DOJ Provides Guidance on Unlawful Discrimination for Federal Funding Recipients
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APPLIES TO All Employers Receiving Federal Funding |
EFFECTIVE July 29, 2025 |
QUESTIONS? Contact HR On-Call |
Quick Look
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Discussion
In the July 29, 2025 memo Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination, the Department of Justice provided additional clarification on what constitutes unlawful discrimination in programs and initiatives of recipients of federal funding. The memo particularly focuses on DEI programs. The guidance specifies that the recommendations are non-binding but are examples of how to comply with federal requirements. It applies to all entities that receive federal financial assistance and are subject to federal anti-discrimination laws including educational institutions, state and local governments, and public and private employers. The memo’s guidance is broken down into both examples of unlawful practices and best practices.
Examples of Unlawful Practices
Most of the examples address programs and initiatives typically found in institutions of higher education. However, all employers should review the examples for parallels to existing or future planned programs and initiatives. The complete examples can be found in the memo. Select examples of unlawful practices are summarized below.
Race-Based Scholarships or Programs. A university’s DEI program establishing a scholarship fund exclusively for students of a specific racial group violates federal civil rights law by discriminating against otherwise qualified individuals based solely on race or treating people differently based on a protected characteristic regardless of the program’s intent to promote diversity. This example does leave the door open for such programs by citing that race-conscious programs must meet strict legal standards.
Preferential Hiring or Promotion Practices. A policy that prioritizes candidates from underrepresented groups for admission, hiring, or promotion where the preferred underrepresented groups are determined on the basis of a protected characteristic like race.
Access to Facilities or Resources Based on Race or Ethnicity. Designating a safe space or lounge exclusively for students of a specific race or ethnic group.
Sex-Based Selection for Contracts. A DEI policy that prioritizes awarding contracts to women-owned businesses, automatically advancing female vendors or minority-owned businesses over equally or more qualified businesses without preferred group status.
Trainings That Promote Discrimination Based on Protected Characteristics. A federally funded school district requires teachers to complete a DEI training that includes statements stereotyping individuals based on protected characteristics – such as “all white people are inherently privileged” or “toxic masculinity.”
Unlawful Proxies and Unlawful Segregation
Unlawful proxies (i.e., the use of neutral criteria as a substitute for explicit consideration of protected characteristics) are also considered unlawful when: (1) they are selected because they correlate with, replicate, or are used as substitutes for protected characteristics; or (2) they are implemented with the intent to advantage or disadvantage individuals based on protected characteristics. Segregation based on protected characteristics is also unlawful except in cases where federal law expressly permits race-based remedies for specific, documented acts of past discrimination or in specialized contexts like correctional facilities. The memo cites failing to maintain sex-separated athletic competitions and intimate spaces is another exception to unlawful segregation because it can create a hostile environment under Title VII and Title IX of the Civil Rights Act of 1964. Examples of unlawful practices include:
Cultural Competence Requirements. Job applicants are required to demonstrate “cultural competence,” “lived experience,” or “cross-cultural skills” in ways that evaluate the candidate’s race or ethnic background rather than objective qualification.
Race-Based Training Sessions. DEI training programs that require participants to separate into race-based groups for discussions.
Segregation in Facilities or Resources. Designating a “BIPOC-only study lounge” and facially discouraging access by students of other races, even if access is technically open to all, creates a perception of segregation and may foster a hostile environment. Single-sex based facilities to protect privacy or safety are excluded from being unlawful.
Best Practices
The memo’s best practices primarily describe existing requirements and limitations on using protected characteristics as a factor in programs and initiatives. However, in some cases, they narrowly interpret existing legal precedent. If implemented incorrectly, an entity could inadvertently violate other federal and state requirements, like providing lawful harassment or discrimination training. For this reason, and since these are non-binding best practices, recipients of federal funding should review the recommendations with their legal counsel before applying them. The memo’s recommendations are:
- Ensure all workplace programs, activities, and resources should be open to all qualified individuals, regardless of protected characteristics. Same-sex separation is necessary where biological differences implicate privacy, safety, or athletic opportunity.
- Base selection decisions on specific, measurable skills and qualifications directly related to job performance or program participation.
- Prohibit demographic-driven criteria by discontinuing any program or policy designed to achieve discriminatory outcomes, even those using facially neutral means.
- Document legitimate rationales unrelated to protected characteristics in hiring, promotions, or selecting contracts that might correlate with protected characteristics.
- Rigorously evaluate and document whether facially neutral criteria are proxies for protected characteristics.
- Eliminate diversity quotas and focus solely on performance metrics. Discontinue policies that mandate representation of specific racial, sex-based, or other protected characteristics in candidate pools, hiring panels, or final selections.
- Ensure trainings are open to all qualified participants regardless of protected characteristics and avoid segregating participants into groups based on protected characteristics.
- Incorporate nondiscrimination clauses in grant agreements, contracts, or partnership agreements and specify that federal funding cannot be used for programs that discriminate based on protected characteristics.
- Implement and communicate policies that prohibit retaliation against individuals who engage in protected activities, such as raising concerns, filing complaints, or refusing to participate in potentially discriminatory programs. Provide confidential, accessible channels for individuals to report concerns about unlawful practices.
Action Items
- Consult with legal counsel to determine if programs, policies, and contracts are compliant with federal anti-discrimination laws prior to making changes.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase