Florida AG sues Starbucks over alleged discriminatory DEI practices
Florida Attorney General James Usmeyer filed a lawsuit Tuesday alleging that Starbucks violates state civil rights law by using diversity, equity and inclusion initiatives to make hiring decisions based on race.
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The Trump administration is investigating the diversity efforts of major companies under the False Claims Act, a federal law that the Justice Department uses to take action against contractors who defraud the government.
As USA TODAY reported in October, the Justice Department began issuing civil investigative demands to employers in a wide range of industries earlier this year, directing them to submit information about their diversity, equity and inclusion programs.
The use of CID, a legal tool that allows the government to collect information during civil investigations and is typically reserved for going after government contractors who submit fraudulent invoices for services, has rattled American companies because it leaves them vulnerable to claims that could reach millions of dollars.
According to a report in the Wall Street Journal, Alphabet Inc.’s Google and Verizon Communications are among the companies requested to investigate by the Justice Department. Google was not immediately available for comment. Verizon declined to comment.
Department of Justice increases oversight of DEI
Just hours after taking the oath of office, President Donald Trump issued an executive order eliminating diversity programs and directing federal contractors to end “unlawful DEI discrimination.” Fearing lawsuits and the loss of government contracts, dozens of the nation’s largest companies, from McDonald’s to Facebook owner Meta, have scaled back or eliminated their DEI programs.
In May, the Justice Department announced its intention to investigate federal contractors and grant recipients by creating the Civil Rights Fraud Initiative, which threatens legal action under the False Claims Act, a civil law that allows the government to recover funds lost to fraud.
Government scrutiny is only increasing as the Trump administration moves to aggressively pressure employers to review their hiring practices in line with the president’s political agenda.
Testifying before the Senate Judiciary Committee in July, Harmeet Dhillon, the assistant attorney general for civil rights, warned of the Trump administration’s crackdown on diversity, equity, and inclusion efforts. In his testimony, Dillon promised that the Trump administration would file “numerous investigations and lawsuits against organizations that continue to violate federal civil rights laws.”
“Either DEI takes care of itself or we abolish it,” Dillon told senators.
False Claims Act lawsuits can be costly
Lawyers told USA TODAY that damages and fines in False Claims Act cases can quickly add up. Defendants risk being held liable for three times the damages claimed by the government.
Additionally, the Department of Justice encourages whistleblowers to file DEI lawsuits on behalf of the government and receive a cut of the proceeds. Last year, the Justice Department received approximately $3 billion in False Claims Act settlements and judgments.
Lawyers say even the threat of a False Claims Act investigation is a powerful cudgel. And being a target of the Trump administration carries significant business risks, from reputational damage to shareholder class action lawsuits.
David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging at New York University School of Law, told USA TODAY in October that “many leaders have said to me, ‘We’re very confident in what we’re doing from a purely legal standpoint.'” “And many of them will say, ‘If we’re dragged into the mud by this administration, none of that matters.'”
