This article was featured in the June 2026 edition of the Utility Contractors Association of New England, Inc.’s Construction Outlook.
In May of 2025, the United States Department of Justice (“DOJ”) launched a new “Civil Rights Fraud Initiative.” The stated purpose of this initiative is to “utilize the False Claims Act to investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws.” At the time, the DOJ stated unequivocally: “[t]he days of using federal funds to further discrimination are over.” A year later, in May of 2026, the DOJ announced its first settlement under this new initiative.
The settlement related to allegations that a national company “violated the False Claims Act by failing to comply with anti-discrimination requirements in federal contracts . . . .” The DOJ noted that “[m]ost federal contracts contain provisions that require contractors to comply with anti-discrimination requirements as to employees and applicants for employment.” The DOJ added that contractors must certify compliance with anti-discrimination requirements. The DOJ’s press release stated that the company allegedly “failed to comply with these requirements and knowingly maintained practices that the United States contends were discriminatory employment practices.”
Among other things, the DOJ alleged that the company made employment decisions based on factors such as race, color, national origin, or sex, and used “a diversity modifier that tied bonus compensation to achieving demographic targets.” The company also allegedly “altered interview criteria based on race or sex” to “identify[] ‘diverse’ candidates for hiring, transfer, or promotion.” The DOJ also alleged that the company offered certain “training, partnerships, mentoring, leadership development programs, and educational opportunities only to certain employees, with eligibility, participation, access, or admission limited on the basis of race or sex.”
According to the DOJ: “[r]acial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI [i.e., diversity, equity, and inclusion].” The DOJ added that “[w]hen a company accepts federal funding while engaging in practices that sort, prefer, or disadvantage employees on the basis of race or sex, the company is stepping outside the conditions under which the government agreed to contract with them, and we will hold them accountable.” In this case, the company agreed to pay the United States more than $17 million to settle the alleged violations, comprised of more than $8 million in “restitution.”
The DOJ acknowledged that the company took “significant steps entitling it to credit for cooperating with the government in its investigation.” Among other things, the company undertook an independent investigation and “made early disclosures of facts” relevant to the government’s investigation. The company also undertook “voluntary remedial measures” which included “termination and/or modification of various programs and practices at issue.”
This case example did not involve a construction contracting company. However, contractors performing public construction contracts in Massachusetts must be sure to comply with applicable anti-discrimination laws. This can present a challenge to contractors, particularly when the requirements of state contracts may arguably conflict with federal requirements. For example, in December of 2024, the Governor of Massachusetts issued Executive Order No. 638 creating a “Diverse and Equitable Construction Workforce Participation Committee.” Among other things, the Executive Order includes a section titled “Promoting Equitable Workforce Participation in Construction Through Good Labor and Equity Practices.” This section requires that state offices and agencies “shall embed in their construction procurements requirements that promote job-quality and inclusion, including, for example, provisions that . . . encourage contractors to provide supportive services . . . to facilitate the participation of women and underrepresented groups in construction.”
Compliance with Massachusetts Executive Order No. 638 could raise questions as to whether a given contractor is also in compliance with applicable federal anti-discrimination laws. For example, assume a Massachusetts contractor is performing work under a state construction contract that contains provisions consistent with Massachusetts Executive Order No. 638. To comply with these provisions, the contractor implements programs or services “to facilitate the participation of women and underrepresented groups in construction.” The contractor certifies compliance with applicable contractual requirements in its monthly applications to the state for payment. At the same time, the contractor is performing work under another state contract that involves federal funding and therefore requires compliance with applicable federal including anti-discrimination laws. Can the contractor validly certify compliance with federal anti-discrimination laws if it has implemented programs and provides services consistent with Massachusetts Executive Order No. 638?
The answer will likely depend on the specific facts and circumstances, including the details of the programs and services that the contractor is offering. However, this scenario illustrates the potential tension between state and federal requirements. This situation can create a trap for the unwary for contractors that perform work on state projects as well as federal projects or state projects involving federal funding. Contractors must be vigilant to avoid practices that could give rise to potential liability under the state or federal False Claims Act. In the construction context, such liability is often premised on certifications made in connection with applications for payment.
Contractors should know that the government is taking enforcement of anti-discrimination laws seriously. Policies and programs that may not have been questioned just a few years ago may give rise to potential liability now. Contractors are encouraged to review their policies and programs for compliance with applicable anti-discrimination laws and update them as may be necessary. There is likely no one-size-fits-all approach. Because each project may be subject to differing requirements, contractors should review the specific terms of their contracts and understand project funding sources, in order to determine what adjustments ought to be made to their policies and programs, if any.
UCANE Construction Outlook, June 2026 | Legal Corner
This alert is for informational purposes only and does not constitute legal advice. The outcome of the pending litigation remains to be determined and is not guaranteed.
This information is provided for educational purposes only. It should not be construed or relied on as legal advice. It 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 or other legal counsel.
