IBM has agreed to pay $17 million to the U.S. government to resolve allegations that it violated anti-discrimination requirements in its federal contracts. The settlement marks the first major victory for the Trump administration's Civil Rights Fraud Initiative.
The Department of Justice announced the settlement last Friday, stating the payment resolves claims that the tech giant breached the False Claims Act. The government alleges IBM failed to comply with non-discrimination mandates while acting as a federal contractor.
Federal investigators claim IBM pursued illegal diversity, equity, and inclusion (DEI) practices through three specific methods. These included constructing "diverse interview slates" and using race and sex demographics to set business unit goals.
The government also alleges IBM limited access to certain training, mentoring, and leadership programs based on race or sex. The settlement follows Executive Order 14173, which prohibits federal contractors from using race or sex-based preferences in their programs.
DOJ targets federal contractor compliance
IBM did not admit liability in the settlement but cooperated with federal investigators. According to the settlement documents, the company assisted with inquiries and helped calculate potential damages.
"When a company accepts federal funding while engaging in practices that sort, prefer, or disadvantage employees on the basis of race or sex, the company is stepping outside the conditions under which the government agreed to contract with them," said Deputy Assistant Attorney General Brenna E. Jenny.
Law firm Latham & Watkins LLP noted that the dispute likely involves contracts IBM signed before the 2025 executive order. The firm stated IBM received credit for voluntarily modifying the programs and practices under investigation.
Legal experts suggest this case sets a precedent for how the Department of Justice evaluates liability under the False Claims Act. Epstein Becker Green advised companies to stay informed about shifting laws to avoid similar federal enforcement actions.
