DOJ Prioritizing False Claims Act and Data Analysis to Root Out “Illegal DEI”

Since President Trump signed Executive Order (EO) 14173 in January 2025, employers have been looking for clear guidance on three things:

• What constitutes “illegal diversity, equity, and inclusion (DEI)”?
• What will government monitoring and enforcement of EO 14173 look like?
• What does this mean for the workforce data that federal contractors had historically been required to gather and monitor under the revoked EO 11246?

Remarks made by Brenna Jenny, Deputy Assistant Attorney General for the Commercial Litigation Branch at the U.S. Department of Justice (DOJ) Civil Division at the Federal Bar Association’s Qui Tam conference on February 19^th are garnering attention because it is the first time a government official has provided such clear answers to these questions.

Read on for insight on Jenny’s remarks and what they mean for federal contractors. As you’ll see, the main takeaways align with what Berkshire has been saying about the importance of continuing to analyze workforce data since the affirmative action space was upended by EO 14173:

• Organizations can operate DEI programs without discriminating – what matters is how the policies and programs are implemented, and the impact they have on selection decisions and other terms, conditions and privileges of employment.
• And what is the most accurate and legally defensible way to determine if selection and other employment decisions are being made regardless of race, sex, or any other protected characteristic, or if they are potentially being influenced by DEI policies or programs? Just like it was before EO 14173, the answer is to analyze workforce data.

Driving home the importance of data, Jenny shared that the increase in claims against federal contractors under the False Claims Act (FCA) - whether DEI related or otherwise - is being driven in large part by an increase in data available to both the DOJ and individual whistleblowers. Jenny also stated that anti-discrimination FCA claims are receiving expedited priority treatment by her office.

What is “Illegal DEI”?

Jenny indicated that many of the DOJ discrimination investigations underway are related to three categories of DEI practices that the administration views as problematic under existing federal law:

• Companies creating and tracking demographic goals related to hiring or promoting employees into specific roles
• Tying employee compensation or incentives to meeting established demographic targets created by the company
• Requiring employees themselves to develop diversity goals, and in turn tying compensation or incentives to meeting those goals

Jenny shared additional examples of activities that the DOJ considers to be problematic. One such example is the use of ‘diverse slate’ policies in the hiring process that result in lowering qualification requirements for candidates that are in a specific demographic group. Another example provided was the creation of executive training and mentoring programs open only to one demographic group, particularly those that offer proximity to higher-level decision makers or other benefits.

While Jenny provided these examples of what the administration would consider “illegal DEI”, she explained that a contractor simply having DEI programs or policies does not necessarily mean they are violating anti-discrimination laws. A contractor can have a DEI program or policy without violating anti-discrimination laws, but they can also violate anti-discrimination laws without having any DEI programs or policies in place.

This is an important take-away for contractors who simply removed all references to DEI from their websites and handbooks and assume this means that they are ‘in the clear’. If your data shows an issue and you are unable to prove that selection or other employment decisions were made for job-related reasons that have nothing to do with race, sex or another protected trait, you could still be a target of the DOJ even if you eliminated any whiff of DEI from your company. The DOJ’s focus is on noncompliance with federal anti-discrimination laws broadly – not just in the DEI context.

False Claims Act as “Illegal DEI” Enforcement

Jenny gave the conference’s keynote speech and participated in a panel discussion titled “Illegal DEI as an FCA Trigger?”. According to sources present at the conference, during this panel Jenny provided the clearest explanation yet of how the Administration intends to use discrimination as a basis for FCA liability. The FCA is a federal law that states that a federal contractor or grantee who knowingly submits, or causes to submit, false claims to the government for payment is liable for three times the government’s damages, as well as penalties and costs. While the federal government can bring FCA claims, the law also allows private citizens to act as whistleblowers and file suit on behalf of the government. These are called “qui tam” suits, and when they are successful, the person who brought the suit may receive a portion of the government’s financial recovery.

Jenny acknowledged that using the FCA to pursue violations of anti-discrimination laws is a new application of the FCA. She also shared that some of the current FCA claims being investigated by the DOJ have been brought by qui tam relators (individual whistleblowers). Jenny noted that almost 500 qui tam lawsuits have been filed in the first six weeks of this year, which is a significant increase over previous years. While she did not share what percentage of these qui tam lawsuits are directly related to violations of anti-discrimination laws, contractors should be aware that individual whistleblowers can trigger investigation into their DEI practices.

The Importance of Data

During her remarks, Jenny spoke about DOJ’s focus on data, and how that data is being used in bringing FCA claims against contractors. This data comes from a variety of sources. In addition to publicly available government reporting, many companies published their ‘diversity metrics’ on their websites and in public annual reports for years, only recently pulling back after President Trump’s Executive Orders at the beginning of his second term. The DOJ has also issued over 1,000 Civil Investigative Demands (CID) in each of the past 4 years. These CIDs are a type of administrative subpoena that compels companies to produce documents, answer written questions, or provide oral testimony without needing court approval.

Jenny specifically tied the overall increase in FCA cases, including a 33% increase in qui tam actions last year, to the amount of data mining being carried out by both the DOJ and potential whistleblowers. While not all of these statistics represent cases related to potential violations of anti-discrimination laws or “illegal DEI”, it is important for contractors to understand that the DOJ likely has more access to their employment data than they would like.

