Opportunity for Canadian organizations to reset and reaffirm DEI programs against pushback: expert
Global tech firm IBM has agreed to pay the US government roughly $17 million to settle allegations that it committed illegal practices under its diversity, equity, and inclusion (DEI) strategy.
The settlement was announced by the US Department of Justice last week, saying that IBM will pay $17,077,043, inclusive of civil penalties, to settle the accusations that it failed to comply with anti-discrimination requirements in its federal contracts.
"Merit drives promotion and opportunity. Not someone's sex or race," said Associate Attorney General Stanley Woodward.
"Today's settlement proves this Department's commitment to ensure companies are not using taxpayer funded work to further woke unconstitutional practices in American workplaces."
Accusations against IBM
IBM had been accused of "knowingly maintaining" practices that the US government contends discriminated against employees during employment and applicants for employment because of race, colour, national origin, or sex.
Among the practices the US government cited were modifications or adjustments to pay, bonus, or other compensation that caused employees to take race, colour, national origin, or sex into account when making employment decisions.
IBM also allegedly took these standards into account as part of decisions to hire, transfer, or promote through the use of "diverse interview slates," "diverse sourcing," and other related employment practices.
It also allegedly offered training, partnerships, mentoring, leadership development programmes, educational opportunities, or resources only to certain employees, with eligibility and participation limited on the basis of race, colour, national origin, or sex.
Deputy Assistant Attorney General Brenna Jenny said the anti-discrimination laws in the US underscore that opportunities should be based on merit and performance, not immutable characteristics.
"When a company accepts federal funding while engaging in practices that sort, prefer, or disadvantage employees on the basis of race or sex, the company is stepping outside the conditions under which the government agreed to contract with them, and we will hold them accountable," Jenny said in a statement.
IBM, which has more than 3,000 employee in Canada, has denied that it engaged in the alleged illegal practices, with the settlement stressing that it was not an admission of liability by the global tech firm.
"This agreement is neither an admission of liability by IBM nor a concession by the United States that its claims are not well-founded," the settlement read.
Workforce strategy based on skills, not identity
In a separate statement, IBM also underscored its skills-based workforce strategy.
"IBM is pleased to have resolved this matter," the spokesperson told CNN. "Our workforce strategy is driven by a single principle: having the right people with the right skills that our clients depend on."
It's important for organizations to distinguish between measuring representation and simply making decisions because of identity, according to Sartaj Sarkaria, President and CEO of the Canadian Centre for Diversity and Inclusion. "Too many organizations have blurred that line in practice, even if unintentionally," says Sarkaria, who points out that DEI should be "building stronger pipelines, fixing biased systems, and ensuring fair processes, not bypassing them."
If DEI strategy is overly dependent on targets tied directly to individual outcomes, it creates risk not because measurement is wrong, but because it’s poorly designed, adds Sarkaria."The organizations that will hold up, legally and reputationally, are those focused on removing barriers, not engineering outcomes," she says.
US crackdown on 'illegal' DEI
The settlement marks the US government's ongoing crackdown on DEI practices in the federal government.
US President Donald Trump's first orders in his second term were to terminate DEI mandates, policies, programmes, preferences, and activities, branding them as unethical and "often illegal."
In March, Trump also directed that federal contracts should have new clauses stating that contractors will not engage in any "racially discriminator" DEI activities, and that they should be willing to submit information and reports, as well as provide access to records, to demonstrate compliance with the order.
The US Department of Justice has been using the False Claims Act, a federal law dating back to 1863, through its Civil Rights Fraud Initiative to enforce compliance with its "anti-discrimination requirements."
"Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI," said Acting Attorney General Todd Blanche in a statement.
"The Department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good."
The crackdown in the US and resulting pushback against DEI is forcing organizations in Canada to ask harder questions about what DEI is really trying to solve and whether it's grounded in fairness and business need, says Sarkaria. However, she believes that Canadian organizations need to maintain their own course in accordance with Canadian values and equity laws.
"If organizations go quiet or start softening language every time there’s external pressure, people will notice, and they’ll assume the commitment wasn’t real to begin with," she says. "This work was never meant to be comfortable or trend-driven - if organizations only invest when it’s easy, they're never doing it for the right reasons."
Despite the pushback, Sarkaria says this is an opportunity for Canadian organizations to reset their DEI initiatives so they're more aligned to business outcomes rather than performative work. "DEI isn’t going away. It’s maturing," she says. "And the organizations that treat this moment as an opportunity to sharpen, not retreat, will come out ahead."
