On July 29, 2025, the U.S. Department of Justice (DOJ), through the Attorney General (AG), issued new guidance directed to all federal agencies, and applicable to federal fund recipients, that diversity, equity, and inclusion (DEI) programs must fully comply with federal civil rights laws, including Title VI, Title VII, Title IX (limited to educational institutions) and the Equal Protection Clause (limited to governments and their agencies). The AG emphasized that practices involving preferential treatment based on protected characteristics (such as race, sex, or national origin) are unlawful unless narrowly tailored to meet specific legal standards, which are rarely satisfied outside of court-ordered remedies. The guidance warns against using protected traits directly or indirectly in hiring, promotion, scholarships, or training programs; segregating individuals by race or sex for access to opportunities, resources, and training; and implementing “diverse slate” requirements, demographic quotas, or tiebreaker preferences based on protected traits. It also cautions that facially neutral practices—such as evaluating “cultural fit” or “lived experience”—may violate the law if used as proxies for unlawful discrimination. Additionally, training programs that stereotype, demean, or exclude individuals based on race, sex, or other protected traits, including sexual harassment training, may be found unlawful, as can retaliation against individuals who object to such practices. This has left many employers, both public and private, scratching their heads about promoting an inclusive work environment while avoiding governmental scrutiny over their employment practices.
It is first important to note that the AG’s guidance is directed only to federal government agencies and entities that receive federal financial assistance under Title VI and similar statutes – including nearly all public schools, both private and public colleges and universities, health care institutions, and federal contractors – not all employers subject to Title VII of the Civil Rights Act. That said, the underlying legal principles outlined in the guidance provide a useful insight into how enforcement agencies, like the Equal Employment Opportunity Commission, may evaluate DEI-related claims under existing anti-discrimination laws. In this way, the guidance not only sets compliance expectations for government agencies and recipients of federal funds, but also serves as a roadmap for all employers navigating how to promote inclusion while avoiding unlawful use of race, sex, or other protected characteristics in employment related decisions.
What Does the Guidance Prohibit?
The guidance covers four practices that the DOJ considers discriminatory, irrespective of current law or whether the practices are designed to promote diversity: (A) preferential treatment based on a protected characteristic; (B) use of proxies, that are facially neutral, for protected characteristics; (C) segregation based on protected characteristics, with the exception of providing separate-sex intimate facilities and sex-specific athletic opportunities; and (D) training programs that promote class-based discrimination or hostile environments.
A. Preferential treatment. Decisions regarding hiring, promotion, compensation, or participation in leadership and mentoring programs should be based on objective, qualifications-based criteria that are clearly defined, consistently applied, and demonstrably tied to the requirements of the role, and not based on any protected characteristic. Such opportunities should not designate or reserve certain spots for “underrepresented groups” that are determined based on membership in a protected group.
B. Proxies. The guidance cautions against using otherwise neutral criteria as “proxies” for unlawful consideration of protected characteristics. The guidance notes these “proxies” can include subjective measures such as “fit,” “cultural competence,” or “lived experience,” targeting specific geographic areas because of racial or ethnic composition in recruiting and requiring applicants to describe obstacles they have overcome.
C. Segregation. The guidance instructs that “[s]egretion based on protected characteristics occurs when a federally funded entity organizes programs, activities, or resources…in a way that separates or restricts access based on…[a] protected characteristic,” and advises that such segregation is unlawful. This includes segregated training sessions, facilities, resources, and program eligibility. For example, Employee Resource Groups should not be limited to a specific racial or ethnic minority, or specifically sex-based, including those geared toward support for LGBTQIA+ employees. However, the guidance also states that sex-segregated intimate facilities, like restrooms and locker rooms, and sex separated sports are permissible, and advises that women who are transgender should be excluded from female-only facilities and sports.
D. Training programs. While workplace anti-harassment training is specifically permitted by the guidance, it explains that such training can be unlawful when the content, structure, or implementation of training stereotypes, excludes, or disadvantages a protected group or creates a hostile environment. Examples provided include using terms such as “all white people are inherently privileged” and “toxic masculinity” and using presentations and videos that single out a particular group as inherently racist or sexist.
How do federal fund recipients mitigate their risk?
The AG provides several recommendations for federal fund recipients – applicable to almost all employers – to reduce legal risk. As an initial step, federal fund recipients are encouraged to conduct a thorough audit of DEI initiatives to ensure compliance with federal nondiscrimination laws as interpreted by the guidance. This includes reviewing internal policies, programs, and decision-making practices to confirm that they are not using protected characteristics such as race, sex, or national origin—either directly or through proxies—as a basis for employment-related decisions.
The following action items are described:
- Ensure inclusive access so that all programs, activities and resources are open to everyone without consideration of any protected characteristic.
- Focus on skills and qualifications in employment-related decisions using specific, defined, and measurable skills related to job qualifications and performance.
- Do not target demographic criteria, such as “underserved geographic areas” or “first generation college graduates” and, instead, focus on neutral equally applied qualifications.
- Document the legitimate business justification underlying employment-related decisions and ensure that those justifications do not conceal or perpetuate unlawful bias.
- Scrutinize otherwise neutral selection criteria to ensure it does not have a proxy effect for unlawful discrimination.
- Do not use quotas based on protected characteristics, including the elimination of requiring minority representation on hiring panels.
- Review third party contracts, because unlawful discrimination by recruiting firms, training vendors, and consultants who engage in practices that would violate nondiscrimination laws if conducted by the employer can create liability, and include nondiscrimination clauses in all contracts that allow the employer to withhold funding from or terminate relationships with vendors or partners whose practices are found to be noncompliant.
- Implement effective anti-retaliation policies and internal reporting mechanisms so that employees can safely raise concerns about potentially discriminatory practices without fear of reprisal.
