Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”, signed on January 21, 2025 (EO), carries new risk for contractors, subcontractors, and recipients of grant funding for potential violations of the False Claims Act (FCA).
Provisions relevant to federal contracting issues are found at Sec. 3 (b)(iii) and (iv) of the EO. They mandate that agency heads include terms in every contract or grant award that:
- Require the contractor or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of the False Claims Act (U.S Code Title 31, section 3729(b)(4)); and
- Requires the contractor or recipient to agree that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws (learn more)
The FCA imposes liability on individuals or companies that defraud the federal government by making false or misleading statements to influence the receipt of payment from the government. 31 U.S.C., Sec. 3729(a)(1)(G). To succeed in a claim under the FCA, the alleged false statements must be material to the government’s decision to make the payment. 31 U.S.C. Sec. 3729(a)(1)(B). The FCA also includes a “qui tam” provision that allows private individuals, known as “relators” or “whistleblowers,” to file lawsuits on behalf of the government and, if successful, receive a portion of the government’s recovery. 31 U.S.C., Sec. 3730(b).
The EO requires organizations doing business with the government to certify that they do not have any DEI programs that are unlawful under federal antidiscrimination laws and seeks to make such a certification a material term of the contract or grant for purposes of the FCA. Notably, by making the materiality of the non-discrimination certification no longer an element of the alleged fraud that must be established by a claimant under the FCA, the government has significantly increased the burden of any company defending such a claim.
Similarly, providing private individuals with the ability to pursue fraud claims against federal contractors and grantees for alleged false certifications under the FCA dramatically increases a company’s likelihood of facing allegations of fraud. The EO puts these companies and organizations on notice that the new administration is empowering interested individuals to join or possibly even replace the EEOC and OFCCP as watchdogs on a company’s compliance related to antidiscrimination laws.
To ensure compliance with the EO’s certification requirement, companies and organizations doing business with the federal government may want to review or audit all existing DEI or Diversity, Equity, Inclusion, and Accessibility (DEIA) initiatives to determine if they align with the Administration’s guidance of lawful practices under antidiscrimination laws. Going forward, these entities may want to consider initiating creative, robust, and ongoing compliance programs to assist in assuring that any certifications executed on behalf of the company or organization are consistent with the actual practices and protocols utilized by the entity.
