Link to Key Takeaways Key Takeaways
- DOJ continues to use the False Claims Act to pursue government contractors over allegedly discriminatory DEI practices.
- The Deloitte allegations largely involve longstanding anti-discrimination requirements, demonstrating that contractors may face exposure even apart from the Trump administration’s newer DEI-related executive orders and contracting requirements.
- The parallel Indiana and Florida settlements highlight that contractors may face state false claims liability when contractual certifications incorporate state anti-discrimination requirements, creating potential exposure beyond federal contracts.
The U.S. Department of Justice (DOJ) announced on August 25 that Deloitte has agreed to pay $21.5 million to resolve allegations that certain diversity, equity, and inclusion (DEI) practices discriminated against employees and applicants based on race or sex and caused the company to submit false claims for payment under federal contracts. The settlement is the latest enforcement action under DOJ’s Civil Rights Fraud Initiative and follows an April settlement in which IBM agreed to pay approximately $17 million to resolve similar allegations.
The Deloitte settlement is notable for at least two reasons. First, although the Trump administration has imposed new restrictions on DEI practices through executive orders and federal contracting requirements, the government’s allegations against Deloitte largely rely on longstanding anti-discrimination obligations that predate those new restrictions. Second, Deloitte separately agreed to pay Indiana and Florida $1.2 million each to resolve claims under each state’s false claims laws, highlighting that contractors may face exposure under state law in addition to the federal False Claims Act (FCA).
Link to DOJ’s Allegations Against Deloitte DOJ’s Allegations Against Deloitte
According to the federal settlement agreement, Deloitte was required as a federal contractor to comply with anti-discrimination requirements under Title VII of the Civil Rights Act of 1964, as incorporated into its federal contracts, and the Federal Acquisition Regulation, including FAR 52.222-26. The government alleged that Deloitte certified compliance with those requirements while maintaining employment practices that considered race or sex and allocating costs associated with those practices to federal contracts.
The government alleged that, from 2017 through the settlement date, Deloitte took race or sex into account in hiring, promotion, and staffing decisions as it sought to meet internal workforce demographic goals. Deloitte business units allegedly received monthly reports measuring progress toward those goals, and approximately 150 senior partners, principals, and managing directors could have had their compensation affected based in part on whether their business units met demographic targets. DOJ also alleged that race and sex were considered during promotion decisions and that Deloitte identified employees by race and sex when determining which employees should be staffed on projects, including federal contracts.
DOJ further alleged that Deloitte restricted access to certain training, mentoring, sponsorship, and leadership development programs based on race or sex. For example, eligibility for Deloitte’s Springboard and Compass programs allegedly depended on those characteristics, while participants received networking and sponsorship opportunities intended to improve their prospects for promotions, leadership roles, and other career opportunities based on the participants’ meeting a particular demographic profile.
Deloitte agreed to pay $21.5 million, of which approximately $10 million constitutes restitution. The American Alliance for Equal Rights, which brought the underlying qui tam action, will receive $4.3 million as its relator’s share. Deloitte denied that it engaged in the alleged conduct, and the settlement does not constitute an admission of liability.
Link to Does Title VII Alone Create DEI False Claims Act Risk? Does Title VII Alone Create DEI False Claims Act Risk?
The settlement illustrates an important distinction for federal contractors assessing the administration’s recent DEI actions. The government’s theory does not depend solely on President Trump’s newer executive orders governing DEI.
Title VII has long prohibited employment discrimination because of race, color, religion, sex, or national origin. Current Equal Employment Opportunity Commission guidance similarly explains that a DEI program may violate Title VII when an employer takes an employment action based in whole or in part on an employee’s or applicant’s race, sex, or another protected characteristic. That can include decisions involving hiring, promotion, compensation, work assignments, training, mentoring, and sponsorship opportunities.
Accordingly, the Deloitte allegations go beyond merely tracking workforce demographics or establishing general diversity objectives. The government alleged that protected characteristics were actually considered when allocating employment opportunities and that access to particular career development programs was restricted based on race or sex. Those allegations implicate anti-discrimination requirements that existed well before the administration’s more recent contracting initiatives.
Link to Executive Order 14398 and FAR 52.222-90 Requirements Executive Order 14398 and FAR 52.222-90 Requirements
At the same time, the administration has added another layer of risk for federal contractors. Executive Order 14398, issued in March, directs agencies to include a contract clause prohibiting “racially discriminatory DEI activities” and expressly provides that compliance with the clause is material to government payment decisions for FCA purposes. The Federal Acquisition Regulatory (FAR) Council subsequently created FAR 52.222-90, Addressing DEI Discrimination by Federal Contractors, to implement the order through agency deviations.
