DEI Developments: The Proxy Problem" is the focus of the latest episode of the Practical Policies podcast. This week's episode features Member Jen Rubin and Associate Nikki Rivers, who break down the following areas for employers to consider:
- The recent Federal DEI guidance concerning "illegal DEI" and the concept of proxies for discrimination
- The impact of the recent guidance on recruiting practices
- Risk mitigation strategies for employers
Listen for insights about the recent stream of regulations, executive orders, and guidances on DEI relevant for all aspects of employment law.
Mintz On Air: Practical Policies – DEI Developments: The Proxy Problem Transcript
Jen Rubin (JR): Welcome to Mintz On Air, the Practical Policies podcast. Today's topic is 'DEI Developments: The Proxy Problem'. I'm Jen Rubin, a member of the Mintz Employment Group with the San Diego based Bicoastal Employment Practice representing management, executives, and corporate boards. Thank you for joining our Mintz On Air podcast. If you have not tuned into our previous podcasts and would like to access our content, please visit us at the Insights page on mintz.com or you can find us on Spotify.
Today I'm joined by my San Diego based colleague, Nikki Rivers, who, like me, represents employers in all aspects of employment law. Nikki and I have been working on various developments that have occurred since the Trump administration started back in January of 2025, and on some of the executive orders and developments that have occurred since the change in administration.
If you followed our blogs and advisories, you know that Nikki and I have worked hard to keep up with the stream of regulations, executive orders, and guidance from all aspects of our federal government. Needless to say, this has become a full-time job in addition to our full-time jobs. Thank you, Nikki, for joining us today.
Nikki Rivers (NR): So excited to be here, Jen. Thanks for having me.
Setting the Stage: DEI Developments Under the New Administration
JR: I really appreciate you taking the plunge into these very murky, and may I say, dangerous waters. To set the stage for our listeners, today, Nikki and I would like to talk about some of the most recent developments relating to DEI. We are going to be focusing on proxies for discrimination claims. We're gonna get into that in a moment, but I thought that the best way we could start is by setting the stage. Nikki, I'd like you to do that by telling us how we got here and what do we need to know to have this discussion?
NR: That in itself could be a podcast. Let's assume everyone has a working knowledge of the different orders and memos that have come out, however let me just give you that quick, quick history. We've got the DEI executive orders I'm talking about the legal DEI executive order, the gender ideology executive order, and to a certain extent, that executive order which purported to eliminate the disparate impact analysis codified in Title VII. We then shift from executive orders over to investigation letters from the EEOC. think, you know, it's been known and understood that the EEOC has been working in the background and sometimes in the foreground issuing letters to various law firms and private employers seeking information about their DEI practices in light of those executive orders.
Finally, which I know is the heart of what we want to talk about today is the agency guidances and memos to come out. When I'm talking about agency guidance, memos, and the context of DEI, I'm really focusing on first, the joint guidance that came out from the EEOC and the DOJ, which talks about how to identify illegal DEI in the workplace. I'm also talking about a memo that came out from the Attorney General's office back in May, which established the civil rights fraud initiative. This is hugely important because that was followed on by the, what I call the Schumate memo. This is the memo from Brett Schumate on June 11, which stated that the DOJ will use its enforcement authority to, and I quote, "prioritize investigations and enforcement actions advancing priorities about combating discriminatory practices and policies" and other points in that memo. That leads us to this memo, this July 29 memo, issued by the DOJ as guidance for recipients of federal funding regarding unlawful discrimination.
Understanding Federal Guidance: What Does It Really Mean?
JR: I'm sure everybody's thinking, well, wait a minute, are we playing 4D chess here? Right? We've got guidances, we've got guidelines, we've got executive orders, and of course we have our statutory framework that starts with Title VII and some of the changes that the Trump administration has proposed to that.
Let's zero in now on the guidance. Let me ask this very basic question to try to simplify things. How much weight do you give to a guidance that comes from an agency of the federal government?
NR: Such a simple question. It's such a difficult answer. I will try. In theory, a guidance is just that. It is a guidance. It is a window, I think is the best way to put it, into how a particular agency is going to review or analyze a particular topic. When we talk about this guidance here, the July 29 guidance, really talking about the guidance as being focused on what the DOJ is looking at for purposes of identifying discriminatory practices for specifically recipients of federal funding.
JR: Nikki, when you say recipients of federal funding, what does that mean?
