"American corporations are on notice: you will face our aggressive enforcement if you use race or national origin to discriminate against qualified Americans," said Acting Attorney General Todd Blanche when announcing the $30 Million Settlement with PayPal over what the Department of Justice termed “illegal DEI.” Harmeet Dhillion, Assistant Attorney General overseeing the Civil Rights Division touted the settlement as eliminating discrimination among businesses.
In April, IBM had settled with the DOJ. IBM entered into a $17,077,043 settlement with the DOJ. It resolved allegations that the company violated the False Claims Act (FCA) by certifying compliance with federal anti-discrimination laws while maintaining discriminatory internal DEI quotas. The DOJ pointed to IBM's use of a "diversity modifier" that tied executive bonus compensation directly to meeting demographic hiring targets. The company also utilized race- or sex-restricted mentoring programs and mandated "diverse interview slates" that explicitly factored race into candidate selection.
In 2020, PayPal launched an initiative to assist Black and underrepresented businesses by creating an Economic Opportunity Fund. The Economic Opportunity Fund "create[d] an economic opportunity fund to support and strengthen Black and underrepresented minority businesses and communities over the long term, and was designed to help drive financial health, access and generational wealth creation." The DOJ determined that restricting fund eligibility based strictly on race violated the Equal Credit Opportunity Act, which bars creditors from discriminating based on race or national origin. As part of the resolution, PayPal was required to create a Small Business Initiative where it agreed to undertake financial needs assessments, waive certain fees, hire a director who will oversee the program and provide opportunities for veteran owned businesses or other businesses engaged in farming, technology or manufacturing. It also agreed to report on its new initiative and inform employees.
These two settlements follow on the heels of several other corporations modifying their DEI activities to avoid scrutiny by the DOJ. The IBM settlement is considered the first of many, as the DOJ has operationalized a broader crackdown against federal contractors under its Civil Rights Fraud Initiative. As a contractor, you might want to review your corporate statements, policies and practices specifically as they relate to hiring, promotion and public facing statements. To ensure compliance with the law and avoid, corporations have generally taken the following steps: