IBM conducted its own investigation and disclosed its findings to the department as well as took voluntary actions, such as terminating and modifying programs and practices involving DEI. Sundry Photography/Getty Images
IBM agrees to pay $17.1M in first big test of new federal contractor DEI rules
The settlement marks an early signal of how the Justice Department plans to interpret and enforce recently reshaped contractor requirements, with implications for companies doing business with the federal government.
The Justice Department’s Civil Rights Fraud Initiative has apparently reached its first settlement with a government contractor, with IBM agreeing to pay $17.1 million to settle allegations that it failed to comply with anti-discrimination requirements involving federal contracts.
Justice launched the initiative following President Trump’s executive orders targeting diversity, equity and inclusion practices involving how federal contractors hire and promote employees. Trump's executive orders rolled back some practices that had been in place since the Johnson Administration.
The Ending Illegal Discrimination and Restoring Merit-based Opportunity executive order also required agencies to identify up to nine investigations into DEI violations involving companies or non-profits with assets worth $500 million or more.
Justice announced IBM’s settlement on Friday and said IBM took “significant steps entitling it to credit for cooperating with the government in its investigation.”
IBM apparently conducted its own investigation and disclosed its findings to the department. IBM also took voluntary actions, such as terminating and modifying programs and practices involving DEI.
The department claims that IBM used a “diversity modifier” that tied bonus compensation to achieving demographic targets.
Justice also says IBM altered interview criteria based on race and sex. The department claims IBM had other criteria in place to identify diverse candidates for hiring, transfer or promotion.
IBM allocated costs for these activities to its federal contracts and sought reimbursement, according to the settlement. The reimbursement requests are part of what Justice relied on to bring the False Claims Act allegations because IBM had to certify compliance with anti-discrimination requirements as a condition of its federal contracts.
Unlike many False Claims Act cases, the IBM settlement does not appear to involve a whistleblower with Justice's civil division handling the matter directly.
IBM is not admitting any liability in the settlement document and denies that it engaged in the “covered conduct.”
The company is settling “to avoid the delay, uncertainty, inconvenience, and expense of protracted litigation,” according to the settlement.
But Justice is touting the settlement as part of a broader push to root out DEI practices.
“Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI,” said acting Attorney General Todd Blanche. “The department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good.”
An IBM spokesman provided this statement to Washington Technology:
“IBM is pleased to have resolved this matter. Our workforce strategy is driven by a single principle: having the right people with the right skills that our clients depend on.”