Key Takeaways
- A recently released memo from the U.S. attorney general reminds employers of the current administration's stance on diversity, equity, and inclusion efforts.
- The guidance is explicitly directed at recipients of federal funds, but the numerous "unlawful practices" it lists likely also carry implications for private sector employers.
- While several elements of the memo are written vaguely, it provides concrete examples of "best practices" that may help employers avoid scrutiny from the U.S. Department of Justice.
Recipients of federal funds were recently provided with additional insights into the administration's positions related to diversity, equity, and inclusion (DEI) programs. On July 29, 2025, U.S. Attorney General Pam Bondi released a memorandum titled "Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination" (the memo). The memo provides a reminder of the administration's critical posture toward DEI programs for educational institutions, public agencies, and private organizations that receive federal funds. The memo does not announce an outright ban on all DEI practices but could lead to federal fund recipients pulling back from lawful practices meant to promote inclusive workplaces. While targeted at heads of federal agencies and recipients of federal funds, private employers should take notice of the administration's positions and expect the government to advance such positions if targeted in any investigation.
The Memo's Key Points
The memo begins with a set of key points, reiterating that the use of protected characteristics to determine employment, program participation, and the allocation of resources or benefits is unlawful. The memo notes that applying neutral criteria—such as "cultural competence" or "lived experience"—to determine employment or program eligibility could be illegal if those terms function as proxies for intentional discrimination. The memo also states that federal funds should not be used to support third-party programs that discriminate on protected bases and that retaliation for opposing "DEI practices [that are] reasonably believed to violate federal antidiscrimination laws" violates the law.
The Memo's Examples of "Unlawful Practices"
The memo includes a nonexhaustive list of unlawful practices that could result in revocation of grant funding. These practices include:
- Scholarships or educational programs limited by race
- Preferential hiring or promotion based on protected characteristics
- Restricted access to facilities or resources based on race or ethnicity
- Use of unlawful proxies, such as targeting specific geographic areas or institutions primarily due to their demographic composition
- Diversity statements or requirements for "cultural competence" serving as substitutes for direct consideration of protected characteristics
- Race- or sex-based training sessions
- Segregation (explicit or implicit) in programs or facilities (unless related to certain single-sex facilities)
- "Diverse slate" policies based solely on race or sex in hiring
- Race- or sex-based selection for contracts
- Program participation or employment tied to race or sex
- Trainings that encourage or promote discrimination based on a protected trait
Many of the practices identified as potentially problematic were previously discussed in a joint guidance released in March by the U.S. Department of Justice (DOJ) and Equal Employment Opportunity Commission (EEOC). We address that guidance here.
Further, many of the targeted practices the memo identifies as contrary to law follow legal decisions and are not practiced by most federal fund recipients. However, some listed practices raise significant questions and compliance ambiguities. We address those below.
Training Programs
The memo targets training programs as potentially creating a hostile work environment if they mention topics such as "white privilege" or "toxic masculinity." Our Update here details how courts have, by and large, rejected claims that trainings covering those topics violate the law.
"Proxy" Discrimination
The memo's focus on "proxy" discrimination raises additional questions for recipients. The memo states that "proxy" discrimination occurs when an entity uses "ostensibly neutral criteria that function as substitutes for explicit consideration of race, sex, or other protected characteristics." This section of the memo notes that "cultural competence requirements," such as lived experience, cross-cultural skills, or cultural competence, could evaluate "racial or ethnic background rather than other legitimate factors."
The proxy discrimination language, however, raises questions. First, the language could be seen as an attempt to warn recipients that subjective criteria cannot serve as a pretext for race-based decision-making. Indeed, the Supreme Court of the United States expressed similar concerns in a college admissions case regarding pretext. The majority decision, though, allowed criteria such as lived experience to be considered if it relates to a specific person's own background, experience, and perspective. Second, the language can be read to take aim at subjective factors writ large. To the extent that a federal fund recipient seeks to consider experiential or cultural factors to create an environment that is open to all (including those with diverse religious views), the memo, by singling out experiential and cultural factors, implies that those factors are not legitimate. This could place the use of those factors in the crosshairs even if a recipient had no intent to use racial or ethnic backgrounds as a factor. For example, considering whether an applicant has deep experience working with Spanish-speaking communities entails some use of subjective criteria. The memo creates the impression that any use of these subjective criteria, even if race or national origin plays no role in the hiring decision, could violate the law.
Supplier Diversity
The memo takes aim at supplier diversity programs for women and minority-owned businesses, stating that prioritization of those vendors would be an example of "unlawful" practices. The underlying legal premise of this statement is unclear, as the memo's legal section omits any mention of Section 1981, which governs discrimination in contracting. Moreover, the memo does not clearly address various federal and state requirements allowing for consideration of such vendors. The memo includes a reference to practices "satisfying the appropriate level of judicial scrutiny." However, the memo does not elaborate on this vague statement, and recipients may be left to guess the best way to navigate supplier selection.
Interest and Resource Groups
Though the memo does not explicitly mention employee resource groups (ERGs), it raises significant questions about the administration's posture toward interest groups, including ERGs or affinity groups. According to the EEOC and DOJ guidance released in March, ERGs can violate the law when membership is limited to a protected class. However, the DOJ in this memo takes a novel view that may apply to interest groups by stating that designating a facility or resource with an "identity-based focus" "creates a perception of segregation and may foster a hostile environment," even if access to the facility or resource is technically open to all. The memo cites a "BIPOC-only study lounge" as potentially creating a hostile environment. This position is unprecedented, as courts have not landed on such a broad reading of discrimination law. Rather, by most accounts, ensuring groups and facilities allow for equal access remains the most accepted manner of complying with the law. Nonetheless, the DOJ's position may foster claims that the mere presence of ERGs creates a hostile work environment.
The Memo's Suggested "Best Practices"
Notwithstanding the various questions and ambiguities, the memo closes with a list of suggested best practices, including recommendations to:
- Guarantee inclusive access
- Prioritize skills and qualifications
- Prohibit the use of demographic-driven criteria
- Document legitimate, nondiscriminatory rationales
- Scrutinize neutral criteria for proxy effects
- Eliminate diversity quotas
- Steer clear of exclusionary training content or structure
- Include nondiscrimination clauses in third-party contracts and monitor compliance
- Establish clear and safe antiretaliation procedures and reporting mechanisms
Many recipients of federal funds will find the list consistent with their current practices. However, the suggestion that recipients scrutinize neutral criteria for proxy effects is notable. President Trump's recent executive order related to disparate impact, "Restoring Equality of Opportunity and Meritocracy," clearly disfavors the legal theory. However, determining proxy effects of neutral criteria would appear to require consideration of whether a neutral practice has an adverse impact on a particular population, which is evaluated through disparate impact analysis.
Potential Effects on Employers
As with previous guidance, this memo does not go so far as to state that the administration considers all DEI-related practices to be unlawful. Instead, in line with March's joint guidance from the EEOC and DOJ, this document attempts to provide illustrations of those DEI practices that, according to the administration's perspective, run afoul of antidiscrimination laws or federal funding priorities.
As the administration continues to reiterate its focus on DEI practices, it will remain up to the courts to set the guidelines for liability under Title VII, Title VI, Title IX, Section 1981, and other antidiscrimination laws. Courts, as a result of the Supreme Court's decision in Loper Bright, have been directed to provide their best reading of the law rather than defer to agency positions. Contractors and grant recipients must continue to carefully review the administration's executive orders, relevant agency guidance, and relevant agreements and work alongside counsel to resolve ambiguities and address many of the questions raised by the government.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
