This article was featured in the June 2025 edition of the Utility Contractors Association of New England, Inc.’s Construction Outlook.
Since taking office in January, the President’s Administration has made clear that it is committed to eliminating “illegal” diversity, equity, and inclusion (“DEI”) policies and practices implemented by recipients of federal funds. The federal government has since signaled that those who maintain unlawful/illegal DEI policies but nevertheless certify compliance with applicable laws may face potential legal exposure. The Administration’s policies have prompted a host of questions for contractors working in the construction industry. What is an “illegal” DEI program? Must federal contractors eliminate all DEI policies and programs in order to work on federally funded projects? What if the contractor is working on a federally-assisted state project that includes state-law workforce equity requirements or is otherwise subject to state policies that conflict with the Administration’s policies? Must contractors seek and obtain modifications of all existing government contracts?
The answers to these questions are typically fact-intensive, require an analysis of the relevant facts and circumstances, and will vary from case to case. The legal landscape remains in flux, perhaps with more questions than answers at this point. This has led some contractors to question the real risks they face. If they continue on business-as-usual, what are the realistic chances that the government targets them for enforcement? In light of a May 2025 United States Department of Justice Memorandum (the “DOJ Memo”), contractors should expect that the federal government will, in fact, use the False Claims Act to go after those who falsely certify compliance with applicable laws, including civil rights laws.
In the DOJ Memo, the Deputy Attorney General of the United States announced the DOJ’s “Civil Rights Fraud Initiative” (the “Initiative”). Under this Initiative, the DOJ has made clear that it will use “vigorous enforcement” of the federal False Claims Act as the DOJ’s “primary weapon against government fraud, waste, and abuse.” According to the DOJ Memo, “many corporations and schools continue to adhere to racist policies and preferences – albeit camouflaged with cosmetic changes that disguise their discriminatory nature.” The DOJ made clear that the “federal government should not subsidize unlawful discrimination.”
In the DOJ’s view, those that falsely certify compliance – including contractors – “defraud the United States.” The DOJ is committed to “enforcing federal civil rights laws and ensuring equal protection under the law” and will use the False Claims Act to do so.
That is, the Initiative “will 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.” (Emphasis added). The DOJ will “aggressively pursue this work together” with a “team of attorneys.” The DOJ will also “engage with the Criminal Division” in this effort.
As an example of conduct potentially in violation of the False Claims Act, the DOJ Memo specifically referenced schools that receive federal funding, but “encourage[] antisemitism, refuse[] to protect Jewish students, allow[] men to intrude into women’s bathrooms, or require[] women to compete against men in athletic competitions.”
Notably for contractors, the DOJ Memo also specifically addressed federal contractors that provide certifications to the government:
“The False Claims Act is also implicated whenever federal-funding recipients or contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin.”
Thus, the DOJ Memo further confirms that contractors on projects involving federal funds face the risk of potential False Claims Act exposure if they certify compliance with applicable laws while knowingly violating civil rights laws (such as by implementing an “illegal” DEI program).
To assist the DOJ in this effort, the DOJ Memo makes clear that the DOJ “strongly encourages” whistleblower lawsuits. In this regard, the DOJ “recognizes that it alone cannot identify every instance of civil rights fraud” and that, as a result, Congress has “authorized private parties to protect the public interest by filing lawsuits and litigating claims under the False Claims Act – and, if successful, sharing in any monetary recovery.” Therefore, contractors hoping to escape the eye of the government will continue to face the risk of a whistleblower action, which incentivizes private enforcement of the False Claims Act.
As a result, the time is now for contractors that perform any work on projects with federal funding to review their policies, programs, and procedures for compliance with applicable laws. Contractors should also examine their existing contracts to determine whether and to what extent steps need to be taken to bring contractors within compliance. In this regard, several federal agencies have released guidance on how they will implement the Administration’s policies, including with respect to current contracts and future procurements. Contractors should engage competent counsel in this process, as there are numerous factors to be considered. Ultimately, this review requires a deep understanding of a contractor’s business as well as applicable legal requirements. Given the risks of significant criminal and civil exposure – including potential treble damages and penalties – contractors that are out of compliance should not assume that they will fly under the radar and avoid a government investigation or a whistleblower action.
