Since our April 6 blog, Why the New DEI Executive Order Matters for Federal Contractors—and Signals Broader Risk for All US Employers, where we highlighted how the latest Executive Order creates new contractual obligations for federal contractors and subcontractors, with potentially far reaching implications, there have been several significant developments that collectively signal a meaningful escalation in scrutiny and enforcement risk for employers.

• DOJ’s first DEI-based False Claims Act resolution: On April 10, DOJ announced its first False Claims Act settlement premised on alleged DEI related misrepresentations by a large multinational employer. Although the company denied the allegations, it agreed to pay $17 million to resolve claims that it improperly considered protected characteristics in employment decisions, including through compensation incentives, interview practices, and access to certain programs. This first resolution under DOJ’s newly created Civil Rights Fraud Initiative demonstrates the federal government’s novel use of the FCA to penalize government contractors that it alleges fail to comply with required certification requirements and knowingly maintain discriminatory employment practices, and is likely an indicator of further inquiries, investigations, and lawsuits to come. Please see our colleagues’ client alert, FCA Settlement Highlights Federal Contractor DEI Risks, here.
• Potential EEOC enforcement focus on employee race and sex data: Recent public remarks by EEOC Chair Andrea Lucas point to heightened enforcement focus on certain DEI related practices. In an April 8 webinar hosted by the College of Labor and Employment Lawyers, Chair Lucas underscored the importance of handling race and sex data with the same level of segregation and confidentiality required for medical information under the ADA—specifically cautioning against placing such data in the hands of individuals involved in employment decision making.

Taken together, these developments signal increased scrutiny, expand potential theories of liability, and elevate the importance of being able to defend how DEI related programs are designed, implemented, documented, and communicated. Against this backdrop, now may be an appropriate time to consider whether a targeted, privileged reassessment of certain DEI-related practices could help mitigate risk and strengthen defensibility. Please reach out to your Baker McKenzie employment lawyer for more.