New Executive Order Ties DEI Compliance to False Claims Act Risk for Federal Contractors

New Executive Order Ties DEI Compliance to False Claims Act Risk for Federal Contractors

On March 26, 2026, the White House issued an executive order titled Addressing DEI Discrimination by Federal Contractors. The order states that its purpose is to “promote economy and efficiency in Federal contracting by preventing racial discrimination.” 

The order does not regulate DEI programs in the abstract. It directly connects certain practices to federal contracting eligibility, payment, and potential liability under the False Claims Act. Interestingly, the False Claims Act is now before the Supreme Court in Eli Lilly and Company v. United States, et al., ex rel. Ronald J. Streck, where it could undercut or strengthen this executive order by clarifying the rights of a private citizen to bring a claim in claiming an "injury" exists to the United States. 

What the Executive Order Requires

The order requires federal agencies to include a clause in contracts stating that:

“The contractor will not engage in any racially discriminatory DEI activities…”

It also defines those activities as “disparate treatment based on race or ethnicity in the recruitment, employment… contracting… program participation, or allocation or deployment of an entity's resources.”

Contractors must also:

• “furnish all information and reports, including providing access to books, records, and accounts”
• report subcontractor conduct that “may violate this clause”
• comply with agency-directed remedial actions

Payment and the False Claims Act

The order expressly links compliance to payment under federal contracts. The required clause states:

“The contractor recognizes that compliance with the requirements of this clause are material to the Government's payment decisions…”

The order further directs that the Attorney General shall:

“consider whether to bring actions under the False Claims Act against any contractors or subcontractors that violate the clause…”

It also requires prompt review of whistleblower actions brought under 31 U.S.C. § 3730, but again, see the case now before the Supreme Court. 

As a result, practices tied to hiring, promotion, training programs, or vendor selection may have implications beyond contract compliance where payment certifications are involved.

Subcontractor and Vendor Requirements

The order applies to subcontractors and lower-tier subcontractors. It requires that:

“The contractor will report any subcontractor's known or reasonably knowable conduct that may violate this clause…”

It also provides that contracts may be:

“canceled, terminated, or suspended… and the contractor or subcontractor may be declared ineligible for further Government contracts.”

Scope of Covered Programs

The order defines “program participation” broadly to include:

“training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities…”

This definition extends beyond hiring and promotion and includes internal programs sponsored by the contractor.

Enforcement Framework

The order directs agencies to take action for noncompliance, including:

• contract cancellation, termination, or suspension
• suspension and debarment

It also directs federal agencies to identify “economic sectors that pose a particular risk” and issue further compliance guidance. 

Implementation Timeline

• Within 30 days: agencies must begin including the required clause in contracts
• Within 60 days: interim FAR guidance is expected
• Within 120 days: agencies must review and report on implementation

What General Counsel Should Review

• Hiring and promotion practices tied to federal contracts
• Eligibility criteria for training, mentorship, and leadership programs
• Vendor and subcontractor selection and oversight
• Contract terms addressing compliance and reporting obligations
• Internal records, communications, and documentation subject to agency review
• Statements or certifications tied to payment requests
• The case before the Supreme Court and the precedent it sets

Bottom Line

This executive order establishes that certain internal practices may affect federal contract eligibility, payment, subcontractor oversight, and potential False Claims Act exposure. It requires alignment between company practices, documentation, and contractual representations in connection with federal work.

Lieb at Law, P.C. represents companies in litigation arising from federal contract compliance, including False Claims Act claims, contract termination disputes, and enforcement actions. We focus on defending complex matters where regulatory risk becomes litigation.

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EEOC Warning on DEI: What General Counsel Must Fix Now

The Equal Employment Opportunity Commission has sent a clear message to employers: calling a program “DEI” does not change your obligations under Title VII. This is not a political issue. It is a legal risk.

The EEOC’s position is straightforward. Workers must be treated as individuals and judged on their skills, abilities, and merit, not on their race or sex as a general category, which violates Title VII and gives rise to reverse discrimination claims. According to the message from EEOC, a company cannot also be cute and evade these obligations by changing the name of their program from DEI to something like, “Inclusion & Diversity,” “Belonging,” “People & Culture,” or “Opportunity & Inclusion.”

Why This Matters to Employers

The risk is not limited to a formal hiring or promotion policy. It can arise from how opportunities are created, who gets invited, who gets mentored, who gets access to leadership development, who receives leads, and how internal messaging explains those decisions.

