Press Release
Federal agencies have now begun issuing newly awarded contracts and modifications containing the new mandatory certification clause required under Executive Order 14398, “Addressing DEI Discrimination by Federal Contractors.”
Many contractors are seeing this language for the first time embedded directly into newly awarded contracts, task orders, and subcontract agreements.
The new FAR clause requires contractors to certify that they do not engage in “racially discriminatory DEI activities” and grants agencies expanded authority to request workforce data, policies, records, and employment-related documentation to assess compliance.
Most significantly, the clause expressly ties compliance to the False Claims Act (FCA), increasing the risk of:
Contract termination or suspension
Debarment exposure
DOJ investigations
Whistleblower complaints
FCA treble damages
Employment litigation
Increased private equity and lender diligence concerns
Many organizations still maintain legacy DEI initiatives, hiring practices, leadership programs, promotion systems, or compensation structures that may unintentionally create elevated exposure under the new federal requirements.
For many contractors, the greatest risk is not intentional discrimination, it is the absence of documented, defensible, merit-based systems capable of withstanding government scrutiny.
Recommended Immediate Actions:
A. Review DEI and talent management initiatives for potential Title VII exposure
B. Conduct statistical analyses of hiring, promotions, terminations, and compensation practices
C. Evaluate whether any employment programs could be interpreted as race-based preferences
D. Strengthen documentation supporting merit-based employment decisions
E. Review compensation systems and pay equity exposure
F. Assess subcontractor compliance obligations and certification risks
G. Coordinate sensitive reviews through legal counsel where appropriate
How HR Unlimited, Inc. Can Help:
HR Unlimited, Inc. specializes in federal contractor compliance and workforce analytics, including proactive risk assessments designed to help contractors prepare for the evolving enforcement environment.
Organizations that proactively identify and address potential risk areas now will be in a significantly stronger position than those waiting for an agency inquiry, whistleblower allegation, or FCA challenge.
If your organization recently received a federal contract award, modification, or subcontract containing this new clause, we recommend conducting a confidential compliance review as soon as possible.
Contact HR Unlimited, Inc. to schedule a confidential strategy discussion.
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