Compliance Round Up – DOJ Hits IBM With a $17 Million DEI Settlement, FTC Targets Noncompetes, and Virginia Reshapes Worker Protections (May 2026)

Headshot of Jennifer Kieswetter
Written By
Jennifer Kiesewetter
Published On: May 4, 2026

Jenny Kiesewetter is a practicing ERISA and employee benefits attorney who partners with HR teams on a wide range of workplace compliance matters — from benefit-plan obligations to day-to-day HR policies and regulatory requirements. Her guidance helps employers spot risks early, navigate regulatory change, and make informed decisions that support both employees and the organization.

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The Department of Justice closed its first False Claims Act settlement targeting alleged DEI discrimination by a federal contractor, with IBM agreeing to pay more than $17 million. The Federal Trade Commission turned a 700-location pest control giant into the test case for its new noncompete strategy. And Virginia’s governor signed a wave of worker-protection laws that lock in pay floors and pull salary history out of hiring.

Here is what HR teams should track this week.

Federal News

Effective Date: Proposed consent order announced April 15, 2026

What’s Changing:

On April 15, 2026, the Federal Trade Commission announced a proposed consent order with Rollins, Inc., the parent company of Orkin, HomeTeam, and Critter Control. The order would require Rollins to stop enforcing noncompete agreements, rescind existing restrictions, and notify more than 18,000 current and former workers. The FTC also sent warning letters to 13 additional pest control companies, signaling broader scrutiny across the industry.

The Rollins agreements generally restricted employees from working in the pest control industry for two years within a 75-mile radius of any Rollins location. Given the company’s nationwide footprint, these provisions significantly limited workers’ ability to find employment within the industry.

The Federal Trade Commission raised concerns that these agreements may limit competition, particularly when applied to rank-and-file workers. The action reflects the agency’s current enforcement approach following legal challenges to its broader noncompete rule, with a focus on targeted actions against specific companies and industries. 

What This Means for HR:

  • Audit your noncompete program against the Federal Trade Commission’s stated concerns — scope, geography, employee compensation, and the legitimate business interest the restriction protects. Pay particular attention to agreements applied to rank-and-file workers.
  • Monitor your industry for FTC warning letters and enforcement activity. Expect similar sweeps in sectors that rely heavily on noncompetes.
  • Document the business justification for any noncompete you maintain, including the specific confidential information, customer relationships, or specialized training at issue, and be prepared to show why a narrower alternative would not adequately protect those interests.

Effective Date: Settlement announced April 10, 2026

What’s Changing?

On April 10, 2026, the U.S. Department of Justice (DOJ) announced that IBM agreed to pay more than $17 million to resolve False Claims Act (FCA) allegations tied to its diversity, equity, and inclusion programs. The settlement is the first under the DOJ’s Civil Rights Fraud Initiative, launched in May 2025, and the first FCA action targeting alleged “illegal DEI practices” by a federal contractor.

The DOJ alleged that IBM offered certain training, mentoring, leadership development, educational opportunities, and similar resources only to certain employees based on protected demographic characteristics. The DOJ also alleged that IBM used a “diversity modifier” tying executive bonus compensation to demographic representation targets. IBM denied the covered conduct, and the settlement does not include an admission of liability. 

The settlement follows Executive Order 14398, “Addressing DEI Discrimination by Federal Contractors,” signed March 26, 2026, which expressly links contractor DEI compliance to FCA liability. IBM is the first sign that the framework has teeth.

Although this case centers on a federal contractor, private employers should take notice—this signals a growing enforcement trend that may shape how regulators and plaintiffs evaluate DEI programs across the private sector. 

What This Means for HR:

  • Audit any program that conditions access, eligibility, or selection on protected characteristics if your organization holds federal contracts or subcontracts, and work with counsel to confirm compliance. Merit-based, consistently applied criteria remain the strongest defense. 
  • Review compensation structures for incentives tied to demographic outcomes. Bonus modifiers linked to representation targets sit at the center of the IBM case.
  • Map FCA-relevant certifications. The exposure here is not just enforcement risk; it includes whistleblower exposure under the FCA’s qui tam provisions, where employees can pursue claims directly.

Trending State News

Effective Date: Assembly Bill 2064 most recently amended April 9, 2026; under consideration in the California legislature

What’s Changing: 

California Assembly Bill 2064, introduced by Assembly Member La-Shae Sharp-Collins (D-San Diego) and amended on April 6, 2026, would expand protections related to criminal history under both the California Fair Employment and Housing Act (FEHA) and the Unruh Civil Rights Act. The bill defines criminal history broadly, building on existing California restrictions governing the use of arrest and conviction records in employment decisions. 

