DOJ Defines “Illegal DEI,” Warns Recipients of Federal Funds to Take Notice

On July 29, 2025, U.S. Attorney General Pam Bondi issued Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination (the “Guidance”). Following the creation of the Civil Rights Fraud Initiative by the Department of Justice (“DOJ”), and joint guidance issued by DOJ and the U.S. Equal Employment Opportunity Commission (“EEOC”) on “unlawful DEI-related discrimination”, the Guidance is the most tangible guidance released to date on what the administration views as “illegal DEI” and a likely roadmap for DOJ’s False Claims Act (“FCA”) investigations under the Civil Rights Fraud Initiative.

I. Legal Framework

The Guidance (which was addressed to all federal agencies but released publicly) is not legally binding, but it sets forth a view of federal antidiscrimination laws¹ that will be directly applicable to recipients of federal funds, and it is also likely to be applied by DOJ and other government agencies to the broader class of entities and persons “that are otherwise subject to federal antidiscrimination laws, including educational institutions, state and local governments, and public and private employers.” The Guidance warns that such entities and persons may be subject to legal actions to enforce those laws.

At a high level, the Guidance advises that using protected characteristics (including race, color, religion, sex, and national origin) as a basis to make decisions about “employment, program participation, resource allocation, or other similar activities, opportunities, or benefits, is unlawful,” regardless of whether the intention or motive is not to disadvantage any group, per se, but rather to be positive or “preferential.” It goes on to say that use of other characteristics, such as personal experiences or background, socioeconomic status, first-generation status, or geographic diversity is also illegal if their purpose is to prioritize individuals based on protected characteristics.

II. The Justice Department’s Guidance on Unlawful Discriminatory Policies and Practices

The Guidance advises that the below, non-exhaustive list of policies and practices is unlawful and may result in the revocation of grant funding as well as civil liability. Entities should review their policies and practices (as well as those of their contractors, grantees, and other third parties) with these examples in mind.

Granting Preferential Treatment Based on Protected Characteristics

According to the Guidance, unlawful preferential treatment occurs when entities provide opportunities, benefits, or advantages in a way that disadvantages those without protected characteristics. Extending exclusive opportunities via race-based scholarships or programs, prioritizing candidates from underrepresented groups when hiring or for promotions, and designating “safe spaces” or lounge access at universities exclusively to students of a specific racial or ethnic group are some examples the Guidance provides.

Prohibited Use of Proxies for Protected Characteristics

The DOJ’s Guidance also identifies the use of facially neutral criteria as a “proxy” for the explicit consideration of race, sex, or other protected characteristics. Again, the provided rationale is that a neutral proxy becomes legally problematic when the criteria is selected as a substitute for protected characteristics, or is implemented with the intent to advantage or disadvantage individuals based on protected characteristics.

Examples of unlawful proxies include evaluating job applicants by their ability to demonstrate “cultural competence,” “lived experiences,” or “cross-cultural skills,” and implementing recruitment strategies targeting specific geographic areas and institutions chosen primarily because of their racial or ethnic composition rather than other legitimate factors. Additionally, it is legally problematic to require that applicants describe “obstacles they have overcome,” or to submit a “diversity statement” in a manner that advantages those who can describe their experience as being implicitly tied to their protected characteristic.

Segregation Based on Protected Characteristics

The Guidance considers organizing programs, activities, or resources in a way that separates or restricts access based on protected characteristics as unlawful segregation. This includes hosting DEI training programs that require participants to separate into race-based groups for discussions or designating identity-based resources and facilities. The Guidance notes that exceptions to this prohibition are “narrow” and include only situations where federal law expressly permits race-based remedies for specific documented acts of past discrimination by the institution itself, or in specific contexts where courts have recognized compelling institutional interests.

The Guidance explicitly warns that, although compelled segregation based on protected characteristics is unlawful, failing to maintain athletic competitions and intimate spaces separated by sex may also violate federal law. In particular, the Guidance says federally funded institutions allowing “males, including those self-identifying as ‘women,’ to access single-sex spaces designed for females” (such as bathrooms, showers, locker rooms or dormitories) could undermine privacy, safety and equal opportunity of women and girls and “risk creating a hostile environment.” The DOJ advises organizations to affirm “sex-based boundaries rooted in biological differences.”

Unlawful Use of Protected Characteristics

Under the Guidance, the use of protected characteristics is unlawful when a federally funded program considers protected traits as a basis for selecting candidates for employment, contracts, or program participation. This includes policies mandating diverse candidate pools or diversity-focused evaluations, sex-based selection for contracts, and requiring a certain percentage of diverse participants for internship programs.

Training Programs that Promote Discrimination or Hostile Environments

According to the Guidance, training that—through its content or structure—stereotypes, excludes, or disadvantages individuals based on protected characteristics or creates a hostile environment towards others is unlawful. An example provided is a federally funded school district requiring teachers to complete DEI training that stereotypes individuals based on protected characteristics (e.g., by use of phrases such as “toxic masculinity” or “white privilege”). 

III. The Justice Department’s Recommended Best Practices

To avoid jeopardizing eligibility for federal funding, DOJ recommends the following “Best Practices” to avoid “legal pitfalls of DEI programs:”

1. Ensure inclusive access to all workplace programs, activities, and resources, regardless of an individual’s protected characteristics (with the exception that “[s]ome sex separation is necessary where biological differences implicate privacy, safety, or athletic opportunity”);
2. Focus on skills and qualifications when selecting applicants for employment or program participation, rather than “cultural competence” or socioeconomic status, first-generation status, or geographic diversity which, while not prohibited, “must not be used if selected to prioritize individuals based on racial, sex-based, or other protected characteristics;”
3. Discontinue demographic-driven criteria in programs and policies, for example, scholarship programs aimed at “underserved geographic areas” or “first-generation students” because “[i]ntent to influence demographic representation risks violating federal law”, instead use “universally applicable criteria, such as academic merit or financial hardship;”
4. Document legitimate rationales unrelated to protected characteristics when hiring, offering promotions, or selecting contracts and ensure these rationales are consistently applied and are demonstrably related to legitimate, nondiscriminatory institutional objectives;
5. Scrutinize facially neutral criteria and document clear, legitimate rationales for their use, unrelated to race, sex, or other protected characteristics;
6. Eliminate diversity quotas in hiring and participation, instead focusing solely on nondiscriminatory performance metrics, such as program participation rates or academic outcomes;
7. Avoid exclusionary training programs (this ties back to the first “Best Practice” above);
8. Include nondiscrimination clauses in contracts with third parties and monitor compliance; and
9. Establish clear anti-retaliation procedures and create safe reporting mechanisms.

Key Takeaways

The Guidance concludes that, “[b]y prioritizing nondiscrimination, entities can mitigate the legal, financial, and reputational risks associated with unlawful DEI practices and fulfill their civil rights obligations.” Thus, it appears the DOJ may look to whether organizations have considered this Guidance in reviewing federal funding and enforcement actions.

Recipients of federal funds should consider assessing their policies and programming in light of the Guidance and latest “Best Practices” provided by the DOJ. This assessment should be applied to any third-party vendors or contractors used as well as any joint ventures.

Although the Guidance provides some insight into how DOJ defines “illegal DEI,” it leaves certain questions open. For one thing, it does not address whether sexual orientation qualifies as a protected characteristic in DOJ’s view. Second, although it does not prohibit outreach or recruiting efforts designed to expand the pool of applicants to a program, a review of the Guidance would counsel that such efforts should be undertaken with careful attention to the nuances of this Guidance. The Guidance also is completely silent on the interaction with state and local anti-discrimination laws, as well as federal Disadvantaged Business Enterprise (DBE) programs (which require recipients of federal funds to meet contracting goals based on protected characteristics).²

The Guidance provides a far more expansive view of “unlawful” discrimination and segregation under this Administration, covering not only explicit actions based on protected characteristics but also appearing to target practices such as considering “lived experiences,” geographic targeting, and overcoming hardship or “obstacles” as proxies for unlawful discrimination. Should DOJ launch an investigation of a particular practice, subjects should anticipate a full examination of their activities for compliance with the Guidance, including employment, contracting, corporate social responsibility, and other charity or community programs. We can also expect a significant amount of litigation around DOJ investigation and enforcement efforts based on this Guidance, including interpretation and application of the guidance itself, to resolve whether the Guidance is consistent with recent Supreme Court decisions and other judicial precedent.

Mayer Brown’s multidisciplinary team, including its recently launched Higher Education Task Force, Employment Litigation and Counseling, Global Investigations and White Collar Defense, and Appellate teams are uniquely positioned to provide strategic legal counsel on the complex legal, compliance, governance, and reputational challenges presented by actions brought in connection with these DOJ directives.

 

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¹ See, e.g., Title VI of the Civil Rights Act of 1964 (discrimination based on race, color, or national origin), Title VII of the Civil Rights Act of 1964 (employment discrimination based on or motivated by race, color, religion, sex, or national origin), Title IX of the Education Amendments of 1972 (discrimination based on sex in education programs or activities receiving federal funds), and the Equal Protection Clause of the Fourteenth Amendment.

² DOJ has taken the position that such programs are unconstitutional, to the extent they rely on race- and gender-based presumptions. See Mid-America Milling Co. et al. v. DOT, No. 23 Civ. 72 (GFVT), Doc. No. 82 (E.D. Ky. May 28, 2025).