IBM Agrees to Pay $17 Million to Resolve Allegations of Discrimination Through DEI Practices

By Kelly Cloonan

IBM agreed to pay $17.1 million to resolve allegations that it implemented illegal diversity, equity and inclusion practices in hiring and employment.

The settlement involves Justice Department allegations that the company violated the False Claims Act, invoking a novel use of a federal law that's been traditionally used to punish contractors who bill the government for work that was never performed, or inflate the cost of services rendered.

Under the suit, the Justice Department alleged the company violated the law by taking race, color, national origin or sex into account when making employment decisions, including with a diversity modifier that tied bonus compensation to achieving demographic targets. The U.S. also contends that IBM sought payment and reimbursement under its federal contracts for costs related to those practices.

"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," an IBM spokesperson said.

As a federal contractor, IBM is required to not discriminate against employees or job applicants because of race, color, national origin or sex, and to take steps to ensure that applicants are hired, and employees are treated, without regard to those same factors, the DOJ said.

The settlement is not an admission of liability by IBM, and the company denies that it engaged in illegal practices, according to the agreement filed Friday.

"Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI," Acting Attorney General Todd Blanche said.

The settlement includes civil penalties.

The Trump administration launched multiple investigations last year into the use of diversity initiatives in hiring and promotion at major U.S. companies under the False Claims Act. Much of corporate America rolled back diversity programs ahead of Trump's second term as the initiatives fell out of political favor.

Write to Kelly Cloonan at kelly.cloonan@wsj.com

(END) Dow Jones Newswires

April 10, 2026 18:30 ET (22:30 GMT)