The U.S. Department of Justice (DOJ) has started investigating federal contractors and grant recipients for allegations that diversity, equity, and inclusion (DEI) programs violate antidiscrimination laws.
Background
In addition to revoking Executive Order (EO) 11246, President Trump’s January 31, 2025, EO 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, also added a new certification requirement for recipients of federal funding, including federal contractors. The new certification in Section 3(iv)(A) & (B) provides that every contract and grant will include a term requiring the recipient to agree that:
Its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decision for purposes of section 3729(b)(4) of title 31, United States Code and
Certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.
Title 31, Section 3729 (b)(4) is the False Claims Act (FCA), a Civil War-era law that is used by the federal government to combat fraud involving false claims for payment. It imposes treble damages and penalties on individuals or entities that knowingly submit false claims or cause such claims to be submitted to the federal government.
DOJ Civil Rights Fraud Initiative
On May 19, 2025, Deputy U.S. Attorney General Todd Blanche issued a memo entitled Civil Rights Fraud Initiative. According to the memo, the FCA is implicated “when a federal contractor or recipient of federal funds knowingly violates civil rights laws— including but not limited to Title IV, Title VI, and Tile IX of the Civil Rights Act of 1964—and falsely certifies compliance with such laws.” It is also implicated whenever federal contractors or grantees “certify compliance with civil right 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” citing the Supreme Court’s decision in SFFA.
This 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.” Co-led by the Civil Division’s Fraud Section and the Civil Rights Division, each division will identify a team of attorneys to aggressively pursue this work and “each of the 93 United States Attorney’s Offices will identify an Assistant United States Attorney to advance these efforts.”
The DOJ also strongly encouraged private parties to protect the “public interest by filing lawsuits and litigating claims” under the FCA if they have knowledge of discrimination by federal contractors and grant recipients.
Attorney General’s Memo on Unlawful Discrimination
U.S. Attorney General (AG) Pam Bondi issued guidance for recipients of federal funding regarding unlawful discrimination on July 29, 2025, which she said clarified the application of federal antidiscrimination laws to programs and initiatives that might involve discriminatory practices, including DEI programs.
The memo outlined what the DOJ considered unlawful discriminatory policies and practices, with examples for each. The policies and practices included preferential treatment based on protected characteristics, use of proxies for protected characteristics, segregation based on protected characteristics, training programs that promote discrimination or hostile environment, and recommendations on best practices.
Civil Investigative Demand Letters
After AG Bondi issued the memo, the DOJ began sending out civil investigative demand (CID) letters to federal contractors and grant recipients as part of the above-mentioned Civil Rights Fraud Initiative. A CID is a legal tool used by the DOJ to gather information during civil investigations usually before a lawsuit is filed. CIDs allow the DOJ to demand documents, written responses, and oral testimony without needing court approval. The process for issuing CIDs is outlined in 31 USC Section 3733, and the DOJ can ask a court to enforce its request if an entity fails to respond or otherwise to cooperate.
Under EO 14173, federal contractors are required to certify that they do not operate any programs that violate federal nondiscrimination laws and that compliance with all such laws is “material” for purposes of the FCA.
The letters from the DOJ are individualized based on the discrimination allegations being investigated, such as admissions or employment practices of colleges and universities, employment practices of cities or states, or employment practices of federal contractors.
Takeaways for Recipients of Federal Funds
All recipients of federal funds including federal contractors and grant recipients should watch for any communications from the DOJ or other federal agencies. If you receive such a letter, immediately contact your legal counsel.