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April 3, 2026 | Legal Update

Authors

                             

Jonathan L. Kotlier chairs Nutter’s White Collar Defense practice group. Kelly Begg Lawrence is a partner in Nutter’s Litigation Department. Bryan M. Connor is an associate in Nutter’s Litigation Department.

For the last year, DOJ has signaled its intent to use the False Claims Act (FCA) to root out what it views to be discriminatory diversity, equity, and inclusion (DEI) related policies and practices utilized by federal government contractors and grant recipients. Contractors and grantees are now being asked to sign updated certifications attesting to compliance with antidiscrimination laws. With these updated certifications, DOJ is actively investigating contractors and grantees for antidiscrimination law violations, largely in connection with DEI practices and policies that DOJ claims encourage preferential treatment based on protected characteristics. Guidance issued by DOJ and recent remarks from DOJ senior leadership have brought DOJ’s FCA enforcement in this area into sharper focus for 2026 and beyond.

This article provides an overview of the FCA, explores where DOJ is headed on FCA enforcement aimed at DEI-related policies, practices, and decisions, and provides some steps federal contractors and grantees can take to minimize DOJ scrutiny and mitigate related risks.

FCA Primer

The FCA is the federal government’s primary tool in combatting fraud against the government. Historically, the FCA has been used to combat fraud involving alleged misuse of federal funds—typically in billing, procurement, or grant administration related to federal contractors and health care benefit programs, like Medicare and Medicaid. Individuals or entities who knowingly submit false claims to the government in violation of the FCA are potentially liable for treble damages, plus mandatory civil penalties per claim And under related criminal laws, false claims may be punished by imprisonment and substantial fines. The FCA also includes a qui tam provision that allows people who are not affiliated with the government, called "relators" under the law, to file actions on behalf of the government. Whistleblowers filed more qui tam actions than ever before in 2025, and were responsible for over 75% of new qui tam actions last year. Additionally, in the healthcare space alone, qui tam actions resulted in $5.7 billion in recoveries in 2025.

New Attention on FCA Liability for Alleged Violations of Antidiscrimination Laws

On January 21, 2025, President Trump issued Executive Order 14173, "Ending Illegal Discrimination and Restoring Merit-Based Opportunity." The Executive Order initiated the Trump Administration's efforts to rein in certain DEI practices. On May 19, 2025, the Department of Justice announced its “Civil Rights Fraud Initiative” (the Initiative), which aims to hold federal contractors, grant recipients, and entities who receive federal funds accountable under the False Claims Act (FCA) for what DOJ characterizes as misrepresentations of compliance with civil rights laws.

In the memo by Deputy Attorney General Todd Blanche announcing the Initiative, the DAG said the Initiative will be co-led by DOJ’s Civil Rights Division and Civil Fraud Section, in collaboration with DOJ’s Criminal Division.  The Initiative represented a marked shift in DOJ’s historical civil rights enforcement strategy, applying the FCA’s high-powered remedies to activities that had not previously been within the scope of FCA enforcement and explicitly encouraging whistleblowers to report potential violations.

Government contractors and grantees were initially without guidance for what this enforcement scheme might mean or look like. In July 2025, Attorney General Bondi issued a memorandum (Bondi Memo) that provides guidance for recipients of federal funding regarding “unlawful discrimination” on the basis of race, color, national origin, sex, religion, or other protected characteristics. The Bondi Memo sought to clarify the application of federal antidiscrimination laws to programs or initiatives that, according to DOJ, may be discriminatory, including efforts related to DEI. Further, the Bondi Memo provided recommendations regarding “best practices” for complying with federal antidiscrimination laws.

DOJ’s 2026 Antidiscrimination Focus

As recently as February 19, 2026, Brenna Jenny, Deputy Assistant Attorney General for DOJ Civil Division's Commercial Litigation Branch, spoke at the Federal Bar Association's 2026 Qui Tam Conference, focusing her comments on DOJ’s efforts to rein in DEI practices in line with Executive Order 14173.

According to Jenny, DOJ is now actively conducting FCA investigations of contractors and grantees for potential violations of federal antidiscrimination laws, and DOJ will enforce the FCA against any violators. DOJ views compliance with federal antidiscrimination laws as a material term of government contracts, critical to the government in deciding with whom it should partner. Jenny cautioned that contractors and grantees may engage in discrimination even if their conduct is not under the guise of DEI programs, indicating that particular care is needed to avoid scrutiny.

Jenny described three practices that DOJ views as encouraging decisions based on race or sex instead of merit and are thus likely to draw interest from DOJ. First, where companies deploy tracking systems to meet demographic metrics in hiring and staffing. DOJ does not view such tracking as remedying any identified discrimination, but instead shifts decisions away from merit in favor of numerical outcomes based on protected characteristics. Second, where companies’ compensation decisions are influenced by race or DEI-related metrics. An example of this is where race is considered for the purpose of bonuses or salary increases. Third, where company policies and procedures require employees to support DEI initiatives in connection with performance reviews, as such practices may pressure employees to support DEI policies and demographic objectives to avoid adverse employment outcomes.