Knowing that the DOJ is using data-driven methods to identify and target potential violators of anti-discrimination laws, it is critical that contractors conduct regular, thorough analysis and monitoring of their employment data. Before contractors can analyze their data, however, they need to be gathering the correct data. When EO 11246 was revoked, some contractors decided to stop collecting voluntary demographic data from applicants and employees. At the time, Berkshire experts advised against that, noting that it was still permissible to gather this data under Title VII of the Civil Rights Act of 1964 and previous Equal Employment Opportunity Commission guidelines, and there was real value to continuing to collect and analyze this data. Considering this information about DOJ’s data gathering efforts, it makes good business sense for any contractors who stopped collecting that demographic data to start again.

Furthermore, knowing that data analysis is key to DOJ’s DEI investigative and enforcement efforts should spur all contractors to also analyze their workforce data if they are not already doing so. Beyond the current FCA risks, regular audits of employment policies and practices have always been helpful for monitoring potential risk for individual discrimination claims from employees and ensuring that company policies and processes are being applied consistently and without regard to any protected characteristics.

As Jenny’s remarks make clear, however, it is not enough for contractors to analyze their data just to check a box and say they did it. Because DOJ is using data to see if DEI policies or programs had the result of impacting the selection decisions made by recruiters and managers, contractors must analyze their data with that same lens. Even if all DEI-related programs and policies have been ended, contractors should identify when they were in place, and analyze the data associated with them at that time.

For example, if there was a program in place for women in leadership, with the goal of increasing the number of women in management at the company, what do the promotions rates of men and women look like into management before, during and after that time frame? Were men and women promoted at expected rates given their representation in the available pool? If not, contractors should do the work of digging into the data to determine if those selection decisions can be defended on the basis of job-related qualifications. These types of analyses can help to show that the DEI program did not result in selection and other employment decisions being made based on anything other than qualifications and merit.

Risk Under the FCA

Jenny’s remarks made clear that the FCA is the main tool the DOJ will be using to attempt to root out and pursue anti-discrimination law violations by federal contractors. While FCA enforcement is not new, it has primarily been used in the healthcare and defense contracting spaces and might be new to contractors who were previously focused on EO 11246 compliance. These contractors should educate themselves not just on how FCA lawsuits can be brought, but also on the risks that come with a finding of an FCA violation.

If a company is found to have violated the FCA, they are liable for three times the government’s damages, as well as penalties and costs. Jenny spoke about how this process might look when the FCA is applied to violation of anti-discrimination laws. She laid out three scenarios for evaluating damages. The first scenario is when the DOJ would argue that they would not have contracted with that company if they had known of the alleged discrimination, and therefore damages would constitute the full value of the contract. The second scenario is if the company used federal funds to design or administer the DEI programs or policies that were deemed by DOJ to be discriminatory. In that case, the money spent on those programs would represent the harm to the federal government and would be the value of the damages. The third scenario she laid out would be a hybrid approach to determining damages, which would be based on the nature of the contracts in question and their relation to the alleged discrimination.

What Should Contractors Do Now?

The information shared by Jenny at the Federal Bar Association’s Qui Tam Conference provides a clear roadmap for the actions contractors should take now.

• Catalog previous and current DEI-related programs and policies: Many contractors modified or ended any DEI-related work quickly after EO 14173 was issued. However, based on the CID letters being issued and Jenny’s remarks, DOJ is not only interested in current “illegal DEI”. They are looking at older versions of company websites and previously shared public company reports to identify what companies had potentially problematic DEI programs in place. To that end, it is not enough for contractors to just scrub all references to DEI from their websites, handbooks, and company intranet. Contractors should determine what policies were in place over the last few years that could potentially raise the interest of the DOJ.

• Analyze historical data: Once previous or existing DEI programs and policies have been identified, contractors should do the work that the DOJ has made clear they are doing – analyze employment data in relation to any programs or policies that were in place that could be deemed problematic in the DOJ’s view. As stated earlier, Jenny made clear that simply having DEI programs and policies may not be a violation of any federal law. The issue is if those policies and programs had the effect of causing recruiters and managers to make selection decisions based on race or sex, violating federal antidiscrimination laws. Contractors should analyze their data to identify if this potentially occurred, or if selection decisions can be explained with job-related and merit-based reasons.

• Confirm current data collection process and implement process of regular data analysis: Contractors who stopped soliciting voluntary race and sex information from applicants and employees are advised to reinstate that process. While not required, without gathering and analyzing this data contractors are simply sticking their heads in the sand and hoping they don’t catch the eye of the DOJ or receive a claim of discrimination from a current or former employee or applicant. If they do receive a CID, or other request from the DOJ or a claim brought by an individual, contractors will be hard pressed to defend themselves without any data to back up their defense. Regular and thorough monitoring of employment data is the only way to stay ahead of these risks, and quickly course-correct if issues are identified.

• Pay attention to DOJ enforcement: In the past, compliance with EO 11246 was clearcut for federal contractors. There were written regulations to follow, and consistent enforcement in the form of audits by the Office of Federal Contract Compliance Programs. With the revocation of EO 11246 and the issuance of EO 14173, the compliance landscape has become much murkier for contractors, with the DOJ becoming the primary enforcement authority. There is much less clarity around what is and isn’t permissible and what the enforcement process entails. Contractors need to pay attention to information coming out of the DOJ as the Administration has made clear violations of anti-discrimination laws are a key focus and the FCA will be the primary tool used to target any potential violations by federal contractors.

The compliance landscape for federal contractors is constantly evolving. Berkshire is committed to keeping contractors informed and will continue to report on these developments and their impact on the federal contractor community.