Seyfarth Synopsis: The U.S. Department of Justice recently issued a memorandum providing additional clarity and guidance on DEI-related programs and policies. The memo emphasizes that federally funded entities may not make decisions—such as hiring, admissions, contracting, or programming—based on protected characteristics like race or sex, even if pursued under the banner of diversity or equity. It also warns that facially neutral criteria may also be unlawful if used as proxies for protected traits or intended to drive demographic outcomes. The memo also outlines non-binding best practices to help organizations avoid legal risk and ensure compliance with federal nondiscrimination obligations. This is an important overview for all employers to consider as there are important considerations outlined in the memo that may be applicable to all employers, regardless of federal funding status.
On July 29, 2025, the U.S. Department of Justice issued a memorandum to federal agencies providing additional guidance on the application of federal antidiscrimination laws to Diversity, Equity, and Inclusion (DEI) programs and policies. While the memorandum was directed to federal agencies and specifically applies to “recipients” of federal funding, the guidance is an important read for all entities subject to federal civil rights laws as they consider the legality of their policies and programs. The guidance was issued pursuant to Executive Order 14173 and affirms the federal government’s laser focus and continued commitment to ensuring that civil rights laws are enforced without regard to the program’s “labels, objectives, or intentions.”
The DOJ memo signals an aggressive enforcement posture toward DEI initiatives that rely in any way on protected characteristics such as race or sex, underscoring that the federal government will “no longer” turn a “blind eye” to discriminatory practices. The guidance identifies specific practices that may give rise to legal risk and offers non-binding best practices for companies to consider as they continue to review and refine their DEI-related programs and practices.
Notably, the federal law has not changed and federal anti-discrimination laws have always prohibited using race/ethnicity or sex to make decisions. To that end, Seyfarth practitioners have consistently communicated there was no such thing as “reverse discrimination” – discrimination is still discrimination, regardless of any positive intentions towards particular group. However, there is – and always has been – a difference between “unlawful” and “lawful” programs that may fall under a “Diversity, Equity, and Inclusion” framework. While the DOJ’s guidance document stops short of describing what programs and practices are permissible, it outlines the federal government’s view of what is unlawful.
Key Takeaways
1. Civil Rights Protections Apply Fully to DEI Programs
The memo reaffirms that all “federally funded entities,” or those that are subject to anti-discrimination laws, including public and private employers, educational institutions, and nonprofit organizations—are subject to laws that prohibit discrimination based on race, sex, color, national origin, religion, and other protected traits. DEI initiatives are not exempt from these obligations, regardless of their goals or framing.
2. Use of Protected Characteristics Is Presumptively Unlawful
Programs or policies that grant benefits, access, or preferences based on protected characteristics (e.g., scholarships for a specific racial group, hiring preferences for women or “underrepresented” candidates) are unlawful unless they satisfy very narrow exceptions under the applicable level of judicial scrutiny.
For race-based actions, this means meeting the Supreme Court’s strict scrutiny standard, which requires a “compelling governmental interest and narrowly tailored means to achieve that interest.” Sex-based decisions are subject to heightened scrutiny, requiring an “exceedingly persuasive justification and substantial relation to an important governmental objective.” In practice, such direct justifications are rarely invoked by organizations in carrying out their programs, as most programs do not rely on protected characteristics for making decisions.
3. Use of Proxies for Protected Characteristics May Also Violate the Law
Notably, the DOJ memorandum addresses the use of facially neutral criteria—such as “cultural competence,” “lived experience,” or geographic targeting—warning that such criteria may be unlawful if used as proxies for race, sex, or other protected traits, or if applied with the intent to advantage or disadvantage individuals based on those traits. This position stands in contrast to the federal government’s broader disavowal of disparate impact theories, which also scrutinize facially neutral policies. This juxtaposition reflects a complex legal landscape in which enforcement may hinge on uncovering the factual and subjective intent behind seemingly neutral criteria—highlighting the need for documentation and sound rationale to support certain types of facially neutral criterion.
The memo cites examples including:
- Requiring “overcoming obstacle narratives” or “diversity statements” that are then used to implicitly advantage candidates based on their protected characteristics.
