Interview transcript:
Terry Gerton Let’s start with the big picture. DOJ published a pretty important memo at the end of July addressing guidance for recipients of federal funding regarding unlawful discrimination. Can you kind of walk us through the provisions in that memo?
Andrew Turnbull So, the DOJ’s guidance, just kind of taking a step back, really is to try to implement this administration’s President Trump’s Executive Order 14173 that was issued in the first week of his administration that had several significant requirements, including for the DOJ to seek enforcement actions for unlawful DEI programs. And so many federal contractors and private employers have been looking for guidance, for many months now, on kind of what this administration believes is unlawful DEI practices and what constitutes unlawfully discrimination. Now the law in this area has not really changed, but what the DOJ’s guidance does is it does give us some insight into what this administration may believe is unlawful. And so in this particular memorandum, it is really geared towards federal fund recipients. That includes federal contractors, grantees, and other companies that may receive federal funds. But the DOJ also says that all entities that are subject to federal anti-discrimination laws should look at this guidance, so even private employers and other companies that may not receive federal funds. This memo essentially has, it’s a long memo, it’s not binding law, but it does provide the DOJ’s views on various federal anti-discrimination laws. It has a non-exhaustive list of unlawful practices that they say could result in liability or revocation of grant funding or federal contracts, maybe in some instances. And it also gives a list of best practices to provide practical recommendations to minimize risk for violating anti-discrimination law. And so there are some interesting parts of this memo that are in there where the DOJ not only gives its view on federal anti- discrimination law, which mostly hews with what is currently legally in place, but it does also indicate that they may be pursuing some areas that may be a more expansive view of anti-discrimination law. One example of that is proxies for discrimination. So if you have neutral practices that don’t actually consider race or gender, but are intended to actually capture individuals based on race and gender, the DOJ said that could be an unlawful practice. So using stuff like geographic locations that would be intended to recruit individuals based on race or using first generation professionals, which we’ve seen a lot of different companies try to use some of these analogs.
Terry Gerton You just articulated some pretty specific findings or recommendations in the DOJ memo. What is the immediate compliance risk for federal contractors and grantees?
Andrew Turnbull So for federal contractors and grantees, I think they really need to kind of focus internally at their practices. Now, we’ve been advising a lot of different contractors on looking at their practices and programs, and there’s not a one-size-fits-all approach. A lot of this is based on their risk tolerances and their preferences. But there are some things that contractors should be doing at this point. One is taking a hard look at their DEI practices for potential risk. As I mentioned earlier, the law in this area has not really changed so far for federal anti-discrimination law, but the risk profile has substantially changed. And so now, armed with this guidance and understanding what the DOJ may consider as unlawful practices, contractors need to really take a holistic review of their DEI policies and programs and anti-bias programs and see, is there any changes that they may need to make. The outcome of these audits can be really helpful for contractors because they help them to kind of consider actionable intelligence on what practices could be unlawful, maybe what they want to change, what they can keep, what can use going forward and a lot of these audits are done through the lens of counsel, so they can be privileged and also have expert guidance on those. So I think certainly that is one action item contractors need to look at. Another risk action that comes out of this memo and some of the other DOJ guidance that has come out is they are obviously looking to bring cases under the False Claims Act. That is certainly one of the tools in DOJ’s toolbox to pursue here. And so they issued back in May of this year, they created a Civil [Rights] Fraud Initiative saying that they’re going to have a special task force that will enforce, be looking for False Claims Act cases for federal contractors and fund recipients related to unlawful DEI practices. And they’ve also said as part of that, that they would be looking for encouraging whistleblowers to bring Qui Tam related actions for False Clames Act issues. So contractors really need to kind of consider their internal controls in this environment and looking at things like, do they have good investigation practices? If they get a complaint of discrimination or retaliation, are they making sure that they investigate those in a timely manner? Are they documenting employment decisions to show that they are making those in a lawful manner? Are they training HR and managers on these types of practices? Another thing that kind of comes out of this particular memo is the DOJ saying that they’re looking at how companies are interacting with third parties and their vendors, and are you having some type of diversity supplier requirement or something like that and they expect for companies to include anti-discrimination provisions in their subcontracts. Now, what’s interesting right now, for the federal certification requirement under Executive Order 14173, that has not been fully implemented at this point and there is currently no flowdowns that are required there, but apparently DOJ is signaling they may think there may be some flowdown requirements like that to certain contractors. So I think contractors really want to look at their practices on what they’re doing with their third party contractors in this space as well.
Terry Gerton I’m speaking with Andrew Turnbull. He’s co-chair of the employment and labor practice at Morrison and Foerster. So Mr. Turnbull, the memo also includes a list of best practices. Do those best practices help clarify this guidance for federal contractors and grantees?
Andrew Turnbull I think in some ways they help, for sure. There are certain things within this guidance that are probably best practices that we would advise companies to have in place to limit discrimination claims or issues within their organizations. But I think it doesn’t provide a fulsome picture of what this administration is looking to do and what they’re trying to look for enforcement actions. But I think, as I mentioned earlier, using this guidance as a lens to audit your own practices is something that would be helpful. Obviously, if DOJ believes that these are best practices, companies want to consider, what am I doing internally that I can show if DOJ came knocking that I’m actually doing some of these recommended practices, that I have implemented these types of things.
Terry Gerton So this is a guidance memo, and they’re very clear to say that it’s not legally binding. And you’ve said that the law in this space really hasn’t changed much. So how should companies be looking at that line between legal compliance, compliance with the guidance, and kind of staying out of trouble?
Andrew Turnbull Yeah, I mean, once again, this goes back to a company’s risk tolerances and preferences. There are certain things, I mean, ultimately the arbitrator of the law is going to be the courts here, and so certainly when you do these assessments, understanding what is lawful and unlawful and where that line is drawn is something that contractors really want to do, and to the extent they have practices that may have been over their skis, they want to certainly evaluate those and remove those. Certain things that are within this DOJ memo, like using proxies, whether that’s intentional, the things that the DOJ is recommending was subcontractors, some things related to segregated bathrooms, which may actually, under state law, there may be a requirement for certain employers to allow employees to use a bathroom that corresponds to their gender identity. So there’s a lot of conflicting things in here as to what the law may require, and so I think that’s where a lot contractors have to kind of look hard at their practices under the guidance of experienced counsel and decide what’s the best path forward for them. Sometimes they have to analyze their risk tolerance too. As a federal contractor, you are subject to not only if you make these DEI certifications, you may be subject to potential false claims actions by DOJ or investigations, but also most federal contracts can be terminated for convenience, and we have seen this administration kind of use its purse strings to pursue policies. And so, there have been instances like universities where the federal government has terminated certain types of federal contracts and grants because they believe that they’ve engaged in unlawful practices or not tried to stem out antisemitism. So contractors kind of have to weigh those risks as well, even if they are performing lawfully within those practices, is that something they want to make sure, not only from a litigation perspective, could we defend this, but from a risk perspective, could we lower the risk of being caught in the crosshairs.
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