DOJ Outlines FCA Enforcement for Contractor Violations of Antidiscrimination Laws

Federal contractors and grant recipients are being asked to sign updated certifications on compliance with antidiscrimination laws in light of recent remarks by senior U.S. Department of Justice (DOJ) officials regarding use of the False Claims Act (FCA) for antidiscrimination efforts in federal contracting. The DOJ is actively investigating contractors for antidiscrimination law violations, including certain diversity, equity and inclusion (DEI) programs that encourage preferential treatment based on protected characteristics.

FCA Liability for Violations of Antidiscrimination Laws

Senior DOJ officials have now made clear their view that violations of federal antidiscrimination laws can expose government contractors to FCA liability.

Recent DOJ remarks on this subject should capture every contractor's attention. Brenna Jenny, Deputy Assistant Attorney General (AG) for the DOJ Civil Division's Commercial Litigation Branch, spoke at the Federal Bar Association's (FBA) 2026 Qui Tam Conference, focusing her comments on Executive Order (EO) 14173, "Ending Illegal Discrimination and Restoring Merit-Based Opportunity." The order initiates the Trump Administration's efforts to rein in certain DEI practices.

Jenny set out the government's enforcement agenda: DOJ is actively investigating contractors and grant recipients under the FCA for potential violations of federal antidiscrimination laws, and DOJ will use the FCA to enforce violations found. DOJ views compliance with those laws as a material term of government contracts and critical consideration when deciding with whom the government should partner.

Jenny also addressed the distinction between illegal discrimination and proper company conduct. She cautioned that promotion of diversity is not a "talisman" that shields companies from unlawful conduct and, likewise, companies may engage in discrimination whether or not they label it "DEI." She also confirmed, without detail, that companies may operate a DEI program without it being discriminatory.

Examples of Improper Contractor Behavior Under DOJ Scrutiny

Jenny's remarks, combined with U.S. AG Pam Bondi's July 2025 DEI memorandum, outline some specific practices that may expose contractors to FCA liability. Contractors should also review the U.S. Equal Employment Opportunity Commission's (EEOC) technical assistance issued in conjunction with the July 2025 memo. Notably, though these are key examples of conduct DOJ flagged at the conference, they are not brightline rules. Contractors should instead treat them as indicators of DOJ's current enforcement priorities and assess the similarity (or not) of their own policies and practices.

Programs That Pressure Race- or Sex-Based Decision-Making. Jenny described three types of "pressure" that, in DOJ's view, are designed to steer employees toward making decisions based on race or sex, not merit or performance:

• Creating and Tracking Goals for Hiring or Staffing Programs Based on Protected Characteristics. Jenny described dashboards that tracked hiring and staffing demographics showing "green" when demographic targets are met and "red" when they are not. She said this is a system that shifts focus away from the merits of individual candidates and toward achieving numerical outcomes based on protected characteristics. Jenny explained that these metrics bore no connection to remedying identified discrimination within the Office of Federal Contract Compliance Programs (OFCCP) framework.
• Compensation Tied to Diversity Metrics. Jenny explained that the most troubling practice DOJ has encountered to date is tying financial incentives to demographic characteristics and outcomes. She recounted a recent relator interview in which a supervisor reported being required to award bonuses to team members solely because of their race, while his own compensation depended on meeting DEI-related metrics.

Such firsthand accounts from employees provide powerful evidence of scienter, the knowledge requirement under the FCA. DOJ can more easily prove an FCA case predicated on discrimination when it has credible evidence that supervisors were explicitly directed to make compensation decisions based on race, sex or other protected characteristics.

• Mandatory Personal DEI Goals Affecting Performance Reviews. Jenny also reported that DOJ is examining company policies that require individual employees to develop personal goals supporting DEI initiatives – particularly when those goals are considered during performance reviews and affect compensation. Ms. Jenny specifically identified this practice as one that creates problematic pressure, transforming what might be framed as voluntary participation into a system where employees face adverse consequences for failing to advance company demographic objectives.

Executive Training Programs with Restricted Participation. DOJ also finds problematic executive training and mentoring programs restricted based on race or sex. Though companies may characterize such programs as equivalent to those offered to all employees, Jenny noted they are often marketed internally as offering special opportunities to network with leadership, gain visibility with decision-makers and receive mentorship that is understood to enhance advancement prospects. When access to these career‑enhancing opportunities is conditioned on protected characteristics, employees who are excluded may effectively be denied the same pathway to promotion as their peers. The nexus between participation and promotion, in particular, can raise questions about legality and, in DOJ's view, may supply evidence that decisions about advancement are being made on the basis of race or sex rather than neutral, performance‑based criteria.

Diverse-Slate Requirements and Two-Tiered Hiring Standards. DOJ also highlighted concerns about diverse-slate requirements and preferential hiring practices. Jenny shared that DOJ is focused on situations where employers announce neutral experience or qualification standards for a role but in practice relax or waive those standards only for candidates from certain protected classes. For example, companies may treat internship, apprenticeship or leadership development positions as gateways to long‑term employment or promotion but then limit access or use different thresholds for acceptance based on race, sex or other protected characteristics.

