DOJ Issues Guidelines on Unlawful Employment Practices for Federal Contractors

When President Donald Trump issued Executive Order (EO) 14173—“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”—earlier this year, what grabbed headlines was the repeal of EO 11246, which had mandated that federal contractors meeting certain size criteria develop affirmative action plans since 1965. EO 14173 also created two new certifications on the system for award management (SAM) that may have an even greater effect on federal contractors than the repeal of affirmative action.

Material Certifications

Federal contractors—including recipients of federal grants and almost all primary, secondary, and post-secondary schools—now have to certify annually that they do not “operate programs promoting [diversity, equity, and inclusion (DEI)] that violate any applicable Federal anti-discrimination laws” and that they are “in compliance in all respects with all applicable Federal anti-discrimination laws.”

The government considers both of these certifications material—meaning that a false certification can open a federal contractor up to liability under the False Claims Act (FCA). Civil penalties under the FCA can conceivably include being forced to repay three times anything the government paid a contractor over the course of the false certification year. The FCA also provides healthy incentives to whistleblowers, including up to 30% of anything the government recovers from the contractor.

Administration’s Targets and Priorities

Recently, the Department of Justice (DOJ) issued guidance on what it would consider a violation of these certifications. While the guidance isn’t binding on any court, courts will consider its persuasive effect. The guidance also gives contractors a heads up on what the administration is targeting and prioritizing. The DOJ considers the following practices illegal:

• Preferential hiring or promotion practices. Employers may not use membership in a protected class as a basis for hiring, promotion, or disciplinary decisions. This includes the use of what DOJ considers proxies, such as “underrepresented groups,” “cultural competency,” “diversity statements,” or “underserved communities.”
• Race-based training sessions. Any training provided only to employees of a certain race or certain races would go against DOJ’s guidance.
• Any segregated spaces. Employers cannot provide “safe spaces” based on membership in a protected class.
• Training that promotes discrimination based on protected characteristics. The DOJ specifically noted that phrases such as “all white people are inherently privileged,” or “toxic masculinity,” come under this category.
• Transgendered access to facilities. The DOJ notes that it isn’t an impermissible segregation to have separate bathrooms, showers, dormitories, or the like based on sex. Nor is it impermissible segregation to have separate sports competitions based on sex. It cautions that allowing a transgendered woman to use such segregated facilities or compete in such segregated sports may create a hostile work environment or deny cisgendered women educational opportunities in violation of federal law.

Takeaway

As always, it’s a good idea to have employment lawyers audit your policies and procedures for compliance with federal law. With EO 14173, those audits become even more pressing—instead of liability under Title VII of the Civil Rights Act of 1964 alone, federal contractors now risk a violation of the FCA through discriminatory employment practices, even those undertaken with the best of intentions.

Michael Rich is an attorney with Burr & Forman LLP and can be reached at 251-345-8216 or mrich@burr.com.

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