Blog Overview:
Late last month, the Department of Justice (DOJ) released a memorandum emphasizing that discrimination by recipients of federal funds will no longer be tolerated. Notably, this memo introduces the concept of "Unlawful Proxy Discrimination," which targets facially neutral criteria that function as proxies for protected characteristics. The memo also reminds entities of their existing federal nondiscrimination requirements and recommends proactive analysis of neutral criteria to ensure compliance.
On July 29, 2025, the Department of Justice (DOJ) released a memorandum from Attorney General Pam Bondi to all federal agencies entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.” The memo asserts that in recent years, the federal government has allowed recipients of federal funds to engage in discrimination and that such will no longer be tolerated under this administration.
“Entities receiving federal funds” includes:
- Any recipients of federal funds
- Entities subject to federal anti-discrimination laws, such as educational institutions, state and local governments, and public and private employers.
The nine-page memo goes on to remind entities receiving federal funds of their existing and, in some cases, longstanding federal nondiscrimination requirements. It also includes “Best Practices," though these are not legally binding and do not contain any new, enforceable requirements.
This guidance is significant because it addresses the intersection and application of several federal anti-discrimination laws for recipients of federal funding.
However, employers only subject to Title VII of the Civil Rights Act will find much of the memo a reminder of the nondiscrimination requirements they are already aware of, practicing, and documenting on a regular basis. For example, employers have never been permitted to use quotas or preferences in hiring nor consider applicants’ race or sex in selection decisions. In fact, this was strictly prohibited under the now-revoked Executive Order 11246.
Interestingly, this memo by the Attorney General creates a new term of discrimination called “Unlawful Proxy Discrimination.” The memo defines proxy discrimination as:
Facially neutral criteria that function as proxies for protected characteristics violate federal law if designed or applied with the intention of advantaging or disadvantaging individuals based on protected characteristics.
The memo goes on to recommend that entities scrutinize neutral criteria for proxy effects. Specifically, the memo suggests that entities conduct the following analysis:
Before implementing facially neutral criteria, rigorously evaluate and document whether they are proxies for race, sex, or other protected characteristics.
New Questions for Employers
Although the memo specifically states that proxy discrimination is intentional, how does the definition of “unlawful proxy discrimination” and the recommended proactive analysis differ from a traditional adverse impact analysis? Or is this a new strategy to go after seemingly neutral employment practices that have a discriminatory effect and simply change the allegation from “adverse impact” to “proxy discrimination?”
For employers who have struggled to determine whether or not to continue soliciting self-identified race and sex data from applicants in a post-Executive Order 11246 world, the Attorney General makes it clear that recipients of federal funding are expected to defend their selection criteria with a robust analysis demonstrating rationale and criteria are applied consistently and “demonstrably related to legitimate, nondiscriminatory institutional objectives.”
Earlier this year, the President issued an Executive Order entitled “Restoring Equality of Opportunity and Meritocracy” stating that all federal agencies should de-prioritize all cases that relied on the adverse impact theory of discrimination. As a reminder, adverse impact theory of discrimination occurs when a seemingly neutral selection process has a disproportionately negative effect on members of a protected class that are not job related and consistent with a business necessity. See our recent blog on the topic of Job Relatedness and Adverse Impact for a deep dive into this topic.
Moving Forward
The Attorney General has reminded all recipients of federal funding of the presidential administration’s continued commitment to rooting out unlawful discrimination and recipients’ responsibilities to continue complying with the regulatory requirements in place. It also appears the Attorney General recommends that recipients of federal funding conduct proactive analytics on neutral criteria to determine if the criteria have a discriminatory effect in the workplace.
DCI will provide updates on this topic as necessary.