Link to Indiana and Florida Settlements Highlight State False Claims Act Exposure Indiana and Florida Settlements Highlight State False Claims Act Exposure
Perhaps more significant for contractors are the parallel settlements with Indiana and Florida. Deloitte separately agreed to pay Indiana $1.2 million and Florida $1.2 million to resolve allegations arising from its work as a state contractor. Together with the federal settlement, the three resolutions require Deloitte to pay approximately $23.9 million and demonstrate that DEI-related FCA exposure may extend beyond federal contracting.
Between 2019 and 2026, various Indiana agencies entered into contracts with Deloitte entities. Those contracts contained non-discrimination provisions expressly tied to the Indiana Civil Rights Law and required Deloitte not to discriminate against employees or applicants based on race, sex, and other protected characteristics. The provisions also stated that a violation could constitute a material breach of contract.
Indiana alleged that Deloitte certified compliance with those contractual requirements while maintaining many of the same employment practices at issue in the federal settlement. The state alleged that Deloitte considered race or sex when making hiring, promotion, and staffing decisions; tracked progress toward demographic goals across business units; and restricted participation in certain mentoring, sponsorship, and leadership programs based on race and sex.
Florida pursued a similar theory. According to the Florida Attorney General’s Office, Deloitte allegedly considered race or sex in hiring, promotion, and staffing decisions while performing state contracts and certifying that it provided equal employment opportunities without regard to race or sex. Florida also alleged that Deloitte tracked demographic workforce goals; evaluated senior leaders based in part on progress toward those goals; and restricted certain training, mentoring, and leadership opportunities based on race or sex.
Both states pursued claims arising from the alleged conduct under their respective false claims laws. Indiana’s False Claims and Whistleblower Protection Act imposes liability for knowingly presenting a false claim to the state or using a false statement to obtain payment of a false claim. Similarly, the Florida False Claims Act imposes liability for knowingly presenting a false or fraudulent claim for payment or making or using a false record or statement material to such a claim. The American Alliance for Equal Rights, which brought the underlying qui tam action, asserted claims on behalf of the federal government as well as Florida and Indiana.
Link to False Claims Act Exposure Matters for Multistate Contractors False Claims Act Exposure Matters for Multistate Contractors
The state resolutions are particularly noteworthy because they demonstrate that DEI-related false claims exposure is not limited to federal contracts or federal law. Companies performing state government contracts may have separate certifications concerning compliance with state anti-discrimination requirements, and those certifications may provide an independent basis for liability under a state false claims statute. For contractors operating across multiple jurisdictions, that means a single employment practice potentially could create overlapping federal and state enforcement risks.
That possibility is consistent with DOJ’s broader enforcement strategy. When establishing the Civil Rights Fraud Initiative in May 2025, DOJ expressly directed its Civil Fraud and Civil Rights components to coordinate with state attorneys general and encouraged private parties to bring qui tam actions involving alleged civil rights fraud.
Link to What Should Government Contractors Do Now? What Should Government Contractors Do Now?
The Deloitte settlement, particularly when viewed alongside the earlier IBM resolution, provides additional evidence that DOJ intends to use the FCA as an enforcement mechanism for alleged discriminatory employment practices by government contractors. Contractors should not assume that the relevant compliance question is simply whether a program carries a “DEI” label. The more important question is whether race, sex, or another protected characteristic affects employment decisions, compensation, staffing, promotion opportunities, or access to programs and benefits.
Contractors should also consider reviewing the requirements in their state and local government contracts, not just their federal contracts. Non-discrimination certifications and representations may incorporate state civil rights laws and, depending on the jurisdiction, inaccurate certifications can create exposure under a state false claims statute separate from any federal FCA risk.
Finally, the Deloitte resolution reinforces the importance of coordination among government contracts, employment, and compliance teams. Federal contractors should review DEI-related programs and employment practices against longstanding anti-discrimination requirements as well as newer federal contracting provisions, including FAR 52.222-90 where applicable. The growing involvement of whistleblowers and state enforcement authorities makes that review increasingly important.
Please contact the authors if you have any questions.
The authors wish to thank Tris Sebesta for his contributions to this content.