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.

NYS' Deceptive Acts and Practices Law Expanded and the AG will be Coming for Business

NYS' Deceptive Acts and Practices Law has been expanded to include "Unfair, Deceptive, or Abusive Acts and Practices" and it is now called the FAIR Act - "fostering affordability and integrity through reasonable (FAIR) business practices act" - with the changes being effective on February 17, 2026. The biggest change being that the law's, GBL 349, consumer-oriented requirement has been dropped as a requisite for the Attorney General to bring a claim, but not for private claims. Under the amended law, a business' act is now also violated for being "unfair" and "abusive." 

Unfair means that the act "causes or is likely to cause substantial injury which is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or to competition." 

Abusive means if: 

"(i) "it materially interferes with the ability of a person to understand a term or condition of a product or service; or

(ii) it takes unreasonable advantage of:

(A) a lack of understanding on the part of a person of the material risk, costs, or conditions of a product or service;

(B) the inability of a person to protect such person's interests in selecting or using a product or service; or

(C) the reasonable reliance by a person on a person engaging in the act or practice to act in the relying person's interests." 

Businesses hit with claims under this amended law, remember YOU HAVE FIVE BUSINESS DAYS after receipt of a certified mail from the attorney general to advise as to why an action or proceeding should not be instituted. 

If you receive a certified letter from the NY Attorney General under the FAIR Act, you have five business days. Call Lieb at Law immediately.

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Employment Discrimination Law Updated in NYS - Discriminatory Effect is Enough

On December 19, 2025, the New York State Human Rights Law was extended by S8338, in adding a new subdivision 5-a to Executive Law 296, which provides for proving discrimination in employment without discriminatory intent, just discriminatory effect. Under the law, a discriminatory effect means that a practice "actually or predictably results in a disparate impact on a group of persons, because of their membership in a class protected under this section."  

To prove a case under subdivision 5-a, known as disparate impact discrimination, there is now a burden shifting formula:

• First, the Complainant must prove that "a challenged practice caused or predictably will cause a discriminatory effect."
• Second, the Respondent must prove "that the challenged practice is job related for the position in question and consistent with business necessity." 
• Third, the Complaint must prove "that the business necessity could be served by another practice that has a less discriminatory effect."

If a workplace policy disproportionately harms a protected group, intent no longer matters. Talk to Lieb at Law about your exposure or your claim.

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Is McDonnell Douglas Dead in NYS' Human Rights Law?

On December 19, 2025, NYS enacted A4040A and S8338, which defines standards for disparate impact discrimination claims in housing and employment respectively, but each also slipped in an easter egg, at new Executive Law 296(5-a)(e), which dramatically changes how disparate treatment discrimination claims will be defended under state law. Specifically, the subsection provides that "[a] demonstration that a practice is supported by a legally sufficient justification, as defined in paragraph (c) of this subdivision, may not be used as a defense against a claim of intentional discrimination." To be certain, under McDonnell Douglas Burden Shifting, which has been utilized to prove intentional discrimination since 1973, the defense of a case was the submission of proof of a non-discriminatory reason for the challenged act. It appears that defense is now dead in NYS - this is a seismic change in NYS discrimination law with ripples unknown. 

If you’re bringing or defending a discrimination case in New York, the rules just changed. Speak with Lieb at Law before you rely on outdated defenses.

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Housing Discrimination Law Updated in NYS - Discriminatory Effect is Enough

On December 19, 2025, the New York State Human Rights Law was extended by A4040A, in adding a new subdivision 5-a to Executive Law 296, which provides for proving discrimination in housing without discriminatory intent, just discriminatory effect. Under the law, a discriminatory effect means that a practice "actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, creed, color, national origin, citizenship or immigration status, sexual orientation, gender identity or expression, military status, sex, age, disability, marital status, status as a victim of domestic violence, lawful source of income or familial."

To prove a case under subdivision 5-a, known as disparate impact discrimination, there is now a burden shifting formula:

• First, the Complainant must prove that "a challenged practice caused or predictably will cause a discriminatory effect."
• Second, the Respondent must prove "that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the respondent."
• Third, the Complaint must prove "that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect."

If a housing policy shuts people out without saying it outright, that can now be illegal. Talk to a fair housing litigator at Lieb at Law, P.C. 

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Training Repayment Just Became Illegal in New York - Clawbacks Limited in NYS by the Trapped at Work Act

New York State has enacted the Trapped at Work Act by A584C, effective on December 19, 2025. This law expressly precludes employers from recovering on clawbacks for reimbursement of the cost of training and the law extends to protect not just employees, but also independent contractors, interns and many other workers. To be certain, while the law expressly prohibits and renders void any employee promissory note that is required as a condition of employment, it also excludes from its auspices, while expressly permitting, agreements under which a worker has to repay "sums advanced to such worker by the employer" that were not relevant to training. That said, the law provides workers with the ability to recover attorneys' fees if they prevail by rendering a promissory note sought to be enforced by the employer through suit, void. Additionally, the government can seek $1K to $5K per violation fines for violations. 