- Practices in which federally funded organizations implement recruiting strategies targeting specific “geographies,” “institutions” or “organizations” chosen primarily because of their racial or ethnic compensation instead of “other legitimate factors.”
- Structuring job criteria that rewards identity-related experiences such as “cultural competence,” “lived experience” or “cross-cultural” skills in ways that effectively advantage candidates based on racial or ethic backgrounds.
4. Segregation of Facilities, Programming, or Trainings Is Prohibited
The DOJ memorandum warns that segregating programs, activities, or resources based on protected characteristics is also presumptively unlawful for federally funded entities. Segregation occurs when access is limited or participation is organized according to characteristics like race, ethnicity, or sex, even if the stated goal is to promote inclusion or address historical disparities. The memo makes clear that such practices generally violate federal civil rights laws unless they fall within narrow, well-defined exceptions.
For example, creating “safe spaces” or resource rooms designated for specific racial or ethnic groups (e.g., “BIPOC-only study lounges”) may foster a perception of exclusion or unequal treatment, particularly where the spaces are functionally or explicitly restricted. Similarly, race-based training sessions—such as required breakout groups labeled by race or affinity-based sessions that exclude individuals of other racial groups—are identified as unlawful, regardless of intent.
The DOJ distinguishes these practices from programming such as a “Faculty Academic Support Network” that is open to all individuals and is not based on protected characteristics.
5. Sex-Segregated Intimate Spaces May Be Required
In contrast to the segregation prohibition described in Section 4 above, the DOJ memorandum describes an exception on the issue of sex-segregated intimate spaces. For the first time in a statement directed to federally funded entities generally (as compared to federal agencies), the DOJ takes the position that “compelling employees to share intimate spaces with the opposite sex” would “typically be unlawful.”
The DOJ guidance asserts that federally funded entities may violate civil rights laws when they “allow males, including those self-identifying as ‘women,’” to access spaces “designed for females—such as bathrooms, showers, locker rooms, or dormitories.” According to the memo, such policies “undermine the privacy, safety, and equal opportunity of women and girls,” and may create a “hostile environment under Title VII,” particularly where women’s “privacy, safety or professional standing” is compromised. The memo further states that permitting “males to compete in women’s athletic events almost invariably denies women equal opportunity by eroding competitive fairness.” To comply with federal law and protect the rights of women and girls, the DOJ advises that recipients should “affirm sex-based boundaries rooted in biological differences.”
The implications for companies are significant given that certain states would take differing views under state law and these issues are often met with strong stakeholder reaction. Accordingly, organizations will need to navigate this issue carefully by monitoring both federal enforcement activity and applicable state or local requirements. In addition, stakeholder engagement and communications will be particularly important.
6. “Diverse Slate” Requirements and Identity-Based Selections or Evaluations May Be Unlawful
The memo also takes aim at DEI practices such as diverse candidate slates, “diversity decision-making panels” or diversity focused evaluations. Setting racial “diversity benchmarks” or “mandat[ing] demographic representation in candidate pools” was specifically described as an example of an unlawful practice.
7. Heightened Scrutiny for Sex or Race-Based Contracting Decisions
The DOJ’s memo also addresses “federally funded state agencies” that implement DEI policies that prioritize “sex-based selection for contracts” or advancing “minority owned business” over other business. These actions are deemed unlawful if they consider protected characteristics—even as a tiebreaker—absent satisfying the appropriate level of judicial scrutiny. In our experience, this guidance will have significant implications for companies with state contracts that incorporate supplier diversity mandates, which may now require reassessment to ensure alignment with federal nondiscrimination obligations.
8. DEI Trainings That Promote Discrimination, Hostile Environments or Stereotype Are Legally Risky
According to the DOJ memorandum, trainings that single out groups (e.g., “White privilege” or “toxic masculinity” narratives), demean participants based on protected traits, or require affirmation of ideological positions may violate Title VI or Title VII. The DOJ advises that such trainings can create a hostile work environment, particularly if participation is mandatory or opposition to such programs is punished.
9. Retaliation Protections Apply
Entities may not take adverse action against individuals who raise concerns about or refuse to participate in discriminatory DEI programs, trainings or policies. Retaliation claims under civil rights laws remain a significant source of legal exposure.
