Illegal DEI Practices: Can You Sue Your Employer? The Four Practices Behind the IBM and Deloitte Settlements — and the Companies That Documented Them

Published August 17, 2026 · Last updated August 26, 2026 · By Fett Law — Michigan Employment Discrimination Attorneys

Yes — employees and applicants can sue over DEI practices that base employment decisions on race or sex. Title VII of the Civil Rights Act protects every race and both sexes, and the U.S. Department of Justice has now collected $38.6 million over allegedly illegal DEI practices in four categories: International Business Machines Corporation (IBM) paid $17,077,043 in April 2026, and Deloitte paid $21,500,000 in August 2026 — with $4.3 million of the Deloitte settlement going to the whistleblower who filed the case. Fett Law has surveyed the public DEI record of the Fortune 1000, and major employers across every industry described one or more of the same four practices in their own published reports. This guide explains the practices, samples the companies, and lays out your legal options and deadlines.

Key facts

What did the IBM and Deloitte DEI settlements say was illegal?

On April 10, 2026, IBM paid $17,077,043 to resolve Justice Department allegations — announced under the title "IBM Pays $17 Million to Resolve Allegations of Discrimination Through Illegal DEI Practices" — that the company certified compliance with federal anti-discrimination requirements while operating DEI employment practices that discriminated on the basis of race and sex. It was the first False Claims Act settlement of its kind, brought under the DOJ's Civil Rights Fraud Initiative (established May 2025). IBM resolved the allegations without admitting liability. (DOJ press release.)

The settlement's "Covered Conduct" described four categories of practices: compensation adjusted so that protected traits factored into employment decisions (such as diversity-linked bonuses); race- and sex-conscious hiring, transfer, and promotion, including "diverse interview slate" requirements; the development of racial and gender representation goals for business units, with protected traits taken into account to progress toward them; and training, mentoring, sponsorship, and leadership-development programs whose eligibility was restricted by race or sex.

Four months later, the pattern was confirmed. On August 25, 2026, the Justice Department announced that Deloitte LLP and four affiliated entities agreed to pay $21,500,000 — the second and larger settlement under the initiative — to resolve allegations that, from 2017 to the present, they falsely certified compliance with federal anti-discrimination requirements while tracking "demographic goals" in monthly summaries, tying senior leaders' compensation to those goals, considering race and sex in promotion decisions and federal-contract staffing, and limiting eligibility for two programs by race or sex. The case began as a whistleblower lawsuit, and the relator received $4,300,000 of the settlement. Deloitte did not admit liability and denies discriminating. (DOJ press release.) Our full breakdown: Deloitte's $21.5 Million DEI Settlement: What It Means for Whistleblowers.

Three things make the settlements matter far beyond IBM and Deloitte. First, the practice categories were not unusual — dozens of major employers described the same kinds of practices in their own reports between 2019 and 2024. Second, the settlements supply a government-endorsed framework for what "illegal DEI" means in practice: not diversity as a value, but a protected trait operating inside an actual employment decision. Third, the Deloitte covered period runs to the present — federal enforcement is reaching conduct that continued after most companies publicly rolled back their DEI programs.

The four illegal DEI practice categories, with real examples

Each category below is drawn from the IBM settlement's covered conduct — the same categories the Deloitte allegations track. The examples are verbatim statements from other companies' own published documents — quoted here because a company's own words are the strongest evidence of how a practice actually worked. Quoting a document does not mean a court has found the practice unlawful.

1. Pay and bonuses tied to demographic targets

The practice: executive or manager compensation rises or falls based on the demographic composition of the workforce — a "diversity modifier" on a bonus, or a scorecard where representation numbers change the payout. Marathon Petroleum Corporation's own report announced this mechanism directly:

"In April 2021, we were the first U.S. independent downstream energy company to link executive and employee compensation to DE&I metrics." — Marathon Petroleum, Sustainability Report 2020, p. 34 (source PDF). The 2021 report shows the DE&I component weighted at 5% of the annual cash bonus, scored on the percentage of external hires who were women or BIPOC.

When a decision-maker's own money depends on demographic numbers, every hire and promotion beneath that decision-maker is made under financial pressure to prefer some candidates over others by race or sex.

2. Race- and sex-conscious hiring: "diverse slates" and demographic sourcing

The practice: recruiters and managers are required or expected to compose interview slates by race and sex, or sourcing pipelines and eligibility screens are defined by protected traits. JPMorgan Chase & Co.'s report stated the rule with a definition:

"In hiring new employees, managers and recruiters are expected to consider a diverse slate of candidates. Diverse slates are defined – in the U.S. – as no less than one woman and one ethnically diverse candidate (defined as Equal Employment Opportunity Commission classifications other than White)…" — JPMorgan Chase, 2021 Environmental Social & Governance Report, p. 30 (source PDF)

A demographically defined slate cuts both ways: candidates outside the favored definitions may compete for fewer effective openings, while candidates inside them may be placed into interviews the employer never intended to be real.

3. Numeric demographic representation goals

The practice: a company sets numeric race or sex representation targets — "double Black leadership by 2025," "30% diverse hires" — and steers employment decisions to hit them, often wiring the targets into the scorecards and pay described in category 1. Microsoft Corporation announced one of the era's most specific commitments in 2020:

A commitment to "double the number of Black and African American people managers, senior individual contributors, and senior leaders in the United States by 2025." — Microsoft, June 2020 commitments, as documented in Microsoft's own diversity reporting; progress on representation was evaluated in senior leadership compensation reviews.