What the EEOC Is Really Targeting

EEOC is focusing on whether protected characteristics are being used, directly or indirectly, in employment-related decisions. That includes programs that may look polished, well-intentioned, and modern on paper, but still create unequal treatment in practice. The issue is not whether there is a noble goal, the issue is if someone is disadvantaged because of which demographic group they belong.

To avoid a claim, GCs should audit there:

• Recruiting pipelines designed to influence demographic makeup
• Leadership or mentorship programs limited to certain groups
• Training or advancement opportunities not equally available to all qualified participants
• Distribution of listings, leads, accounts, or customer-facing roles based on identity-driven assumptions
• Internal statements about targets, representation goals, or balancing outcomes
• Programs repackaged under softer labels but built on the same protected-class framework

The Problem with “Equal Outcomes” Thinking

One of the clearest signals in the EEOC’s letter is its rejection of workplace approaches that seek equal outcomes instead of equal treatment and equal opportunity. That matters because many employers spent years adopting programs built around representation goals, demographic benchmarks, and identity-based development tracks. Those approaches are now far more likely to be used against the employer as evidence.

In other words, a company can create legal exposure even when it believes it is doing something positive. Intent does not control the analysis. Structure does.

The Real Risk Is Often the Written Record

Most employers assume the danger lies in what they intended to do. In practice, the danger usually lies in what they wrote down. This is not restricted to the actual policy, but drafts, emails, and chats are also ripe to create danger. Also, there is a recent federal district court decision that cautions about asking AI about your policy because all of that is discoverable in litigation too. Website language, recruiting materials, employee handbooks, training decks, internal emails, chat messages, and policy documents can all become exhibits in a claim so be careful.

That is especially true where language suggests that a company is making decisions based on group identity rather than individual qualifications. Once that language exists, it becomes much harder to defend the program as neutral and lawful.

The EEOC Is Not Just Talking

Employers should not dismiss this as symbolism. The EEOC has expressly said it is prepared to use its full range of enforcement tools, including large-scale litigation, systemic cases, and pattern-and-practice claims. That means employers should expect scrutiny not only of isolated complaints, but of company-wide programs and recurring workplace structures. Also, private litigants are watching and you should expect reverse discrimination claims to tick up. 

What Employers Should Do Now

Employers should immediately review any initiative that touches hiring, promotion, training, mentorship, leadership development, access to opportunity, or internal eligibility criteria.

The goal is not to abandon workplace culture or professional development. The goal is to make sure programs are legally defensible. That means:

• reviewing all current and past DEI-related policies and programs
• removing eligibility limits tied to protected class
• rewriting language to focus on objective, business-related criteria
• eliminating references to quotas, balancing, or demographic targets
• documenting neutral reasons for how opportunities are allocated
• making sure managers and decision-makers are not improvising standards office by office

Bottom Line

The EEOC’s message is simple: employees must be treated as individuals, not as members of a group. If your company has programs that suggest otherwise, the fact that they were created under a DEI banner, or renamed under a softer title, will not shield them from scrutiny.

Contact Lieb at Law

Lieb at Law advises companies on discrimination risk, compliance strategy, and litigation defense. We help businesses identify exposure, restructure policies, and protect themselves before internal programs become the basis of a lawsuit or regulatory investigation.

Need a privileged review of your policies, recruiting materials, training programs, or internal initiatives? Contact Lieb at Law to conduct a compliance audit and address risk before it turns into a claim.

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DEI, the False Claims Act, and the New Enforcement Reality for Employers

National Law Review article published this week highlights a significant shift in federal enforcement strategy: the U.S. Department of Justice is now actively using the False Claims Act (FCA) to scrutinize workplace DEI initiatives at companies that receive federal funds or hold government contracts.

Read the article here:
https://lnkd.in/ee_mvzCg

According to the article, DOJ is issuing civil investigative demands to major employers and treating DEI-related inquiries as potential fraud investigations, not policy disagreements. The focus is no longer limited to what a DEI policy says on paper, but how it operates in practice.

For employers and the attorneys, this represents a material change in exposure.

The FCA has traditionally been used to police false billing and fraudulent payment claims. DOJ is now advancing a novel theory: that maintaining certain DEI practices while certifying compliance with federal anti-discrimination laws can constitute a false or misleading claim for payment. This approach has been reinforced by executive orders, DOJ guidance, and public statements from senior DOJ leadership.

Whether courts ultimately endorse this theory remains to be seen. In the meantime, investigations are underway, and the cost of responding to a CID alone can be significant. Documentation, internal decision-making, and how DEI concepts are operationalized are now front and center.