NR: When we talk about recipients of federal funding, we're really talking about federal contractors and those who receive federal grants. That is the focus of the July 29 guidance. It is issued specifically to those particular groups.
JR: Maybe we have folks out there who say, "You know what, federal funding, we get a $100 grant a year from the federal government. Do we need to worry about this?"
NR: I would argue under the theory that I am a federal-funded entity or a federally-funded organization, I think a $100 grant would be de minimis. Where this guidance becomes critically important and why we're probably talking about it today is because of the impact that this guidance will have not just on those receiving federal funding, but also on private employers. There's a lot of... not even subliminal messaging, actually really upfront and express messaging exactly about what the DOJ is looking at. It would be wise to not ignore this guidance simply because your organization is not federally funded.
JR: We take a step back. This guidance is a window into how the federal government is thinking about, let's call it 'proxies for discrimination'. I know we're going to talk about that in a moment, but it applies to those who receive federal funding, but then there's this kind of chilling effect that you just talked about because it is a glimpse into how the federal government is thinking about these things. Tell us what it says at a very high level. What is the structure of this guidance? And then we're going to dig into it a little bit.
NR: The guidance is set out in two parts. There is what it identifies first as a list of practices which the DOJ believes could promote unlawful discrimination. It identifies specifically several practices: You've got preferential treatment, the proxy discrimination, segregating individuals based on protected characteristics, using protected characteristics in the selection process, and also utilizing training programs to, as the guidance says, promote discrimination or create a hostile work environment. The first section is what it identifies as being possibly discriminatory.
The second part of the guidance then focuses on best practices. It's a little bit comforting to know that some of the best practices that the DOJ is identifying are best practices that we've encouraged and repeated to our clients and also generally. Things like documenting rationales for hiring programs, things like avoiding diversity quotas, which have never been legal as we know under any standard, and things like ensuring training programs have material and content that isn't going to give rise to hostile work environment. There are some curveballs in those best practices too, especially relating to the proxy.
JR: We'll get to the proxies in a moment because, to me, that's kind of the most fascinating part of the guidance. I want to pause quickly because one thing that I think is important for our listeners to understand, especially for those receiving federal funds, is the potential for False Claims Act (FCA) liabilities. Explain to us, how this comes into play with respect to this particular guidance and also the Schumate memo.
NR: If you look at the guidance Jen, there's nothing in there that mentions FCA liability. that may not be top of mind, but I think should certainly be top of mind, notwithstanding the fact that it's not specifically mentioned in the guidance. The FCA liability really stems from the original illegal DEI executive order back in January, and as we've seen over the course of the guidances and memos that have been issued, it's taking a more and more prominent role. We've got now the civil rights funded fraud initiative, which is tasked with identifying potential discriminatory practice for purposes of FCA liability. Then we've got the Schumate memo that comes out and says, we are indeed committing funds and resources to finding areas of discriminatory practices so we can pursue FCA liability. It really stands to be weighed heavily by federal contractors and federal grantees specifically because of the fact that they have to do those DEI certifications.
JR: Explain what that's about, please.
False Claims Act Liability and DEI Certifications
NR: The DEI certifications are mandated by the illegal DEI executive order, and what they say in a very high-level summary is that the organization is required to certify that they do not engage in any discriminatory practices or that they do not engage in any illegal DEI. As you and I know, Jen, this concept of illegal DEI has been undefined.
Undefined since it was first, I won't say created, but as it was first mentioned in that January 20 illegal DEI memo. Federal contractors and federal grantees who are presented with these DEI certifications really need to think critically about what their practices are, what their programs are, and what their policies are, because again, that certification can give rise to viability under the FCA.
JR: This is a very complicated interrelationship here, particularly for those who are certifying that they are not engaged in these illegal DEI practices, right? That's a real concern. If you're not sure what the practices are, it's hard to certify that you're not engaging in it. But this is where this guidance comes in, right? Because now the guidance is explaining this window into what the government thinks is illegal DEI.
Now let's come full circle because this is where the concept of the proxy comes into play, right? We're not talking about proxies like the public company reporting. We're talking about proxies as substitutes for discrimination. So, Nikki, tell us what the term proxy is being used for in the context of this particular guidance.
The Proxy Problem: What Counts as Discrimination?
