COMPLIANCE CORNER - OCTOBER 2025

DOJ Issues New Guidance on “Unlawful DEI”

On July 29, 2025, Attorney General Pam Bondi issued Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination. Here is a link to the Guidance: https://www.justice.gov/opa/pr/justice-department-releases-guidance-recipients-federal-funding-regarding-unlawful.

The Guidance sets forth the bedrock principle that all Americans must be treated equally. It clarifies the application of federal antidiscrimination laws to programs or initiatives that may involve discriminatory practices, including those labeled as Diversity, Equity, and Inclusion. “Entities receiving federal funds, like all other entities subject to federal antidiscrimination laws, must ensure that their programs and activities comply with federal law and do not discriminate on the basis of race, color, national origin, sex, religion, or other protected characteristics – no matter the program’s labels, objectives, or intentions.” The Guidance offers non-binding suggestions for compliance with antidiscrimination laws.

The Guidance defines “unlawful proxy discrimination.” This is the practice of using facially neutral criteria (e.g. “cultural competence,” “lived experience,” or geographic targeting) as proxies for protected characteristics. If these neutral criteria have the intention of advantaging, or disadvantaging, an individual based on protected characteristics, the DOJ will consider the practice unlawful discrimination. The Guidance goes on the opine that a federally funded program which requires applicants to describe “obstacles they have overcome” or submit a “diversity statement” in a manner that advantages those who discuss experiences intrinsically tied to protected characteristics, it will be considered using the narrative as proxy for advantaging that protected characteristic in providing benefits. Bondi Memorandum P.5: Recipients of federal funds should ensure funds are not used to support programs that discriminate unless such practices meet the very narrow exceptions.

The Guidance sets forth examples of “unlawful practices” including,

        • Preferential hiring or promotion practices that prioritize candidates from “underrepresented groups” based on a protected characteristic to the disadvantage of a qualified candidate that does not belong to the group.
        • Hosting race-based DEI training which separates groups based on protected characteristics while excluding individuals who do not share the characteristic from participating.
        • Sex-Based Selection for Contracts: A federally funded state agency implements a DEI policy that prioritizes awarding contracts to women-owned businesses, automatically advancing female vendors or minority-owned businesses over equally or more qualified businesses without preferred group status. This includes any contract selection process that uses sex or race as a tiebreaker or primary criterion, such as policies favoring “minority- or women-owned” businesses without satisfying the appropriate level of judicial scrutiny.

 

The Guidance makes several Best Practice recommendations, including:

        • Review All Programs, Policies, and Partnerships to comply with federal law
        • Ensure Inclusive Access
        • Focus On Skills and Qualifications
        • Prohibit Demographic-Driven Criteria
        • Document Legitimate Rationales
        • Scrutinize Neutral Criteria for Proxy Effects
        • Eliminate Diversity Quotas
        • Avoid Exclusionary Training Programs
        • Include Nondiscrimination Clauses in Contracts to Third Parties and Monitor Compliance
        • Establish Clear Anti-Retaliation Procedures and Create Safe Reporting Mechanisms

 

Contractors should take proactive steps to review its policies and procedures to align with this new Guidance making sure its programs are inclusive, and do not base employment or hiring decisions on otherwise neutral criteria which can be considered “proxy discrimination.”

If you would like more information or assistance, kindly reach out to Lorraine D’Angelo, lorraine@ldaconmplianceconsulting.com or call (914) 548-6369.