IBM has agreed to pay $17 million to the US government to settle allegations that its diversity, equity, and inclusion (DEI) policies discriminated against employees and job-seekers. The Department of Justice (DOJ) announced the settlement on Friday, highlighting it as the first secured under the Civil Rights Fraud Initiative, which was launched in May 2025 by the Trump administration.
The initiative aims to address DEI-related complaints against government contractors by applying the False Claims Act of 1863, which allows for triple damages and civil penalties against contractors found to have defrauded the government.
The Justice Department alleged that IBM violated the False Claims Act by failing to adhere to anti-discrimination requirements in its federal contracts. These contracts mandated that IBM certify its compliance with non-discrimination laws. The US claims that IBM certified compliance despite implementing practices that allegedly discriminated against employees and applicants based on race, color, national origin, or sex.
According to the US, IBM took race, color, national origin, or sex into account when making employment decisions. This included using a "diversity modifier" that linked bonus compensation to achieving demographic targets. The US also stated that IBM altered interview criteria based on race or sex and established race and sex demographic goals for business units, influencing employment decisions to meet these goals.
Furthermore, the US objected to IBM offering training, partnerships, mentoring, leadership development programs, and educational opportunities selectively, with eligibility limited by race or sex. The government also claimed that IBM allocated costs related to these practices to its federal government contracts and sought reimbursement for these costs.
While companies often settle without admitting guilt, this agreement notes that IBM ended conduct it denies ever engaging in. The settlement states that IBM's cooperation included taking voluntary remedial measures, such as terminating or modifying various programs and policies. However, it also explicitly states that "IBM denies that it engaged in the Covered Conduct."
The settlement requires IBM to pay $17,077,043 to the government within 14 days. This amount comprises civil penalties and $8.2 million in restitution.
Acting Attorney General Todd Blanche stated, "Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI. The department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good."
The Trump administration has adopted an aggressive stance against DEI programs designed to support historically underrepresented groups. President Trump has previously issued executive orders targeting DEI, including one aimed at federal contractors.
Beyond government DEI initiatives, the Trump administration has employed legal and regulatory tools to influence private companies. For instance, the chairman of the Federal Communications Commission has reportedly refused to approve mergers unless the involved companies discontinue their DEI initiatives.
In a statement to Ars, IBM said, "IBM is pleased to have resolved this matter. Our workforce strategy is driven by a single principle: having the right people with the right skills that our clients depend on."
The Justice Department acknowledged IBM's cooperation, noting early disclosures of facts gathered during IBM's independent investigation, which assisted in calculating damages and penalties. The department also recognized the company's voluntary remedial actions, including the termination and modification of the programs and practices in question.