Facing a training clawback or promissory note? Talk to a New York litigator at Lieb at Law, P.C. before you pay a dime.

New NY Foreclosure Law Forces Lenders to Apply Your Payments

A very important foreclosure law bill, Assembly Bill A2739, which we discussed at How New York Assembly Bill A2739 Could Give Homeowners a Leg Up in Foreclosure Defense was signed and is effective as of December 12, 2025.

Now, homeowners in default a real edge against foreclosure. The law requires mortgage lenders to accept and immediately apply payments made in reliance on a payoff statement – no more excuses, no more “we’ll hold it in suspense.” As long as you pay where and how your lender says to, your money counts toward your loan balance.

If you’re facing foreclosure and want to make sure every payment counts, contact Lieb at Law, P.C. – because now, your money can finally work for you.

Law on Access to Adjoining Property for Improvements or Repairs Updated in NYS

Starting on December 5, 2025, RPAPL 881 offers a new framework under S3799C for a property owner seeking a court ordered license in a special proceeding to access their neighbor's property in order to make improvements or repairs. As the bill jacket explains, sometimes "owners and their neighbors cannot work out a solution without going to court" and the prior law, from 1968, is now being updated to be more predictable. The framework makes it easier to name lessees into the proceeding as their rights will be adversely impacted and they are a necessary party to such lawsuits. It also clarifies that a licensee can be obtained for a preconstruction survey to document the existing condition of the property, to address vibration, cracks, optical monitoring devices, protective coverings for the property, scaffolding, bracing, building supports, flashing, and construction staging necessary to complete work, amongst others. The new law also requires the licensee to maintain commercial general liability insurance for damages to persons or property with the adjoining owner as an additional insured. Finally, to the good stuff, "[t]he licensee shall be required to reasonably compensate the adjoining owner for the loss of use and enjoyment of the adjoining premises including diminution in value." plus, "to reimburse the adjoining owner for reasonable fees incurred in connection with the review of relevant documents for the installation, maintenance, inspection, repair, replacement or removal of devices, structures, materials or equipment on the adjoining property."

If you’re facing a construction-access fight with a neighbor, or you need to secure compensation for loss of use, we handle RPAPL 881 litigation. Contact Lieb at Law to protect your rights and your property.

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How New York Assembly Bill A2739 Could Give Homeowners a Leg Up in Foreclosure Defense

As of December 8, 2025, Assembly Bill A2739 has cleared the Senate and Assembly and is now sitting on Governor Kathy Hochul’s desk. If she signs it, this little-known bill could give homeowners in default a real edge against foreclosure. The law would require mortgage lenders to accept and immediately apply payments made in reliance on a payoff statement – no more excuses, no more “we’ll hold it in suspense.” As long as you pay where and how your lender says to, your money counts toward your loan balance. That’s a big deal because right now, lenders can refuse partial payments or take them without actually reducing what you owe.

Here’s the exciting part: combine this law with the state’s mandatory settlement conferences, and homeowners suddenly have a legally backed, game-changing strategy to slow down foreclosure. You can make installment payments to chip away at your default and potentially save your home – all without needing a full payoff, a modification, or a short sale. It’s a way to fight back while saving time, money, and headaches.

If the bill becomes law, homeowners should be prepared for possible delays or added complexity when requesting payoff statements and making payments. If you’re facing foreclosure and want to make sure every payment counts, contact Lieb at Law, P.C. – because now, your money can finally work for you.

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Brokerages Are Now on the Hook for Agent Telemarketing: What Hollis v. eXp Means for You

Every real estate brokerage should be watching Hollis v. eXp Realty closely, where the court denied eXp Realty’s motion to dismiss, allowing Plaintiff's claims of both direct and vicarious liability to move forward. In this case, eXp is being held responsible for both their own unsolicited telemarketing (like, cold calling and cold texts) and more importantly, the unsolicited telemarketing undertaken by their agents/associated licensees.

The case involves allegations on unsolicited calls made in violation of the Telephone Consumer Protection Act ("TCPA"), which comes with steep penalties of $500 to $1,500 per unlawful call or text. Historically, many real estate brokerages believed that they were insulated from liability because agents/associated licensees were treated as independent contractors so they were not responsible under vicarious liability. However, in the Court's latest ruling, a clear shift occurred where brokerages were told that they can be held accountable when agents/associated licensees, who they supervise, violate the TCPA.

After the denial of their motion-to-dismiss, eXp Realty and the agent defendant filed their answers, and the case is now moving through the discovery process. 

Every brokerage should treat this case as a wake-up call. Now is the time to act. Implement or update TCPA compliance policies, train agents/associated licensees on proper lead-generation practices, prohibit unsolicited autodialed calls and texts, audit marketing systems, CRMs, and third-party vendors, and document compliance and supervision efforts. 

Failing to supervise agents/associated licensees marketing activities is no longer an option, brokerages can be on the hook for agent misconduct.

If your brokerage needs a TCPA compliance audit or guidance on agent supervision, contact Lieb at Law, P.C.

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