The FCA Framework: Why These Practices Create Liability

DOJ's enforcement theory rests on a straightforward premise: Contractors and grant recipients who engage in discriminatory conduct while certifying compliance with federal antidiscrimination laws have made false certifications and, therefore, submitted false claims to the government.

Those laws include Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, Section 503 of the Rehabilitation Act of 1973, Equal Pay Act and Age Discrimination in Employment Act, and Pregnant Workers Fairness Act. Those laws apply regardless of any Federal Acquisition Regulation (FAR) clauses expressly incorporating them into a contract or grant. Indeed, those laws apply even though, consistent with EO 14173, the U.S. Department of War and General Services Administration (GSA) implemented class deviations removing FAR 52.222-25, Equal Opportunity, and FAR 52.222-26, Affirmative Action, from contracts and solicitations.

The financial stakes are substantial. The FCA's treble-damages multiplier and per-claim penalties apply to these cases, and Jenny indicated DOJ will seek penalties in addition to damages. As a result, even conduct that may appear limited in scope at the company level can translate into significant exposure once multiplied and aggregated across multiple claims, invoices or task orders submitted over time.

Damages calculations will vary based on the scope and extent of the alleged violations, as well as how DOJ chooses to frame its theory of harm. Potential approaches include treating the matter as fraud in the inducement (arguing that the contract or modification would not have been awarded but for the alleged misrepresentations), seeking recovery of the costs of allegedly discriminatory programs that were passed through to the government or employing a hybrid model that combines elements of both. In determining the appropriate recovery, DOJ may also take into account mitigating factors, such as cooperation with the federal government's investigation, voluntary self-disclosure, the duration of the conduct, involvement of senior leadership and implementation of remediation measures.

Defending FCA Enforcement Against DEI Practices

Some commentators have suggested that DEI-based FCA actions would be difficult to enforce, citing lack of materiality in particular. The implied certification theory, which DOJ is likely to use in DEI cases, applies where a defendant submits a claim for payment that makes specific representations about goods or services provided but knowingly fails to disclose noncompliance with a statutory, regulatory or contractual requirement that the defendant knows is material to the government's payment decision.

At the FBA's 2026 Qui Tam Conference, Jenny pushed back forcefully against suggestions that DOJ would struggle to prove materiality. In doing so, she explained that federal contracting, in DOJ's view, is not simply about procuring goods or services – it involves choosing a partner to perform public work with public funds, and antidiscrimination compliance reflects a material policy decision about how taxpayer funds can and should be used.

Jenny also indicated the FCA elements of falsity and scienter could be met through evidence that contractor employees are directed to hire a specific number of people of a particular race or sex, through circumstantial evidence such as meeting notes reflecting statements such as "we need more women in these roles" or directives to prioritize people of a specific race for a project, followed by hiring patterns consistent with those directives. In DOJ's view, such documents and resulting patterns can support an inference that decisions were, in fact, being made on the basis of protected characteristics rather than neutral, performance‑based criteria.

With respect to mentorship and similar career‑development programs, Jenny indicated DOJ may compare what companies disclosed to OFCCP with how diversity initiatives actually operated in practice, looking for discrepancies between stated policies and on‑the‑ground implementation that could evidence knowing violations. Significant mismatches – particularly where they suggest intentional steering of opportunities based on race or sex – may, in DOJ's view, provide evidence of falsity in certifications and knowing noncompliance with federal antidiscrimination requirements.

What Government Contractors and Grantees Should Do Now

Federal agencies are starting to amend existing contracts and grants to require updated certifications regarding antidiscrimination in accordance with EO 14173's direction 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."

Additionally, the GSA on February 18, 2026, proposed revisions to the certifications federal financial assistance applicants and recipients must make as part of their System for Award Management registration, adding new attestations concerning DEI initiatives, immigration and national security and clarifying how those certifications apply when an injunction is in effect. Public comments on the proposal are due by March 30, 2026.

Contractors and grantees should review the requested certification language carefully to ensure the company can comply. Holland & Knight has observed variation in the certification language, and the wording can make a difference to potential exposure and the extent of any adjustments needed to policies and practices. A prudent path forward involves careful review of existing programs in light of the July 2025 guidance and recent DOJ statements, including those by Jenny. Given DOJ's stated enforcement priorities, government contractors and grantees should:

• review existing programs for any that involve demographic goals tied to compensation, preferential treatment in hiring or promotions, or exclusive training opportunities based on protected characteristics
• examine internal communications, performance metrics and training materials for content that could be characterized as directing, encouraging or pressuring employment decisions based on or influenced by protected characteristics
• compare OFCCP submissions, EEOC EEO-1 submissions and internal data to identify discrepancies between on-paper policies and people's actual behavior
• ensure communications on the ground align with stated company policies
• consider consulting with counsel experienced in federal contracting, FCA defense and federal employment law; given DOJ's emphasis on cooperation and self-disclosure as mitigating factors, contractors who identify potential violations should consult with counsel about voluntary disclosure

This is a rapidly evolving field, so organizations need to stay up to date. Contractors and grantees with questions about how these developments may affect their existing programs or upcoming certifications should feel free to contact the authors of this alert to discuss tailored risk assessments and proactive next steps.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.