Link to “Beware the Jabberwock, my son! The jaws that bite! The claws that catch!” “Beware the Jabberwock, my son! The jaws that bite! The claws that catch!”
– Lewis Carroll: “Jabberwocky,” Through the Looking-Glass, and What Alice Found There (1872)
There is a growing sense of confusion and unease among many federal contractors and grant recipients in these early days of the second Trump administration. In a time when some agencies face dislocation and downsizing (or, as with USAID, effective disbandment), contractors may feel like Alice stepping through the Looking Glass into a world strangely inverted from the one they knew. This shift is especially evident in the administration’s rejection of seemingly all diversity, equity, and inclusion (DEI) policies—long used to prevent discrimination, comply with civil rights laws, and foster inclusive environments in the American workforce.
Now contractors face a new and greater legal risk: the False Claims Act (FCA). On May 19, Deputy Attorney General Todd Blanche expressly unleashed the Jabberwock in a memorandum (Blanche Memorandum) directing the Department of Justice’s (DOJ’s) Civil Division Fraud Section and Civil Rights Division to launch the Civil Rights Fraud Initiative. This initiative will investigate and pursue FCA allegations “against any recipient of federal funds that knowingly violates federal civil rights laws.”
This move places federal contractors on notice that failure to comply with the administration’s interpretation of antidiscrimination laws not only risks loss of contracts but may also trigger FCA enforcement and the attendant “parade of horribles” flowing therefrom—including treble damages, penalties for false certifications of compliance, and perhaps even the initiation of suspension/debarment proceedings. Few jaws bite harder.
Down the Rabbit Hole: A New Reality for Federal Contractors
For nearly 60 years, Executive Order 11246, signed by President Lyndon Johnson in the wake of the Civil Rights Act of 1964, prohibited federal contractors from engaging in discriminatory practices and mandated affirmative action. The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) enforced this through regulatory audits aimed at promoting workplace diversity.
However, on January 21, 2025, President Donald Trump issued Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which, among other things:
- Revoked Johnson’s Executive Order 11246
- Directed federal agencies and government contractors to end “illegal preferences and discrimination” and “illegal DEI”
- Stated that many DEI practices are “dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called [DEI]…that can violate the civil-rights laws of this Nation.”
It also linked DEI compliance directly to the materiality element under the FCA (31 U.S.C. § 3729 (a)(1)(B)), implying that noncompliance could be considered fraud against the government. This is presumably intended to support future arguments that the government considers this issue important (material) to payment and puts contractors on notice of the same.
The Red Queen’s Rules: Redefining Discrimination
The new paradigm of discrimination in the workplace emphasizes that DEI programs should not result in discrimination against any group, including those not traditionally underrepresented. The Equal Employment Opportunity Commission and DOJ are issuing new guidance that promises to clarify that DEI policies are unlawful if they are motivated by protected characteristics, such as race or sex, and result in adverse employment actions. Thus, the administration’s view is that DEI programs may themselves be discriminatory—particularly when they implement or otherwise involve training relating to:
- Quotas
- Workforce balancing
- Preferential treatment based on race or sex
Under this new paradigm, even programs intended to help underrepresented groups may be viewed as unlawful if they result in adverse employment actions and/or focus on protected characteristics. The Blanche Memorandum raises the stakes for federal contractors, coupling the Civil Rights Division and the Civil Fraud Section in an effort to utilize FCA enforcement to destroy DEI initiatives and, more generally, to police the conduct of any federal fund recipient that the administration deems to be in violation of civil rights laws.
The Jabberwock Lurks: FCA Risks and Whistleblower Traps
As discussed in a previous posting, failure to comply with these laws is compounded by the added risk of exposure to costly investigations and claims, whether they are initiated directly by the DOJ or by relator “whistleblowers.” The DOJ’s use of the FCA as an anti-DEI enforcement tool is likely to fuel a wave of whistleblowers seeking up to 30 percent of any recovery by targeting federal fund recipients. To be sure, the Blanche Memorandum “strongly encourages” whistleblowers to bring FCA lawsuits to protect the public interest and share in any monetary recovery. These cases are typically long and costly, with investigations often lasting months or even years before reaching court or settlement. Last year alone, the government recovered more than $2.9 billion under the FCA. We expect that number to increase this year.
Tidying Up the Tea Table: Compliance Hygiene in Wonderland
Managing this shifting landscape is critical to survival. Federal contractors should immediately review and revise DEI-related policies to avoid the appearance of any preferential treatment based on protected characteristics. Key steps include:
- Auditing or reviewing existing DEI programs, especially those designed with past OFCCP audits in mind
- Updating language on websites and internal materials to reflect a focus on general nondiscrimination and merit rather than affirmative action
- Eliminating quotas or preferences in scholarships, hiring practices, or supplier selection
- Maintaining compliance with still-active obligations under Section 503 of the Rehabilitation Act and the Vietnam Era Veterans’ Readjustment Assistance Act, which require affirmative action for individuals with disabilities and protected veterans
These legal shifts and the DOJ’s aggressive posture may be vulnerable to expected court challenges, but this is the current enforcement climate unless these initiatives are enjoined or otherwise declared invalid. Though the risks are significant, they can be managed with careful planning and a clear understanding of the evolving legal standards. In times of uncertainty, a well-designed compliance strategy can offer both protection and alignment with organizational values—your own vorpal sword against regulatory uncertainty.