Federal law has long required recipients of federal funds to comply with anti-discrimination laws. Over the last decade, initiatives under the label Diversity, Equity and Inclusion ("DEI") became a widespread vehicle for addressing alleged past and present discrimination at both public and private institutions. Now, the US Department of Justice has issued sweeping guidance characterizing these programs as unlawful race- and sex-based discrimination that could lead to loss of federal funds.
- Practices that grant preferential treatment based on protected characteristics, such as race, color, national origin, sex or religion;
- Practices that use facially neutral proxies for protected characteristics;
- Programs that segregate participants based on protected characteristics; and
- Training programs that promote discrimination or hostile environments.
Below we discuss the significance of this sea change and how impacted entities can ensure they do not put themselves at risk for losing federal funding.
Anti-Discrimination Under the Trump Administration
Earlier this year, Bracewell wrote about the Trump Administration's use of the False Claims Act to police the use of DEI programs in the federal contracting process, under the executive order entitled, "Ending Illegal Discrimination and Restoring Merit-Based Opportunity." Institutions of higher education have likewise for months faced scrutiny under the Justice Department's stated commitment to ending illegal DEI discrimination and eliminating the use of race in university admissions.
As recipients of federal funds, these entities must comply with Title VI of the Civil Rights Act of 1964, which prohibits discrimination based on race, color, or national origin; Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on, or motivated by, race, color, religion, sex or national origin; Title IX of the Education Amendments of 1972, which prohibits sex-based discrimination in education programs; and the Equal Protection Clause of the Fourteenth Amendment, which prohibits discrimination from state or local governments. That has always been true. What is new is the Justice Department's interpretation of what constitutes "unlawful discrimination" under these laws, and the threat of revoking federal funds for any entities engaging in the practices that have now been declared unlawfully discriminatory.
The DEI Memo's interpretation materially expands the prohibited conduct and makes clear that it will reach all recipients of federal funding and entities that are otherwise subject to federal anti-discrimination laws. This includes all educational institutions (not just universities), state and local governments, public employers, nonprofits and charities that receive government grants, healthcare providers and private employers who receive federal financial assistance. The DEI Memo even threatens liability for federal funding recipients who "knowingly fund the unlawful practices of contractors, grantees, and other third parties" and recommends including nondiscrimination clauses in contracts to third parties, monitoring compliance and terminating funding if the third party is noncompliant.
Four Types of Unlawful Practices
The DEI Memo details four categories of unlawful discriminatory conduct that could result in losing federal funding: (1) granting preferential treatment—through providing certain opportunities, benefits or individuals—based on protected characteristics "in a way that disadvantages other qualified persons"; (2) using ostensibly neutral proxies that correlate with or are used as a substitute for protected characteristics (or using such proxies with the intent to advantage certain individuals with protected characteristics); (3) segregating individuals based on protected characteristics for programs, activities or resources; and (4) DEI training programs that stereotype, exclude or disadvantage individuals based on protected characteristics.
DEI programs appear to be the Justice Department's primary concern in its guidance. Providing resources, trainings or programs for individuals based on protected characteristics is described by the Department as impermissible "segregation," unless it is sex-based segregation in bathrooms, showers, locker rooms and dormitories, or women's sports, which the guidance describes as necessary for the "privacy, safety and equal opportunity of women and girls."
The guidance also focuses on impermissible selection processes—including for admissions, hiring and promotion—that use protected characteristics or proxies for the same. The Memo asserts that the goal of promoting diversity or retaining talent from diverse geographic areas and socioeconomic classes is not a compelling interest that withstands the scrutiny of race-based discrimination. Targeting recruiting efforts in low-income areas, for example, may be seen as an impermissible use of socioeconomic status as a proxy for race.
The guidance provides the following non-exhaustive list of conduct that would be considered unlawfully discriminatory.
- Race-based scholarships or programs, including mentorship programs, leadership initiatives and internships that exclude students of other races;
- Preferential admission, hiring or promotion practices that prioritize underrepresented racial groups;
- Access to facilities or resources based on race or ethnicities, such as "designat[ing] a 'safe space' for students of a specific racial or ethnic group";
- "Cultural Competence" Requirements, e.g., requiring student applicants to describe their "lived experience" in order to evaluate the student's racial background or asking faculty candidates to "describe how their 'cultural background informs their teaching'";
- Geographic or Institutional Targeting of certain areas or organizations because of their racial or ethnic composition;
- "Overcoming Obstacles" Narratives or "Diversity Statements" that serve as a proxy for race or other protected characteristics;
- Race-based training sessions where participants are separated into groups based on race;
- Segregation in facilities or resources, e.g., a study lounge designated for certain racial or ethnic groups. Facilities that are "single-sex based on biological sex to protect privacy or safety, such as restrooms, showers, locker rooms, or lodging" are permitted;
- Implicit segregation through program eligibility, e.g., programs "for underrepresented minorities only"; and
- Trainings that promote discrimination based on protected characteristics and create a hostile work environment through statements such as, "all white people are inherently privileged," and "toxic masculinity."
The Justice Department's Recommended Best Practices
The DEI Memo warns that entities that engage in the above unlawful practices could have their federal funding revoked. To mitigate that risk, the Memo recommends that federal funding recipients:
- Ensure inclusive access by avoiding "organizing groups or sessions that exclude participants based on protected traits";
- Focus on skills and qualifications that are specific, measurable, and "directly related to job performance or program participation," rather than criteria like socioeconomic status or geographic diversity;
- Prohibit demographic-driven criteria in scholarships, like those that target "first-generation students" or "underserved geographic areas";
- Document legitimate rationales in hiring, promoting or selecting contracts to demonstrate that selections were made for reasons unrelated to race, sex or other protected characteristics;
- Scrutinize neutral criteria for proxy effects in hiring and admissions decisions—do not target "low-income students" to achieve racial outcomes;
- Eliminate diversity quotas in favor of merit-based selections;
- Avoid exclusionary training programs where participants are segregated based on protected characteristics or required to "confess" to personal biases or privileges based on a protected characteristic;
- Include nondiscrimination clauses in contracts to third parties and monitor compliance and terminate funding for noncompliant programs; and
- Establish clear anti-retaliation procedures for individuals who refuse to participate in potentially discriminatory programs and create "safe reporting mechanisms" for individuals who raise concerns.
Evaluating Programs for Compliance
Given the significance of both this shift and the stakes, entities that receive federal funding should engage in a thorough review of their relevant processes and programs to ensure full compliance with the new interpretation of federal anti-discrimination laws. This review should not be limited to the "obvious" DEI policies, but rather take a holistic view and evaluate any conduct that, while intended to promote previously acceptable goals, could be viewed as disadvantaging certain individuals based on protected characteristics.
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.
