Federal Guidance on Unlawful Discrimination Published

On July 29, 2025, the U.S. Attorney General published a memo providing new guidance to all federal agencies and recipients of federal funding regarding unlawful discrimination. The memo states that all entities receiving federal funds (state/local governments, hospitals, contractors, etc.) must ensure strict compliance with federal anti-discrimination laws. This is nothing new. However, this memo finally provides some guidance on what the current administration believes would be unlawful. While not creating new law, this memo is the DOJ's boldest and most detailed statement yet on how federal anti-discrimination law applies to DEI-and to any program that may resemble DEI. Institutions must now not just look at what their programs say, but also carefully evaluate how they operate.

Unlawful Discriminatory Practices-What's Prohibited?

The guidance lists five key categories of practices that, according to DOJ's interpretation, are unlawful for recipients of federal funding:

• Preferential treatment based on protected characteristics: Any program, benefit, or opportunity reserved for one group based on race, sex, or similar characteristics-such as race-based scholarships, hiring, promotion, or exclusive facilities-violates federal law unless it meets very narrow legal exceptions.
• Use of "proxies" for discrimination: Even facially neutral criteria (such as "cultural competence," "lived experience," or targeting specific geographical areas) are considered unlawful if selected or applied to advantage or disadvantage individuals based on protected characteristics.
• Segregation: Separating or restricting access to programs or spaces-like training sessions or lounges-by race or sex is generally unlawful except in specific contexts like biological sex-segregated athletic teams or facilities.
• Use of protected characteristics in candidate selection: Requiring that a certain percentage of candidates, contract awards, or program participants come from particular demographic groups, or using "diverse slates" or diversity-focused selection panels, constitutes unlawful discrimination if not legally justified.
• Training programs that promote discrimination or a hostile environment: Trainings that stereotype, exclude, or demean based on protected characteristics in a severe and pervasive manner, or that require people to affirm certain ideological positions about race or gender, are deemed illegal under this guidance. Consistent with current anti-discrimination laws, the Guidance states, "Federal law allows workplace trainings that are focused on preventing unlawful workplace discrimination and that do not single out particular groups as inherently racist or sexist."

What Are Good Practices?

The memo also offers what it deems as "best practices" (non-binding, not mandatory) for recipients to avoid running afoul of the law, including:

• Ensuring open access to all programs, resources, and trainings regardless of protected characteristics.
• Using measurable and job-related qualifications only-never demographic-based or proxy-based criteria. "If using criteria in hiring, promotions, or selecting contracts that might correlate with protected characteristics, document clear, legitimate rationales unrelated to race, sex, or other protected characteristics."
• Eliminating quotas (already illegal), benchmarks, and any demographic-driven policies in candidate selection, contracting, or scholarships.
• Including clear nondiscrimination and anti-retaliation clauses in partner contracts, with active monitoring for compliance.
• Establishing confidential and accessible mechanisms for reporting discrimination or retaliation.

As a reminder, this memo is non-binding and is not the law. Rather, the memo provides clarification on the current administration's view of federal anti-discrimination laws. Much of the memo confirms what we already know to be illegal discrimination under current federal law. It also highlights new areas of focus, such as proxy practices, that will require organizations receiving federal funds to evaluate their programs and practices with even more scrutiny.

Article reposted with permission from our sister association Cascade Employers Association.