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The IBM settlement could prompt the Department of Justice to continue its anti-DEI enforcement activities at an accelerated pace. What boards should consider.
The U.S. Department of Justice's Civil Rights Fraud Initiative, which polices DEI policies, recently entered into its first False Claims Act settlement agreement with IBM regarding the government's claims that the tech giant “knowingly” maintained what the U.S. claims are discriminatory employment practices. This action confirms that any organization actively pursuing DEI efforts should take the Trump administration's anti-DEI enforcement efforts seriously. Board members of companies with DEI initiatives can examine the IBM settlement and determine whether their boards should recommend adjustments to their company's employment practices.
“International Business Machines Corporation (IBM) has agreed to pay the United States $17,077,043, including civil penalties, to resolve allegations that it violated the False Claims Act by failing to comply with the nondiscrimination requirements of federal contracts for practices that the United States alleges discriminate against employees and applicants for employment on the basis of race, color, national origin, or sex,” the Department of Justice said in a press release.
The release also said, “When a company accepts federal funds while engaging in practices that screen, favor, or disadvantage employees based on race or gender, that company is deviating from the terms of the government's agreement with its employees, and we will hold those employees accountable.”
The IBM settlement could prompt the Department of Justice to continue its anti-DEI enforcement activities at an accelerated pace. With this in mind, board members may want to consider:
Analysis of the government's settlement with IBM. Analyzing IBM's settlement offer will give board members answers about the government's case against IBM and provide hints to help companies avoid government scrutiny in the future. Information from the settlement may also help companies take corrective action to bring their employment practices into compliance with government standards, including terminating or changing certain programs or policies.
A full-scale review of a company's employment practices led by the board of directors. Boards need to support the company's employment practices. To ensure that the risks associated with current employment practices are appropriately addressed, it is best to communicate between the board, CEO, management team, and major shareholders. Companies can also contact legal consultants if necessary.
If targeted, we will fully cooperate with the Department of Justice. In announcing the settlement with IBM, the Justice Department said, “IBM has taken significant steps to credit IBM for cooperating with the government's investigation.” By cooperating and voluntarily changing policies opposed by the government, the company is likely to obtain a lower settlement than if it had chosen to fight in court.
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