DOJ memo provides guidance on prohibited discrimination practices for federal contractors and federal funds recipients

At a glance

• A recent Department of Justice (DOJ) memorandum offers non-binding guidance to federal fund recipients on complying with anti-discrimination laws, emphasizing best practices to avoid legal risks.
• It identifies five unlawful practices: preferential treatment, use of proxies, segregation, biased candidate selection, and discriminatory training programs.
• Examples include race-based scholarships, DEI policies prioritizing underrepresented groups, and training that stereotypes or creates hostile environments.
• The DOJ warns that engaging in these practices may lead to loss of federal funding or legal liability under Title VII and other civil rights laws.
• The memo recommends best practices such as focusing on qualifications, avoiding demographic-driven criteria, and ensuring inclusive, non-discriminatory policies and procedures.

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United States Attorney General Pam Bondi recently issued a memorandum to all federal agencies titled, 'Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.'

The June 29, 2025 memorandum, while not legally binding, offers insight into how the United States DOJ will interpret federal anti-discrimination law, including by outlining 'Best Practices' to help federal funds recipients 'comply with federal antidiscrimination laws and avoid legal pitfalls.'

While the memorandum is consistent with prior DOJ and Equal Employment Opportunity memoranda and guidance, it provides additional information on practices deemed unlawful under Title VII and other civil rights laws.

The memorandum outlines five unlawful practices – including (1) 'Granting Preferential Treatment Based on Protected Characteristics', (2) 'Prohibited Use of Proxies for Protected Characteristics,' (3) 'Segregation Based on Protected Characteristics,' (4) 'Use of Protected Characteristics in Candidate Selection,' and (5) 'Training Programs That Promote Discrimination or Hostile Environments' – which it states could result in revocation of grant funding and / or discrimination liability. It also provides examples of each practice.

We discuss these practices and examples below.

Granting preferential treatment based on protected characteristics 

The DOJ notes that offering opportunities, benefits, or advantages to individuals or groups based on protected characteristics 'in a way that disadvantages other qualified persons' is unlawful. The memorandum provides several examples of what the DOJ considers to be preferential treatment:

• Race-based scholarships or programs, such as a 'Black Student Excellence Program'.
• Preferential hiring or promotion practices, such as a 'diversity, equity, and inclusion (DEI) policy that prioritizes candidates from ‘underrepresented groups’ for admission, hiring, or promotion'.
• Access to facilities or resources based on race or ethnicity, such as 'a lounge exclusively for students of a specific racial or ethnic group'.

Prohibited use of proxies for protected characteristics 

The DOJ memorandum makes clear that intentionally using 'ostensibly neutral criteria' as a substitute for protected characteristics will also be considered unlawful. Identified examples include:

• 'Cultural competence' requirements, such as requiring a job applicant to demonstrate 'cultural competence,' 'lived experience,' or 'cross-cultural skills' to evaluate candidates’ racial backgrounds instead of 'objective qualifications'.
• Geographic or institutional targeting, such as instituting 'recruitment strategies targeting specific geographic areas, institutions, or organizations chosen primarily because of their racial or ethnic composition rather than other legitimate factors'.
• 'Overcoming obstacles' narratives or 'diversity statements,' such as requiring applicants to describe '‘obstacles they have overcome’ or submit a ‘diversity statement’' and using the statements as proxies for giving advantage to 'those who discuss experiences intrinsically tied to protected characteristics'.

Segregation based on protected characteristics

The DOJ notes that organizing 'programs, activities, or resources in a way that separates or restricts access based on race, sex, or other protected characteristics' is unlawful and provides examples, including:

• Race-based training sessions, such as a 'DEI training program that requires participants to separate into race-based groups for discussions'.
• Segregation in facilities or resources, such as designating a 'Black, Indigenous, and People of Color (BIPOC)-only study lounge,' even if the lounge 'is technically open to all.' The memorandum clarifies that this does not apply to spaces intended to 'protect privacy or safety, such as restrooms, showers, locker rooms, or lodging'.
• Implicit segregation through program eligibility, such as a 'DEI-focused workshop series that requires participants to identify with a specific racial or ethnic group or mandates sex-specific eligibility'.

Use of protected characteristics in candidate selection

The memorandum provides that using protected characteristics as a basis to select candidates for employment, program participation, or contracts is unlawful. This includes:

• Race-based 'diverse slate' policies in hiring, such as requiring interview slates to 'include a minimum number of candidates from specific racial groups'.
• Sex-based selection for contracts, such as prioritizing 'awarding contracts to women-owned businesses'.
• Race- or sex-based program participation, such as requiring 50% of participants in an internship program to be from underrepresented minorities or women.

Training programs that promote discrimination or hostile environments

Consistent with other agency interpretations, the memorandum states that DEI trainings that 'stereotype, exclude, or disadvantage individuals based on protected characteristics or create a hostile environment' are unlawful. This includes trainings that include 'stereotyping' statements like 'all white people are inherently privileged' or touch on 'toxic masculinity.'

The DOJ asserts that federal law allows for workplace harassment trainings that are focused on preventing unlawful workplace discrimination and 'do not single out particular groups as inherently racist or sexist.'

The memorandum closes by recommending 'Best Practices,' suggesting federal funds recipients:

• ensure inclusive access to workplace programs, activities, and resources;
• focus on skills and qualifications in making selection decisions;
• prohibit demographic-driven criteria in programs and policies;
• document legitimate rationales unrelated to race, sex, or other protected characteristics in hiring, promotions, or selecting contracts;
• scrutinize neutral criteria for proxy effects;
• eliminate diversity quotas;
• avoid exclusionary training programs and segregating participants into groups based on race, sex, or other protected characteristics;
• include non-discrimination clauses in contracts to third parties and monitor compliance; and
• establish clear anti-retaliation procedures and reporting mechanisms to protect individuals who raise concerns or refuse to participate in programs or policies.