When is it appropriate to impose a counterweight to mischief made by a government policy?

There are a lot of angles to Donald Trump’s executive order on “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” Some pieces are likely to generate more controversy or litigation than others. The order rescinds prior executive orders of presidents Obama, Clinton, and even Lyndon Johnson. It purges federal DEI staff and ends racial-preference mandates for federal contractors. A good deal of this is likely to survive legal challenge on the theory that these are voluntary executive-branch policies rather than things mandated by Congress, and the executive is normally (with rare exceptions) harder to challenge when the president is declining to do something.

There’s at least one new heavy weapon being deployed against private-sector DEI initiatives, however (at least insofar as they are operated by government contractors), contained in Section 3(b)(iv) of the order:

(iv) The head of each agency shall include in every contract or grant award:

(A) A term requiring the contractual counterparty 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 section 3729(b)(4) of title 31, United States Code; and

(B) A term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws. [Emphasis added]

Let’s start with the new rule in subpart (B). Under prior practice, the government demanded that contractors certify their compliance with a bunch of civil rights-related mandates as a term of a contract. These could be onerous and often went beyond just certifying what was done by the contractor on the contract to what it did in its entire business operation. The desire to comply with these mandates, along with other demands from the federal, state, and local governments, provided the impetus for a good deal of modern human resources and DEI programs, training, and initiatives.

Now, there’s been a roiling debate on the right for quite some time about how to deal with private conduct that is the direct result of private choices but is heavily influenced, shaped, incentivized, and originated with the government. When is it sufficient to remove malign government influence and restore freedom, and when is it necessary and appropriate to impose a government counterweight to mischief made by a longstanding government policy? That debate lies near the heart of arguments over woke capital, the new republicanism, and Florida’s efforts in areas such as the Stop WOKE Act. In fact, it goes back further: debating when we need government intervention to undo government-backed discrimination and malfeasance was at the heart of arguments over the federal breaking of state-level Jim Crow in the 1960s and over the scope of Reconstruction after slavery in the 1860s.

What subpart (B) aims to do for every federal contractor or grant recipient is to demand that they assure the government that they are out of the DEI programs business in all of their operations. The caveat that this applies only to DEI programs “that violate any applicable Federal anti-discrimination laws” is a very large limitation, and surely many contractors and grant recipients will just dig their heels in and argue that everything they’re doing is already within those laws. Even so, the scale of this is potentially enormous: it extends not only to a huge swath of private industry but also, if I read the order correctly, to most American universities, given that they receive a vast quantity of research grants. (A separate part of the order tells the attorney general and the secretary of education to demand assurances of compliance in admissions from “all institutions of higher education that receive Federal grants or participate in the Federal student loan assistance program.”)

Then, there’s enforcement, which brings us to subpart (A). 31 USC 3729 is the False Claims Act. Under the False Claims Act, a contractor “who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim” can be “liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000 . . . plus 3 times the amount of damages which the Government sustains because of the act of that person” plus the costs of bringing suit. And here’s the kicker: a private whistleblower who learns of a FCA violation can bring a lawsuit (what’s known as a qui tam suit) in the government’s name. There’s a ton of complexity to the FCA case law and procedures, but the bottom line here is that, by demanding that the no-DEI assurance be classified as a material term of the contract, he’s at least attempting to allow it to be civilly enforced by private litigants for profit. Of course, that, too, will raise legal questions about whether the executive branch can unilaterally define what is and is not a material contract term.

In theory, this could go even further. The Supreme Court is currently hearing a case, Kousisis v. United States, to consider whether it’s criminal mail or wire fraud for a federal contractor to lie about the contractor’s compliance with federal affirmative-action mandates. As I previously explained:

At issue in Kousisis is the regulatory regime under which federal contractors and subcontractors have to detail how a portion of their work on construction jobs will be done by “Disadvantaged Business Enterprises” such as black-owned businesses. The defendants in Kousisis — a painting company and its project manager — won the low bid on a bridge-construction project funded by the Transportation Department, but lied about the extent to which its supposed DBE supplier was really just a pass-through taking a cut for being a DBE but not doing the work. In other words, the DBE was just paid for bringing the right demographics to the job, not for doing the job. This pleases our federal government, and it gets angry when it’s been had. But the defendants were the low bidder, they did the job well, they alone faced the financial risks if they had been required to hire a different DBE, and there was no theory under which the government had lost any money on account of the scheme. Is that fraud?

Based on how the argument went, it seems likely that at least some of the liberal justices will vote with the government in Kousisis on the theory that reassurances about the race of a contractor are hard to distinguish from, say, reassurances that work is being done by a licensed plumber; it is less clear if any of the conservatives will join them. But if the government succeeds in Kousisis in persuading the Court that it’s criminal mail and wire fraud to lie in pro-racial-preference statements, it would seem to follow that it is equally fraud to lie in anti-racial-preference statements.