Earlier this year, we wrote about Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity. What grabbed headlines was the repeal of Executive Order 11246, which mandated that federal contractors meeting certain size criteria develop affirmative action plans.

As discussed in the earlier Burr alert, Executive Order 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. Federal contractors[1] now have to certify annually that they do not “operate programs promoting 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 certification's material—meaning that a false certification can open a federal contractor up to liability under the False Claims Act, 31 U.S.C. §§ 3729 to 3731. Civil penalties under the False Claims Act and conceivably be forced to repay three times anything the Government paid it over the course of the false certification year. 31 U.S.C. § 3729(a)(1)(G). The False Claims Act also provides healthy incentives to whistleblowers, including up to 30% of anything the Government recovers from the defendant contractor. 31 U.S.C. § 3730(c)(2).

Recently, the Department of Justice issued guidance on what it would consider a violation of these certifications. While this guidance isn’t binding on any court, courts will consider its persuasive effect. Gonzales v. Oregon, 546 U.S. 243, 269 (2006). The guidance also gives contractors a heads up on what this administration is targeting and prioritizing. DoJ considers the following practices illegal:

1. 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.”
2. Race-Based Training Sessions. Any training provided only to employees of a certain race or certain races.
3. Any Segregated Spaces. Employers cannot provide “safe spaces” based on membership in a protected class.
4. Trainings that Promote 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.
5. Transgendered Access to Facilities. 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. DoJ 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.

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

[1] This includes recipients of federal grants and almost all primary, secondary, and post-secondary schools.