Employment Law Report
DOJ Issues New Guidance On DEI for Recipients of Federal Funding
Written by Michelle D. Wyrick
On July 29, 2025, the Department of Justice (DOJ) issued guidance on unlawful discrimination for recipients of federal funding. The guidance clarifies the application of federal antidiscrimination laws to Diversity, Equity, and Inclusion (DEI) programs. It makes clear that the use of terms like “DEI” or “equity” does not excuse unlawful discrimination. Although aimed at grant recipients and federal contractors, the guidance provides insight for all employers about the Trump Administration’s views on what is illegal under federal antidiscrimination laws.
Preferential Treatment
It is generally illegal to grant preferential treatment to individuals or groups based on protected characteristics, except in very limited circumstances. Preferential treatment takes place if an entity provides opportunities or benefits based on protected characteristics in a way that disadvantages other qualified individuals or groups.
The guidance identifies race-based scholarships and race-exclusive internships, mentorship programs, and leadership initiatives as examples of potentially illegal preferential treatment. If those programs are limited to candidates from a specific racial group and exclude otherwise qualified candidates of other races, they likely violate federal civil rights laws. According to the guidance, the intent to promote diversity would not save those programs. Likewise, hiring or promotion practices that prioritize candidates from “underrepresented groups” may violate federal antidiscrimination laws if the “underrepresented groups” are determined based on a protected characteristic such as race.
Unlawful Proxies for Discrimination
According to the guidance, if an entity intentionally uses ostensibly neutral criteria that function as substitutes for explicit consideration of protected characteristics, the entity would violate federal anti-discrimination law. It provides examples of the potentially illegal use of proxies, including the use of facially neutral criteria such as “cultural competence” or “lived experience,” as well as geographic targeting if those criteria are used as substitutes for protected characteristics or are designed or applied with the intention of either benefiting or disadvantaging individuals based on protected characteristics.
As an example, the guidance states that if a university requires faculty candidates to describe how their “cultural background informs their teaching,” it could be an unlawful proxy if it is used to evaluate candidates based on race or ethnicity. In addition, the guidance asserts that if an organization designs its recruiting strategies to target specific geographic areas, institutions, or organizations primarily because of their racial or ethnic composition rather than other legitimate factors, it would be an unlawful proxy for race or ethnicity. Likewise, the guidance contends that if an organization requires applicants to describe “obstacles they have overcome” in a manner that advantages applicants who discuss experiences that are intrinsically tied to protected characteristics, it would violate federal anti-discrimination laws.
Segregation
Segregating employees based on any protected characteristic is generally illegal. Separating employees by race for a workplace training program would be unlawful. Implicit segregation is also illegal. For example, an organization that hosted a DEI-focused workshop series limited to participants who identified “with a specific racial or ethnic group (e.g., ‘for underrepresented minorities only’)” or to participants of one sex would be illegal.
Required Single-Sex Spaces
Maintaining separate spaces for males and females for bathrooms, showers, locker rooms, and dormitories, however, is not prohibited and, is in fact, necessary, according to the guidance. Failing to maintain separate single-sex spaces for bathrooms, showers, locker rooms, or dormitories, could violate federal anti-discrimination laws. Institutions that allow males, including those who self-identify as women, to access single-sex spaces designed for females risk creating a hostile environment under Title VII, and in educational settings, can violate Title IX.
(One portion of Equal Employment Opportunity (EEOC) Enforcement Guidance on Harassment in the Workplace (Apr. 29, 2024) relating to discrimination based on gender identity and sexual orientation identifies misgendering (repeated and intentional use of a name or pronoun inconsistent with an individual’s known gender identity) and denial of access to a bathroom or other sex-segregated facility consistent with an individual’s known gender identity as examples of discrimination or harassment based on gender identity. The EEOC has not yet withdrawn the guidance due to lack of a quorum. A federal district court in Texas, however, has vacated portions of the EEOC guidance relating to gender identity and sexual orientation. See Texas v. EEOC, 2:24-CV-173 (N.D. Tex. May 15, 2025). Title VII of the Civil Rights Act prohibits employers from discriminating against applicants and employees because of sex. In Bostock v. Clayton County, 590 U.S. 644 (2020), the Supreme Court held that “[d]iscrimination based on homosexuality or transgender status necessarily entails discrimination because of sex.” The Court made clear that it was not judging questions under any federal anti-discrimination law other than Title VII. See id. at 681. And Bostock expressly stated that it did not decide anything about access to “bathrooms, locker rooms, or anything else of the kind.”
Unlawful Use of Protected Characteristics
Organizations may not use protected characteristics as a basis for selecting employees, vendor agreements, or program participants (e.g., internships, scholarships, or training). Thus, an entity may not mandate representation of specific groups in candidate pools or prioritize protected characteristics through selection criteria such as “diverse slate” requirements or diversity-focused evaluations. And in most circumstances, entities may not prioritize awarding contracts to women- or minority-owned businesses or require that contractors use a certain number of working hours from individuals with certain protected characteristics. Similarly, an institution may not require that a certain percentage of participants in scholarships, fellowships, or leadership initiatives be a particular race or sex, even if the program is framed as addressing underrepresentation.
Training
Some DEI training programs are illegal, according to the guidance. Unlawful DEI training programs stereotype, exclude, or disadvantage individuals based on protected characteristics or create a hostile environment. The guidance asserts that training can create an “objectively hostile environment through severe or pervasive use of presentations, videos, and other workplace training materials that single out, demean, or stereotype individuals based on protected characteristics.” It warns that DEI training that includes stereotypical statements like “white privilege” or “toxic masculinity” may violate Title VI or Title VII if the training creates a hostile environment or imposes penalties for dissent in ways that result in discriminatory treatment. Training should not single out particular groups as inherently racist or sexist.
Best Practices
The guidance includes non-binding recommendations about best practices to ensure compliance with federal anti-discrimination laws.
· Ensure that all workplace programs, activities, and resources are open to all qualified individuals regardless of any protected characteristics.
· Base selection decisions on skills and qualifications. The guidance advises organizations to assess specific skills such as language proficiency or relevant educational credentials rather than asking about “cultural competency.” And do not use criteria that are selected to prioritize individuals based on race, sex, or other protected characteristics.
· Do not use demographic-driven criteria, even if they are facially neutral. “Intent to influence demographic representation risks violating federal law.”
· Document reasons for using criteria that may correlate with protected characteristics and be able to demonstrate that the criteria are related to legitimate, nondiscriminatory institutional objectives.
· Evaluate facially neutral criteria to determine if they are illegal proxies for race, sex, or other protected characteristics.
· Do not use quotas. Focus on nondiscriminatory performance measures without reference to protected characteristics. Do not mandate
representation of protected groups in candidate pools, hiring panels, or final selections.
· Ensure that training programs are open to all qualified participants.
· Include nondiscrimination clauses in contracts with third parties.
· Implement policies prohibiting retaliation. Make sure that the anti-retaliation policies include reporting mechanisms.
Organizations that receive federal funding should review their programs and policies in light of DOJ’s interpretation of federal anti-discrimination laws. All employers should be aware of the guidance and the Trump Administration’s interpretation of federal anti-discrimination law.
If you have questions regarding the DOJ’s guidance or best practices to ensure compliance with federal anti-discrimination laws, contact a member of Wyatt’s Labor and Employment team.