NR: Jen you really just described it right there. It is this concept that the DOJ is applying to state that an organization is using something that seems on its face to be fine, but as a vehicle for, according to the DOJ, pursuing what it believes to be illegal DEI. I will say too about this guidance: as a whole it is taking us a large step beyond where we expectednew things to be, what the current state of play was. We go back to the EEOC DOJ guidance, and it also outlined practices that it deemed to be indicative or suggestive of illegal DEI. When you peel that guidance apart, those practices are based on court decisions and those court decisions may not have been widely known, but there was some true foundation for the guidance. Again, taking a step back with that EEOC DOJ guidance, it wasn't surprising.
Where this guidance, this July 29 guidance stands in stark contrast is that some of the concepts, some of the practices it identifies, have been practices that we in the DEI space and as employment lawyers have thought were acceptable.
JR: Can you give some examples?
NR: In the wake of the Harvard admissions decision, we've all understood it to be an acceptable practice to inquire into lived experiences or ask applicants to discuss how their different backgrounds have played a role in who they've become. The guidance here attacks that as an unlawful proxy.
JR: Can you say more about that? An unlawful proxy meaning the guidance says that's a proxy or a substitute for what? What is it a substitute for?
NR: That is the question because as I noted at the top of this, the guidance is focused on identifying practices and then offering best practices to avoid engaging in what it identifies as illegal practices. When we talk about unlawful proxies in the context of asking about lived experiences, the idea that what the DOJ is getting at and, actually it seems to suggest, is that by asking about someone's background, you are using that information to advantage or disadvantage someone else.
I can be more explicit here. When we talk about the guidance, the guidance is really focused on two protected characteristics. It's focused on race and it's focused on gender. According to the guidance, a college, for instance, or an employer asks an applicant about lived experiences, the guidance is assuming, and apparently will assume, that that request is intended to understand information about that person's particular characteristics in order to use that information to give them a proverbial leg up over others who have not had those same experiences.
JR: Let me just stop you there because this is the part where I admit that I get a bit confused. If the goal is to understand people holistically, to talk about lived experiences or background, and to know, every single human has a different experience. Every single human comes from different backgrounds and is shaped by different forces in their lives. I had thought after the Students for Fair Admissions case from the Supreme Court that it seemed clear in one of those footnotes that asking about those particular characteristics that make us unique as humans is perfectly acceptable. So are we at odds here?
NR: That is exactly the conflict that I'm alluding to. This guidance takes that footnote from the Harvard admissions decision and says, "No, that is, according to the DOJ guidance, a proxy for unlawful discrimination." According to that guidance, if you're going to ask about a different experience, and I'm making some assumptions here and I want to be clear about that, if you're asking about what lived experiences someone has andif you're asking about basically anything other than a very neutral set of facts, you must be doing it because you're interested in learning about how someone's race or gender places them in a different position that warrants some type of advantage or disadvantage.
JR: I just want to pull a string on that for a moment. So, I'm an employer, right? And I want to go out and hire people. I want to hire the best talent in my workforce, right? There's no question. You have to have skills. You have to have education. You have to have experience that I need in my workforce. And this is what I'm concerned about as an employer. And that's all allowed, right? Nobody's saying you can't do that. Let me go a step further because now I'm an employer and I want to make sure that I have the right workforce, not only for now, but to prepare for the future. In order to do that, I need to make sure that the people I'm bringing into my organization have certain experiences and have a diversity of thought, not race or gender, right? Have a diversity of humanity to come into my organization. How do I – this is the totally unfair question I'm going to ask you right now, Nikki – how do I do that in light of this guidance? Let's look at super practical right now. I'm an employer. What to do?
Practical Advice for Employers Navigating DEI Risks
NR: This is first off where risk analysis comes in. First thing to consider is what kind of employer am I? I don't mean that to be this esoteric existential question. But am I a federal contractor? Am I a federal grantee? Or am I a private employer? Because the risk analysis changes depending on whether which bucket you fit into or which multiple buckets you fit into.
I think all employers certainly still can pursue an inclusive workforce and for exactly the reasons that you described. But how to do it may change depending on whether or not you are a recipient of federal funding or simply a private employer. If you want to avoid risk, recognizing that the guidance is just a guidance, you may want to reconsider what questions you're asking your applicants, notwithstanding the fact that you do want to create an inclusive environment.
I certainly think that there are still ways to do it. You have to be more thoughtful. And I'll shift out of the application, the essay thing, and think more broadly in terms of just general recruiting.
