of DEI or affirmative action practices and policies after Executive Order 14173 and modified or discontinued what they were doing in that space. However, this settlement shows that employers are still at risk from things that occurred well before these changes occurred. Employers would be wise to review past practices, communications, documentation, and policies to ascertain their level of risk when it comes to potential claims under the FCA.