This is exactly why Attorney Andrew Lieb recently served as a featured instructor for a New York State Bar Association CLE titled Risk-Informed DEI: Balancing Legal Exposure and Organizational Culture. The program was designed to address the reality employers and counsel are facing now.

The CLE focuses on practical, defensible frameworks for advising employers in this environment. That includes identifying where FCA risk may arise, understanding how regulators evaluate DEI implementation rather than labels, and developing documentation and compliance strategies that align with both legal obligations and organizational goals.

For attorneys advising employers, and for organizations that contract with or receive funding from the federal government, DEI is no longer a purely cultural initiative. It is a legal risk management issue that requires careful, informed handling.

Details on the NYSBA CLE, including registration and CLE credit information, are available here:
https://lnkd.in/eHK9FHfk

As enforcement continues to evolve, employers should not assume that rebranding or surface-level changes are sufficient. The question regulators are asking is how programs actually function, how decisions are made, and what representations are being made to the government. Getting that analysis right now can make the difference later.

Are Company DEI Programs Going to Get Them Sued for Reverse Discrimination?

This past month, the Department of Justice issued guidance on Diversity, Equity, and Inclusion (DEI) for Funding Recipients, but every employer and employee (regardless of government funding) should take notice of this guidance because it explains a lot of acts that give rise to a reverse discrimination lawsuit and many employees now seem to have a good case. 

Federal law prohibits discrimination on the basis of protected characteristics like race, sex, and religion, and if you object to a policy you believe is discriminatory, you are legally protected from retaliation. The DOJ’s new guidance clarifies that all discrimination, including “reverse discrimination” is illegal, even when done with good intentions under a DEI label. 

This means that policies giving preferential treatment based on race or sex in hiring, promotions, or contracting are likely unlawful. Watch out for “diverse slate” mandates or quotas in hiring, as these are specifically called out by the DOJ as problematic. 

The government is also scrutinizing seemingly neutral terms like “cultural competence” when they are just used as a substitute for race. Notably, DEI training that segregates employees by race or promotes stereotypes can create a hostile environment and violate federal law. The main takeaway is clear: workplace policies must ensure equal opportunity for everyone, without exception, and calling a discriminatory policy DEI does not protect it from constituting actionable discrimination.

New Rule Targets Salary History to Close Gender and Racial Pay Gaps

The Office of Personnel Management (OPM) has taken a significant step towards addressing gender and racial pay disparities within the Federal workforce with its latest regulation. Effective April 1, 2024, this rule prohibits the use of salary history in setting pay for new civilian employees, a practice that has historically contributed to ongoing pay inequities.

The private sector should take notice because the use of pay history is going to be a driving force in future claims under the Equal Pay Act based upon extrapolations from this regulation. 

Salary history has often been a determining factor in pay decisions, but this approach fails to account for the diverse experiences and qualifications individuals bring to their roles. More critically, it has perpetuated biases, inadvertently anchoring new salaries to previous ones that may have been influenced by discrimination. This cycle has been particularly detrimental to women and people of color, who statistically earn less than their white male counterparts. The gap is even more pronounced for women of color, underscoring the urgency of implementing measures that promote fair compensation.

By mandating that Federal agencies set pay based on merit, qualifications, and the requirements of the position rather than past compensation, the OPM aims to dismantle one of the barriers to achieving pay equity. This rule is a bold move towards creating a more equitable and inclusive Federal workforce, where pay disparities no longer shadow one's career.

For an in-depth understanding of the OPM's final rule and its impact on pay equity, visit the Federal Register: Advancing Pay Equity in Governmentwide Pay Systems.

Expect New Federal Sex Discrimination Laws & Regulations by the End of 2021

President Biden just established a Council to coordinate the Federal Government's efforts to advance gender equity and equality. 

In plain English, this counsel's mission is to combat sex discrimination by providing legislative and policy recommendations by September 24, 2021.

Stay tuned. Equality is happening now. 

Are you ready?

 

NYS Senate Report on Fair Housing - Changes Coming to RE Brokerage - Get Ready NOW

A 97 page report was just issued by the NYS Senate on persistent racial and ethnicity-related housing discrimination and this report is going to change the real estate brokerage industry in NYS forever. 

Are you ready? 

According to the report, housing discrimination has changed over the last hundred years from being overt to subvert. However, housing discrimination clearly still exists and something has to be done about it now. 

Would it surprise you to learn that in 2019 there were 28,880 reported complaints of housing discrimination in the USA? Again, twenty-eight thousand complaints!!!

