DOJ Targets Corporate Diversity Programs Via the False Claims Act

The U.S. Department of Justice (DOJ) issued policy memoranda in May and July of 2025 announcing a stated intent to investigate entities that accept federal dollars via contracts and grants while engaging in “race, ethnicity, or national-origin based preferences” in employment practices. These policies evidence the DOJ’s expanded use of the False Claims Act (FCA) to investigate and, in some cases, take action against companies whose DEI efforts are perceived to violate federal law.

These policies are now beginning to take shape, as the DOJ has recently initiated multiple investigations into the DEI practices of several major companies that contract with or receive funding from the federal government.

The False Claims Act: An Overview and DOJ’s Expanded Use

The False Claims Act is one of the federal government’s primary tools for combating fraud against the United States. The law imposes liability on individuals and companies who defraud governmental programs, and defendants found liable under the FCA may be ordered to pay three times the actual amount of the government loss (i.e., treble damages).  Although FCA matters often arise from claims brought by whistleblowers (usually employees or former employees), the DOJ itself can institute FCA investigations and lawsuits, and it can also intervene in matters brought by private parties.

While the FCA has traditionally been used to target fraud in industries such as healthcare, defense contracting, and government procurement, the DOJ has recently broadened its focus to include corporate diversity programs as potential targets for FCA enforcement. This shift is driven by governmental claims that certain DEI initiatives run afoul of federal anti-discrimination laws, such as Title VII of the Civil Rights Act, or may result in misrepresentations to the government regarding compliance with these laws. The DOJ maintains that if a company certifies compliance with federal equal employment opportunity (EEO) requirements while simultaneously implementing diversity programs that allegedly disadvantage certain groups, such actions could constitute a “false claim” and thus violate the law.

Early cases within this new FCA framework often begin with whistleblower complaints from employees who allege that their companies’ diversity programs result in “reverse discrimination” or otherwise violate federal law. At the close of 2025, DOJ had already begun investigating government contractors’ DEI practices in a wide array of industries, including automotive, defense, pharmaceuticals, technology, telecommunications, and utilities.

Corporate Responses and Legal Uncertainty

The DOJ’s increased scrutiny has prompted many companies to reevaluate their diversity initiatives and compliance policies. Corporate legal departments are now more frequently consulting with outside counsel to ensure that their DEI programs do not inadvertently expose them to FCA liability. Companies have been pressured to re-evaluate their workplace policies, and there is a growing emphasis on documenting the legality of such programs.

Risk Mitigation and Compliance Best Practices

The DOJ’s use of the FCA to target diversity initiatives marks a significant development in the intersection of civil rights and corporate compliance. Companies that do business with the federal government—or that are subject to federal EEO laws—must now navigate a complex landscape in which well-intentioned DEI initiatives could become the basis for costly investigations and litigation. In the short term, businesses can reduce FCA exposure by taking the following precautions:

• Review internal policies and procedures, particularly related to hiring and employment practices.
• Ensure accurate reporting to federal agencies, and document compliance reviews in order to establish a good faith basis for DEI-related certifications to the federal government.
• Review state-level anti-discrimination laws that may complicate compliance with federal law.
• Seek legal guidance to mitigate potential risks.

Bottom Line

The recent efforts by the DOJ to apply the FCA to companies’ diversity hiring and promotion initiatives represent a notable shift in federal enforcement priorities. The evolving legal landscape presents both challenges and opportunities for organizations seeking to balance the goals of diversity and compliance. Going forward, businesses will need to maintain vigilance, transparency, and legal rigor in implementing DEI programs to avoid running afoul of federal law and drawing government scrutiny.