Jenny also singled out employee training and mentoring programs with restrictions based on race or sex, saying that when access to such opportunities is restricted to certain groups, it effectively denies the benefits of membership in such groups to other employees. In DOJ’s view, this can lead to career advancement decisions being made on the basis of race or sex, and not on merit.[1] Additionally, Jenny raised concerns about “diverse-slate” requirements and preferential hiring practices, stating that DOJ is concerned with situations where employers relax experience or qualification standards only for certain candidates on the basis of race or sex.

In line with this enforcement shift, federal agencies are requiring updated certifications regarding antidiscrimination in line with Executive Order 14173's directive to include in every contract or grant award "[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 "[a] term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws."

On February 18, 2026, the General Services Administration proposed revisions to the certifications that applicants for and recipients of federal financial assistance must make as part of their System for Award Management registration, adding new attestations concerning DEI initiatives, immigration, and nationality. The proposed changes from the GSA affirm that federal antidiscrimination laws apply to programs or initiatives that purportedly involve discriminatory practices, including those labeled as DEI or “diversity, equity, inclusion, and accessibility” (DEIA), and specifically references prohibitions on discrimination based on race or skin color. Notably, the amended attestation makes no reference to numerous other categories protected from discrimination, such as sex, age, disability, or veteran status.

The proposed revisions from the GSA also include examples of practices that may violate federal antidiscrimination laws, such as preferential treatment based on race or color (including the use of “diversity statements”); segregation by race or color in trainings, facilities, or program eligibility; and retaliation against employees, participants, or beneficiaries who refuse to participate in DEI practices. The public comment period for the GSA’s proposal closes on March 30, 2026.

A similar certification for federal contractors is expected to follow closely behind this proposed certification for federal financial assistance recipients.

DOJ’s Theory of FCA Liability

This enforcement angle, while new, is constructed on an elementary proposition. DOJ’s position is that contractors and grantees who engage in conduct outlined in the Bondi Memo and summarized in DAAG Jenny’s conference remarks are engaged in discriminatory conduct. Thus, if contractors or grantees are engaged in discriminatory conduct while certifying compliance with federal antidiscrimination laws, they have made false certifications. Therefore, they have submitted false claims to the government in violation of the FCA and, potentially, criminal false claims laws.

The economic risks to any contractor or grantee who is a target of such an FCA action are considerable. The treble damages and per-claim penalties available under the FCA are at play, and, in her remarks, Jenny indicated DOJ will seek both penalties and damages. Moreover, as DAG Blanche stated in announcing the Civil Rights Fraud Initiative, DOJ will engage the Criminal Division to investigate and prosecute antidiscrimination violations, including false certifications. As a result, contractors and grantees may face significant exposure should now-prohibited conduct, policies, or practices be multiplied and aggregated across multiple claims over a period of time.

Contractor and Grantee Risk Mitigation

Organizations that receive any form of federal funds should consider taking the following steps to mitigate risk:

• Assess existing DEI or diversity-related programs to ensure compliance with existing statutory and case law related to antidiscrimination, as well as with Executive Orders and proposed certification changes, with particular focus on whether existing programs involve preferential treatment in hiring or promotions, whether certain exclusive opportunities are based on membership in a protected class, and whether compensation is tied to DEI-related metrics.
• Ensure that written policies and directives aimed at mitigating FCA risk are appropriately administered in practice across the organization and monitored to assure compliance with nondiscriminatory practices.
• Conduct comprehensive review of how employees can report concerns and how they will be protected against retaliation.
• Memorialize processes and procedures for responding to complaints, with a focus on investigative protocols and documentation.
• Engage attorneys to conduct a privileged compliance review of DEI-related policies as well as certifications made in connection with federal awards or contracts.
• Consult with counsel regarding certification language in government contracts, including reviewing updated certification language with counsel to ensure the organization can comply with the certifications being made.

Any entity that receives federal funding should also be prepared to respond to Civil Investigative Demands or Administrative Subpoenas related to any program or policy that may fall within the purview of DOJ FCA targets.

Understandably, contractors and grantees have questions about how these developments may affect their existing operations or government certifications. Entities should consistently discuss with counsel risk assessments and mitigation efforts. Additionally, as this area continues to grow and evolve, consideration must be given to the risks and benefits of voluntary disclosure and the prospects of cooperation with DOJ.

[1] Although DOJ has not yet filed an FCA action for what it sees as violations of federal antidiscrimination laws, there have been other federal enforcement efforts against DEI-related practices. For example, on February 18, 2026, the EEOC filed a complaint against a Coca-Cola company alleging it violated the Civil Rights Act in 2024 by hosting a two-day, employer-sponsored event at a casino solely for female employees. A male employee reported this event to the EEOC, who undertook an investigation before filing suit.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.