Executive Summary
- What is new: The Office of the U.S. Attorney General issued important guidance clarifying that any policy or practice distinguishing based on protected characteristics may violate federal antidiscrimination laws, including many DEI programs.
- Why it matters: Recipients of federal funds — including employers, schools, nonprofits and local governments — risk revocation of federal funding and potential liability if they engage in potentially problematic practices identified in the guidance.
- What to do next: Review all programs, policies and partnerships to ensure compliance with federal law, avoid practices that discriminate based on protected status, and implement best practices outlined in the guidance.
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On July 29, 2025, the Office of the U.S. Attorney General issued a memorandum to all federal agencies entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.” The memorandum provides sweeping guidance, clarifying the legal obligations of federal funding recipients — including public and private employers, schools, nonprofits and local governments — with respect to discrimination laws, such as Titles VI and VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972 and the Equal Protection Clause of the Fourteenth Amendment.
Expanding on its prior guidance, the Department of Justice’s (DOJ’s) memorandum considers any policy or practice that distinguishes in any way based on protected characteristics a potential violation of federal antidiscrimination laws, including those labeled as diversity, equity and inclusion (DEI) programs. It does not matter, according to the DOJ, whether a policy is framed as an effort to increase inclusion or address historical underrepresentation. Among other examples, the DOJ flagged as potentially problematic policies or practices that use seemingly neutral criteria that actually function as proxies for protected characteristics, such as targeting an “underserved geographic area” or “first generation” programs, considering diversity or “overcoming obstacles” statements, and considering concepts such as “cultural competence” or “lived experience.”
In light of this guidance, employers, especially those receiving federal funds, should review their programs, policies and partnerships to ensure compliance with federal law and avoid any practices that discriminate based on protected status. Any federally funded entity that engages in these potentially problematic practices risks revocation of federal funding. In addition, federal fund recipients could be liable for “knowingly fund[ing]” unlawful practices of their contractors, grantees or other third parties.
We highlight below the unlawful policies and practices and best practices for compliance identified by the guidance.
Unlawful Policies and Practices
- Preferential treatment based on protected characteristics. This category includes any opportunity, benefit or advantage — such as race-restricted scholarships (e.g., “Black Student Excellence Scholarship”), exclusive internships or mentorships, preference-based hiring or admissions policies, or designated “safe spaces” — that is granted based on a protected characteristic and disadvantages other qualified individuals.
- Use of facially neutral criteria as proxies for protected characteristics. The guidance considers unlawful any use of seemingly neutral criteria — such as targeting “underserved geographic areas,” diversity statements, “overcoming obstacles” narratives, or concepts like “cultural competence” and “lived experience” — as substitutes for considering protected characteristics like race or ethnicity. Criteria become problematic if they are selected because they correlate with protected characteristics or they are implemented with intent to advantage or disadvantage individuals based on protected characteristics.
- Segregation based on protected characteristics. The guidance explains that unlawful segregation occurs when federally funded programs segregate participants based on protected characteristics, such as race-based trainings, BIPOC-only spaces (even if access is technically open to all) or programs limited to specific identity groups.
- Use of protected characteristics in candidate selection. These unlawful practices include the use protected of characteristics like race or sex in selecting candidates for jobs, contracts or programs — such as through “diverse slate” hiring policies or sex-based contract preferences — though single-sex facilities based on biological sex for privacy or safety remain permissible.
- Training programs that promote “discrimination” or “hostile environments.” The memorandum deems DEI training programs unlawful when their content, structure or implementation stereotypes, excludes or disadvantages individuals based on protected characteristics or creates a hostile work environment — for example, requiring employees to attend training that includes statements about “toxic masculinity.”
Best Practices
The guidance outlines several best practices and practices to avoid, in addition to the examples listed above. Organizations should ensure all workplace programs, activities and resources are inclusive and open to all qualified individuals; use neutral, merit-based criteria for hiring, admissions and resource distribution; clearly document nondiscriminatory reasons for all decisions; and implement clear confidential reporting channels to ensure that concerns can be raised without fear of reprisal. Organizations should not use diversity quotas or demographic-driven criteria or hold training programs that segregate participants based on protected characteristics. In addition, the guidance recommends that recipients of federal funds should include nondiscrimination clauses in all contracts and establish systems to monitor third-party compliance, ending funding if discriminatory practices are found.
In sum, the memorandum signals a heightened enforcement environment and a narrowed legal tolerance for identity-based programming. Organizations receiving federal funds, along with all employers, should reexamine their policies and practices through this strict lens to ensure compliance with the guidance’s interpretation of federal antidiscrimination laws and avoid loss of federal funds and potential liability.
See the Executive Briefing publication
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.