In general recruiting, typically... employers go to job fairs and they go to diversity job fairs. My advice would not be to stop going to those job fairs, but to consider also other job fairs as well. To focus on a diverse pipeline, not specifically focused on the capital "D" diverse, but thinking about pulling applicants from all different walks and ways of life. So if you're only going to diversity job fairs, expand that. Go to other job fairs as well. Go to job fairs where you think, if you're an engineer, where young engineers are going to be attending. Don't just go to the Black Engineer Diversity Job Fair.
JR: What about things like the Rooney Rule? For those of you who don't know what the Rooney Rule is, that's requiring that a minimum number of individuals who represent underrepresented communities are considered for certain positions. This is something that came out of the NFL and that has been under frequent attack. Can an employer have a panel of diverse individuals? Is that a requirement that an employer can put into play here?
NR: It's great that you mentioned the Rooney Rule because that's been particularly fascinating to me. Having a diverse slate requirement to me speaks to a diversity quota, not in the sense of hiring, but in the sense of generating applicants. So I've always wondered why the Rooney Rule has never really been mentioned. I think it's fascinating that the Rooney Rule is coming from the NFL, because it's one thing to go after private employers, but it's another thing to go after America's great love, not baseball, but football.
JR: I agree with that by the way, but keep going.
NR: To the extent there was any question about the viability of the Rooney Rule, notwithstanding the fact that diversity quotas have never been allowed, the guidance here specifically calls out the Rooney Rule as a potential illegal practice.
JR: So, if you're a federal contractor receiving federal funds, use it at your own risk type of thing.
NR: Absolutely.
JR: What about scholarships? A lot of companies have scholarships that are predicated on frankly, race or gender, which are, generally these are private philanthropic endeavors. Are scholarships still okay if they're premised on race or gender?
NR: Again, this is going to be one of those first know which bucket you fall into. The risk analysis continues to depend highly on that. We've always operated under the idea that we can do what we want with our money. That premise now becomes riskier. The idea of having a scholarship that is race-based or gender-based is now subject to additional scrutiny under this guidance. It becomes still a 'tread carefully' situation, particularly depending on whether or not you're a federal funding recipient or a private employer.
JR: What about using this lived experiences question? Employers saying to somebody, "Hey, you're a job applicant, tell me about any particular aspects of your life that you found were challenging or shaped you as a person." Is there anything wrong with asking those questions in the job application process?
NR: The guidance would say yes. I haven't mentioned this before, but the other thing about this proxy concept that troubles me is that there is an assumption of intent that's being taken on by the federal agency. It is going to interject a certain intent into employers' actions.
I you're going to ask about lived experiences, you may do so for a variety of reasons, including wanting an inclusive workplace, but maybe there are other things that you're looking for as an employer. It's going to be, on its face, riskier in light of this guidance. To the extent that you still are interested in pursuing those questions, it would behoove you to identify somewhere why you're asking those questions. Document that rationale.
Wrap-up and Recap
JR: I'm going to wrap up here and I really like ending on this. First of all, just to recap, know what you are, number one as an employer. Are you a federal contractor? Are you receiving federal funds? What are your risks? So, understanding what you are. But this goes to know who you are. What's important to you as an employer? Employing these kind of statements of intent that make it clear that, to the extent you're using any of these vehicles to create an inclusive environment, that you're doing so not as a proxy, as the guidance says, but because you're trying to accomplish certain things. Then set forth what those things are, which is preparing your workforce for the future, you're looking for certain skills, whatever it may be, these are things that somebody really needs to think about in terms of who you are because that might help divert a claim that you're using something as a proxy for discrimination when in fact that is clearly not your intent.
Thinking about those statements of intent that are used in your recruiting process and your human resources process, perhaps even in your mission statement as an employer, particularly for corporate employers, that's something to think about.
That goes back to one of the things that was mentioned at the top of the podcast, which is knowing who you are making sure you've looked at your policies and procedures, ie these audits that we've been suggesting since January to make sure that you're compliant with all these ever-changing rules and regulations. That's something that we suggest and for all of you who have followed my podcast know I try to bring things back to the practical because we're all out here trying to do business and do business in a way that does accomplish our missions as employers.
Nikki, thank you. I know I asked you some really tough questions today. You did a great job trying to get really practical and may I say, cogent answers to those questions. I know some of those questions were unfair, but then again, we're just unpacking what we're reviewing.
We here at Mintz and our employment group is standing by to help anybody who is trying to work through these issues, which are important to understand.
Again, thank you, Nikki Rivers. I'm Jen Rubin. Thank you again to those who have tuned in to our Practical Policies podcast. Visit us at Mintz.com or find us on Spotify.
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