IBM’s government DEI settlement could increase pressure to avoid tech hiring diversity

IBM has agreed to settle a complaint from the US Justice Department around its initiatives to diversify its workforce and to encourage hiring of underrepresented groups, contrary to a presidential directive. The federal contractor also agreed to pay the government roughly $17 million.

The pressure from the Trump administration to eliminate workforce diversification efforts, typically known as DEI (Diversity, Equity, and Inclusion) programs, has persuaded many companies, including Meta, Google, Amazon, Salesforce, Intel, OpenAI, Tesla and Zoom, to publicly back away from those diversification efforts. A few companies, including Apple, Microsoft, Nvidia and Oracle, have held firm in favor of DEI, for the most part. 

The government’s official position states that age, race, sexual preference, and gender should have zero impact on hiring decisions. Diversification proponents counter that workforce composition will stay stagnant unless explicit efforts are made to diversify.

Focus of settlement

The Justice Department settlement focused mostly on IBM’s role as a government contractor.

The government filing said IBM made “false claims” and “false statements” to the government regarding hiring practices in connection with IBM’s government contract work.

“As a federal contractor, IBM was required to comply with anti-discrimination requirements as set forth in Title VII of the Civil Rights Act of 1964,” the settlement said, adding that IBM “discriminated against employees during employment and applicants for employment because of race, color, national origin, or sex, and failed to treat employees during employment without regard to race, color, national origin, or sex.”

Beyond hiring practices, the government also opposed hiring goals that encouraged diversity, including “developing race and sex demographic goals for business units and taking race, color, national origin, or sex into account when making employment decisions to achieve progress towards those demographic goals” and using those same criteria to offer “certain training, partnerships, mentoring, leadership development programs, educational opportunities or resources, and/or similar opportunities only to certain employees.”

The agreement also said that the deal “is neither an admission of liability by IBM nor a concession by the United States that its claims are not well founded” and added that IBM agreed to the settlement “to avoid the delay, uncertainty, inconvenience and expense of protracted litigation.”

Acting US Attorney General Todd Blanche issued a statement saying, “racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI.”

IBM did not respond to an email seeking comment.

Companies can work around biases

Bryan Howard, the CEO of recruiting strategy consulting firm Peoplyst, said he would encourage enterprises to simply move their workforce diversification efforts earlier in the recruitment process. 

“There’s a big difference between candidate pool and the selection process,” Howard said, suggesting that there are no federal rules limiting outreach choices. If, for example, a company wanted to increase workforce representation for a particular group, then the job notice should be focused on universities and other places where that group is well represented.

“Expand your pool and do not contract it. Fish in the ponds where those people are,” Howard said. “Increase diversity by simply recruiting from diverse sources.”

Howard also said the government position leverages last year’s US Supreme Court decision in Ames v. Ohio Department of Youth Services, where the court held that reverse discrimination is illegal. 

Complicating diversification efforts today are two popular recruiting/hiring tools pushed by HR: Using genAI to filter a massive number of applicants and only present a small handful to the hiring managers to choose from; and referral programs in which employees are offered cash incentives if they recommend job candidates who are eventually hired.

AI’s bias is to seek job candidates whose profiles most closely resemble that of the current workforce. In other words, AI wants to learn everything it can about who the company has hired before, to help it determine the attributes to look for. 

Referral programs, Howard said, also tend to attract people with the same characteristics as the existing workforce. Even though those referral hires tend to stay with the company longer, “if you have a population that is already skewed and that is the population recruiting, the existing bias will likely continue.”

Settlement could hurt recruitment efforts

Consultant Brian Levine, executive director of FormerGov, said it is difficult to interpret the settlement as anything other than opposing DEI efforts. 

The US Justice Department, where Levine once worked as a federal prosecutor, ”has issued a multi-million dollar penalty for company policy that seemed to be intended to encourage diversity,” he said. “As with Anthropic, in this new world, sometimes organizations may be forced to choose between ‘the law’ as it is currently being interpreted by some, and a good faith effort to positively influence society, or at least to minimize societal harm.”

Levine said some enterprises may try to overcompensate to keep the current administration happy.

“Fearing financial penalties, some companies that work with the federal government will now choose to ensure their DEI program is fully dismantled,” Levine said. “Other companies may choose to cease working with the federal government and/or may choose to keep, or even double down, on their DEI program. If Anthropic is any indication, these latter companies may ultimately be rewarded in the market.”

Flavio Villanustre, CISO for the LexisNexis Risk Solutions Group, added that this settlement might end up hurting tech recruitment efforts. 

“I think that this will force organizations to reframe their DEI programs to not upset the DOJ, which could have an impact on hiring of individuals in certain classes and could result in overall less diversity,” Villanustre said. “Diversity is an important part of building resilient, successful organizations, so this could have a broader impact than just the one at hiring time.”