Did you know that the precursor to the National Association of Realtors (NAR) required its members to discriminate as follows:

A Realtor should never be instrumental in introducing into a neighborhood a character of property or occupancy, members of any race or nationality or individuals whose presence will clearly be detrimental to property values in that neighborhood. 

While this overt discrimination is less prevalent today, the report explains that: 

Today, bad actors often use subtler forms of discrimination; they direct homebuyers of different apparent backgrounds toward different communities, impose more stringent financial requirements on people of color, and provide unequal services to clients based upon their race or ethnicity.

[S]ome real estate agents utilize subtle ways to discriminate, like racially coded guidance and disparate treatment in services offered.

In acknowledging that real estate brokers and agents are the gatekeepers for neighborhoods, the report makes the following categories of recommendations:

1. Develop a NYS Fair Housing Strategy
2. More Proactive Enforcement of Fair Housing Laws (i.e., testing, more funding, & data collection)
3. Licensing & Renewal Training Requirements (i.e., more training from better instructors for licensing & continuing education with a focus on implicit bias trainings)
4. Increased Penalties & Broader Accountability (i.e., $2K fines increased from $1K & managers responsible like brokers with increased experience requirements to qualify)
5. Standardized Broker Policies with Public (i.e., prospect identification, exclusive broker agreement requirements, & pre-approval for mortgages)
6. Internal Brokerage Policies (i.e., brokerages need updated policy manuals with fair housing statements & explanations of the consequences for violations)
7. State & Local Governments to Affirmatively Further Fair Housing (i.e., enforcement is everyone's responsibility) 
8. Brokers Must Open Offices in Communities of Color (i.e., 12 firms control 50% of listings, but only about 20% to 33% of the listings in minority communities)
9. More Diverse Brokerage Workforce (i.e., NAR's members are 80% white; need Diversity, Equity, & Inclusion initiatives to attract talent to the industry) 

The report also suggests, that brokers fund these recommendations by charging between $10 & $30 for license renewal to the 130,578 real estate brokerage licensees in NYS.

Are you ready yet? 

There are eleven new pieces of legislation supported in this report and because our state has a one-party controlled government, they are likely going to pass quickly.

Brokers, Salespersons, and other industry participants, like landlords, property managers, and attorneys need to get ahead of this now and make proactive changes to their practices today. The alternative is defending the next wave of enforcement initiatives. 

In reminding everyone of this salient fact, the report quoted Supreme Court Justice Thurgood Marshall in saying:

There is very little truth in the old refrain that one cannot legislate equality. Laws not only provide concrete benefits, they can even change the hearts of men some men, anyhow for good or evil.

It's time to change from being part of the problem to being part of the solution. Are you ready?

Systemic Employment Discrimination Enforcement Brought to you by the EEOC - Be Warned

The Equal Employment Opportunity Commission (EEOC) just launched a new website detailing how it pursues systemic discrimination cases against businesses throughout the US.

It's like a shot across the bow of your boat if you own or manage a business - they are coming for you if you don't start implementing Diversity, Equity, and Inclusion (DEI) initiatives now. 

When implementing your DEI initiatives focus on these 4 main categories, which EEOC targets for systemic employment discrimination enforcement:

1. Hiring / Promotion / Assignment / Referral
2. Policies / Practices
3. Lay-off / Reduction in Force / Discharge Policies 
4. ADA (disability) / GINA (genetic info) 

The EEOC defines systemic as "pattern or practice, policy and/or class cases where the discrimination has a broad impact on an industry, profession, company or geographic location.” 

Basically, it means that they are looking for more than just one plaintiff (think, class action, just a little different). 

The new EEOC website lists the top 10 systemic enforcements topics, which you should review immediately to avoid a charge from the EEOC:

1. Use of background checks
2. Denying women jobs in fields such as truck drivers, dockworkers, laborers
3. Refusal to hire African American, Hispanics and older workers for front of the house positions
4. Ending staffing agency use of referring applicants based on customer preferences
5. Widespread sexual harassment of teenagers in fast food chains
6. Racially hostile displays such as nooses and racist graffiti
7. Eliminating tap on the shoulder recruiting in favor of job posting
8. Challenging policies of issuing attendance points for medical related absences, without accounting for disabilities
9. Challenges of deportation made against employees complaining of discrimination
10. Challenges to abuse of vulnerable workers who were subject to years of confinement, abuse, deplorable conditions, and reduced pay following charges of discrimination

If you aren't concerned yet, be warned that in "2020, OGC resolved 33 systemic cases, recovering $69.9 million for approximately 25,000 individuals."

Do you have your policies, practices, and procedures in place to prevent EEOC from charging your company?