Summary of DOJ Best Practices
The DOJ memo outlines a set of non-binding best practices that organizations may consider to support compliance with federal civil rights laws and avoid unlawful discrimination in connection with DEI initiatives. While not mandatory, the best practices are positioned as practical guardrails to help minimize legal risk and promote equal opportunity. While there are nine separate recommendations, they generally fall in the following four categories:
Ensure Inclusive Access
Programs, resources, and activities should be open to all qualified individuals, regardless of race, sex, or other protected characteristics. The DOJ discourages identity-based exclusions or access restrictions. However, it is the DOJ’s position that separation based on biological sex “is necessary” where biological differences implicate privacy, safety or athletic opportunity.
Training programs should be designed to welcome participation from all individuals and avoid separating groups based on protected traits. Trainings should not require attendees to affirm specific ideological beliefs or include generalizations about groups of individuals based on race, sex, or other identities.
Use Job-Related Qualifications, Avoid Proxy Criteria, and Document Selection Rationales
According to the best practices outlined in the DOJ memo, all selection decisions should be grounded in demonstrable skills, qualifications, or experience directly tied to performance or program participation. While it is permissible to rely on legitimate factors such as language skills or relevant educational criteria, broad or subjective attributes like “lived experience” or “cultural competence” should be avoided. Companies are also encouraged to remove policies or practices that mandate demographic representation in candidate pools, hiring panels and, not surprisingly, final selections.
Even criteria that does not directly implicate race or protected categories, such as “first generation status” or “socio-economic status,” should be avoided if they are used as a proxy for identity-based protected characteristics. Such criteria may also be impermissible if they were chosen to indirectly increase participation of certain race or sex-based groups.
The DOJ also encourages entities to scrutinize facially neutral criteria and “rigorously evaluate” whether they are proxies for protected characteristics. In addition, companies are encouraged to document any “legitimate rationales” which may be unrelated to protected categories when using criteria that “might correlate” to race, sex or other protected characteristics. Also, according to the DOJ memo, criteria should be “demonstrably related” to legitimate “non-discriminatory” objectives.
Monitor Third Parties and Contractors for Compliance with Antidiscrimination Laws
The DOJ advises entities to include clear nondiscrimination clauses in contracts, grants, or partnership agreements with third parties. Organizations are encouraged to monitor compliance of those third-party partners who receive federal funds and to discontinue contracting relationships where noncompliant violations occur.
Prohibit Retaliation by Establishing Safe Reporting Channels
The DOJ encourages organizations to ensure protection for individuals who object to, raise concerns about, or refuse to participate in potentially unlawful DEI initiatives. Confidential reporting mechanisms and clearly communicated anti-retaliation policies should be widely available in codes of conduct, handbooks, and program materials.
Strategic Considerations
This DOJ guidance should be read in conjunction with Executive Order 14173, which requires federal contractors and grant recipients to certify that their programs and practices comply with federal nondiscrimination laws. Together, the DOJ guidance and EO 14173 demonstrates a sustained focus in the federal enforcement landscape—one that places DEI initiatives under heightened scrutiny.
To ensure continued compliance under the law organizations receiving federal funding should consider the following:
- Conduct legal reviews of existing DEI programs, trainings, and policies to assess alignment with civil rights obligations;
- Audit selection and evaluation criteria used in hiring, promotion, contracting, scholarships, and awards, including facially neutral criteria that could function as proxies for protected characteristics;
- Reassess third-party partnerships, grants, and subcontracts to ensure compliance with nondiscrimination clauses and monitor downstream use of federal funds; and
- Strengthen internal compliance protocols, including documentation practices, reporting mechanisms, and anti-retaliation safeguards for employees who raise concerns.
Even if an organization recently conducted a review of its programs and practices, the DOJ memorandum outline several that may warrant another review.
In closing, the DOJ’s memorandum signals a new level of regulatory scrutiny around DEI practices, with a particular focus on whether seemingly neutral policies conceal impermissible considerations of race, sex, or other protected traits. In this evolving environment, even well-intentioned diversity efforts can trigger enforcement risk if not carefully structured.