If enacted, employers could still consider criminal history through individualized assessments under California’s existing Fair Chance Act, but they would have to demonstrate that a conviction has a direct and adverse relationship to the specific duties of the position before denying employment. The practical effect is an increased burden on employers to justify decisions based on criminal history. 

What This Means for HR:

  • Track AB 2064 through the California legislature. The bill’s broad definition and individualized-assessment requirement would expand existing requirements and change how employers evaluate criminal background checks for California roles.
  • Audit your current Fair Chance Act process. Documented assessments tied to specific job duties already reduce risk and would strengthen your position if AB 2064 becomes law.
  • Train recruiters and hiring managers on the difference between a blanket disqualifier and an individualized review. The latter is already best practice; AB 2064 would reinforce and expand the requirement for individualized assessments.

Effective Date: Minimum wage bills signed April 9, 2026; salary history ban signed April 22, 2026 (effective July 1, 2026); first scheduled minimum wage increase January 1, 2027

What’s Changing?

Virginia Governor Abigail Spanberger spent April 2026 reshaping the worker-protection rules her state’s employers operate under. Two signings in particular deserve HR attention.

On April 9, 2026, Spanberger signed Senate Bill 1 and House Bill 1, codifying the $12.77 per hour minimum wage already in effect on January 1, 2026, and locking in scheduled increases to $13.75 per hour on January 1, 2027, and $15.00 per hour on January 1, 2028. Before these bills, Virginia’s path beyond the current rate depended on legislative reauthorization. The signed legislation converts that uncertainty into a fixed, multi-year schedule.

On April 22, 2026, Spanberger signed House Bill 636 and Senate Bill 215, the companion salary history ban that prohibits Virginia employers from seeking, requiring, or relying on a candidate’s prior salary history to set pay. The law takes effect July 1, 2026, and applies across hiring, promotion, and transfer decisions. 

Employers can still ask candidates about salary expectations and disclose internal pay ranges; they cannot ask what a candidate earned previously or use a recruiter or vendor to gather that information indirectly. Affected applicants can seek injunctive relief, lost wages, and attorneys’ fees.

What This Means for HR:

  • Update payroll and budgeting models with the codified minimum wage rates: $12.77 for 2026, $13.75 for 2027, and $15.00 for 2028. Confirm that Virginia offer letters and tip credit language reflect the new schedule.
  • Remove salary history questions from job applications, applicant tracking system fields, and interview scripts before July 1, 2026. Train recruiters and hiring managers on what they can and cannot ask, and instruct your background check vendor to suppress prior salary data for Virginia roles.
  • Calibrate offers based on the role’s value, your internal pay structure, and external market data. With salary history off the table, a strong compensation framework becomes essential.

Around the Courts

Effective Date: Decision issued April 21, 2026 (Cemex Construction Materials Pacific, LLC v. National Labor Relations Board, U.S. Court of Appeals for the Ninth Circuit)

What’s Changing:

On April 21, 2026, the U.S. Court of Appeals for the Ninth Circuit issued its long-awaited decision in Cemex Construction Materials Pacific, LLC v. National Labor Relations Board, enforcing the Board’s bargaining order against the employer. The court concluded that the employer’s unfair labor practices were severe enough to justify a bargaining order under long-standing Supreme Court precedent in NLRB v. Gissel Packing Co., 395 U.S. 575 (1969).

The Ninth Circuit did not decide whether the Board’s 2023 Cemex framework is valid. Instead, it relied on existing law and declined to address the new standard.

The Board’s 2023 framework, often called the Cemex standard, requires an employer faced with a union demand for recognition to either recognize and bargain or promptly seek an election. If the employer commits unfair labor practices that would require setting aside the election, the Board may issue a bargaining order. 

The result keeps the framework in place at the Board level. The Sixth Circuit, in Brown-Forman Corp. v. NLRB earlier this spring, rejected it outright. Other circuits remain free to take their own positions.

What This Means for HR:

  • Plan for the NLRB to apply the Cemex standard in proceedings outside the Sixth Circuit.  Employers in Ninth Circuit states should plan union response strategies under the existing framework.
  • Train managers on prohibited conduct during a representation campaign. Wage increases, benefit changes, and gifts during organizing are unfair labor practices regardless of which bargaining-order standard applies.
  • Engage counsel early if you face an active or potential union campaign. Forum, timing, and remedy strategy all turn on which test governs.

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