Defense contractor Lockheed Martin has agreed to pay approximately $29.5 million to settle federal allegations that its diversity, equity, and inclusion programs discriminated against white employees and violated anti-discrimination requirements attached to its government contracts.

The two-part settlement, announced Tuesday by the Department of Justice and the Equal Employment Opportunity Commission (EEOC), includes $22 million for the federal government and approximately $7.5 million for more than 1,000 Lockheed Martin employees who were allegedly affected by discriminatory employment practices. The employee payments resolve claims that the company discriminated against white workers in performance evaluations, bonuses, and other compensation decisions.

The Justice Department alleged that Lockheed Martin violated the False Claims Act by falsely certifying that it complied with federal anti-discrimination requirements while considering race and sex in employment decisions. Federal contractors are required to certify that hiring, compensation, and workplace treatment are conducted without discrimination based on those characteristics.

Investigators focused in part on a compensation program introduced in 2021 called the Compensation Adder, which awarded additional annual pay increases to the top 20% of employees within each business unit. Managers were initially instructed to select employees based on merit and performance. However, the government alleged that the company later used demographic analyses to flag selections that did not meet internal racial and gender representation goals.

According to the Justice Department, human resources personnel pressured some managers to revise their selections after those demographic reviews. The department alleged that certain employees who were not members of minority groups were removed from consideration so minority employees could be added, regardless of their original performance-based nominations. In one instance cited by investigators, a business unit leader was reportedly instructed to reevaluate minority employees until enough changes were made to resolve a racial disparity flagged by the company.

The government also alleged that Lockheed Martin incorporated demographic targets into management performance measures and used race and sex in hiring and promotion decisions. The company allegedly established internal workforce goals and offered certain mentoring, training, and leadership development opportunities based on employees' race or sex.

The EEOC's portion of the settlement resolves a 2025 commissioner's charge filed by EEOC Chair Andrea Lucas. The agency said the approximately $7.5 million in payments to more than 1,000 employees represents the largest publicly announced group of workers to receive compensation through an EEOC settlement involving alleged discrimination connected to a corporate DEI program.

"Title VII protects every worker from employment discrimination on the basis of race, and that protection does not yield when discriminatory decisions are framed as diversity initiatives," Lucas said. She added that the settlement reinforces the requirement that workplace opportunities and compensation cannot be allocated based on race or sex.

Former Lockheed Martin Vice President Tim Booher initially brought the allegations forward through a whistleblower lawsuit filed under the False Claims Act. Booher reportedly resigned from the company in 2023 because he believed he could no longer participate in what he considered discriminatory practices. Under the settlement's whistleblower provisions, he will receive $4.4 million from the federal government's recovery.

Lockheed Martin denied wrongdoing and emphasized that the settlement does not constitute an admission of liability. The company said it agreed to resolve the matter to avoid the distraction and expense of prolonged litigation, allowing it to remain focused on its national security work.

The agreement requires Lockheed Martin to comply with federal anti-discrimination laws and maintain a merit-based workplace in which race and sex are not considered in hiring, compensation, bonus, or promotion decisions. The EEOC will have the ability to review the company's compliance during the agreement's term.

The settlement is part of the Trump administration's broader effort to challenge race-based employment practices at companies that receive federal funding. The Justice Department has pursued similar cases involving major contractors, including IBM, Deloitte and Accenture, arguing that companies cannot certify compliance with federal civil rights requirements while using race or sex as factors in employment decisions.

The government stressed that the claims resolved by the Lockheed Martin agreement were allegations and that no determination of liability was made.