A numeric demographic goal is a target someone is responsible for hitting. Employees who worked in recruiting or line management during this period frequently have first-hand knowledge of how the numbers translated into individual instructions.

4. Programs restricted by race or sex

The practice: fellowships, mentoring, sponsorship, and leadership-development programs — concrete career advantages — whose eligibility is limited to particular races or one sex. Pfizer Inc.'s Breakthrough Fellowship is a documented example: the company's 2021 Annual Report described the hiring pipeline as "reserved for applicants that increase the pipeline for Black, Latino, and Native Americans." The program's eligibility terms were the subject of a federal lawsuit, Do No Harm v. Pfizer (filed January 2023); Pfizer opened eligibility in February 2023, and the case was resolved in January 2025 after the Second Circuit revived it. (Allegations in that suit were never adjudicated on the merits.)

A program whose participants are selected by race or sex, and which delivers a concrete employment advantage, allocates opportunity by protected trait — the fourth covered-conduct category in the IBM settlement.

When does a DEI program cross the legal line?

Valuing diversity is lawful. Broad outreach, wide advertising of openings, skills-based sourcing, accessibility accommodations, and employee resource groups open to everyone are lawful. What the law prohibits — and what the IBM and Deloitte settlements targeted — is a protected trait operating inside an actual employment decision: a bonus that pays more when demographic numbers move, a slate that must contain candidates of specified races, a numeric target a manager is accountable for, a fellowship a candidate of the wrong race cannot enter.

Title VII of the Civil Rights Act of 1964 prohibits employers from making employment decisions because of race or sex — and it protects every race and both sexes. Two recent Supreme Court decisions sharpened the rule. In Muldrow v. City of St. Louis (2024), the Court held that a plaintiff challenging a discriminatory change in the terms or conditions of employment need show only some harm, not a "significant" disadvantage. In Ames v. Ohio Department of Youth Services (2025), the Court unanimously rejected the rule that majority-group plaintiffs must meet a higher evidentiary bar. Separately, 42 U.S.C. § 1981 prohibits race discrimination in the making and enforcement of contracts — including employment relationships — with a four-year window and no agency-filing requirement. (Statutes and opinions: Title VII, § 1981, Muldrow, Ames.)

To be precise about what this page does and does not say: practices like the four categories above can give rise to liability under Title VII and § 1981 — whether any particular company's practice did depends on whether a protected trait actually changed a decision, which is a fact-specific question no public document fully answers. No court or agency has found that any company listed below violated the law, and the IBM and Deloitte settlements themselves resolved allegations without an admission.

Can you sue your employer over illegal DEI practices?

You can bring a claim if race or sex affected an employment decision about you — whatever your race or sex. In practice, the people with the strongest potential claims fall into four groups:

Passed over for a hire or promotion. You lost a position, or never got a real shot at one, while your employer was running demographic targets, slate rules, or diversity-linked pay for the managers deciding. Under Muldrow, even a lateral transfer or a changed role can qualify if it left you worse off in some respect.

Excluded from a program. You were told a fellowship, sponsorship, mentoring, or leadership program "wasn't for you" — or its published eligibility was limited to particular races or one sex — and participation carried real career value.

Managed under the targets. You were a manager, recruiter, or HR professional whose own evaluation or bonus depended on demographic numbers, and you saw — or were instructed in — how the pressure was applied to individual decisions. You may have both your own claim and first-hand knowledge relevant to others' claims or a whistleblower claim.

Slotted into a process that wasn't real. Slate rules also injure the people they nominally favor: candidates interviewed to fill out a slate for a decision already made. A proposed class action against JPMorgan Chase, Jackson v. JPMorgan Chase & Co. (E.D. Mich., filed December 2025), alleges exactly this "sham interview" scenario. (Allegations, not findings.)

Proof matters, and this is where the documents on this page come in: when a company's own reports describe diversity-linked pay, slate definitions, or numeric goals in the years you were affected, those documents are evidence that the practice existed and was official policy — the kind of evidence most discrimination plaintiffs never have.

Which companies documented these practices?

Fett Law has surveyed the public DEI record of all Fortune 1000 companies — annual reports, ESG and sustainability reports, proxy statements, diversity reports, and official web pages, 2019–2026, including archived copies of pages companies later deleted — screening for the four practice categories in the IBM settlement. We cannot possibly list every company here. The tables below are a small sample of employers whose own published documents described at least one of the four categories. A ● means the company's own published documents described a practice in that category; a blank cell means our review of public documents did not find one (not that none existed — many operative practices never appear in public records).

All four categories documented

A sample across industries

One pattern deserves emphasis: many of these companies deleted the evidence. Marathon Petroleum's 2019 report now returns "not found"; Wells Fargo removed a program page; KPMG deleted its transparency reports; UnitedHealth scrubbed its site; Cummins, Honda, and others quietly dropped goals from later editions. Deleting a report does not delete the history — archived copies are preserved, and in several cases the rollback announcements themselves describe the practices being discontinued.