DOJ Releases Memo Regarding Unlawful Discrimination by Federal Funding Recipients

Bottom Line Up Front

On July 29, 2025, the Department of Justice (DOJ) issued further guidance regarding the application of federal antidiscrimination laws to programs and initiatives undertaken by recipients of federal funding, in the form of a memorandum from Attorney General Pam Bondi titled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.” The memorandum follows a series of directives issued by the Trump administration targeting diversity, equity, and inclusion (DEI) efforts and provides long-sought guidance as to what the administration considers to be “unlawful discrimination.”

Although the memorandum is targeted toward federal contractors, it cautions all entities that are “subject to federal antidiscrimination laws” to review the guidance carefully. It further states that it applies to all efforts that “discriminate on the basis of race, color, national origin, sex, religion, or other protected characteristics” regardless of the “program’s labels, objectives, or intentions.” The memorandum also provides “best practices” to help funding recipients comply with federal antidiscrimination laws.

Background

The DOJ’s July 29 memorandum followed the joint statement issued by the Equal Employment Opportunity Commission (EEOC) and the DOJ on March 19, 2025, which made it clear that private sector employers, regardless of whether they are federal contractors, are not immune from investigations and potential liability if they maintain DEI programs that have a direct or indirect adverse impact on employees who are not members of an underrepresented group.

Federal antidiscrimination laws prohibit discrimination based on protected characteristics, including but not limited to race, color, religion, sex, and national origin. These federal laws are codified in various statutes, including but not limited to (1) Title VI of the Civil Rights Act of 1964, which “prohibits discrimination based on race, color, or national origin in any program or activity” that receives federal funds; (2) Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on “race, color, religion, sex, or national origin, in any terms, conditions, or privileges of employment, including hiring, promotion, demotion, termination, compensation,” training, or other benefits; (3) Title IX of the Education Amendments of 1972, which prohibits sex discrimination in certain areas, such as admissions policies, equal access to resources and athletics, and educational programs or activities, receiving federal financial assistance; and (4) the Equal Protection Clause of the 14th Amendment, which prohibits states “from denying any person the equal protection of the laws,” including discrimination claims.

Examples of Unlawful Discriminatory Policies and Practices

The July 29 memorandum provides examples of unlawful discriminatory policies and practices, which, if undertaken, may result in the revocation of federal funds, and confirms that federal fund recipients must not knowingly fund the unlawful discriminatory practices of lower-tier contractors or grantees (i.e., entities that help the prime contractor or grantee perform its contract or grant). Although the definition of “knowing” is not provided in the memorandum, we suggest that federal fund recipients take proactive steps to ensure that lower-tier contractors and grantees are not using federal funds for unlawful discriminatory practices. These steps may include ensuring that lower-tier contractors or grantees have enacted policies and procedures that prohibit unlawful discriminatory practices and represented in writing that they are not currently engaged in — and neither previously engaged in nor plan to engage in — unlawful discriminatory practices.

The following list represents the unlawful practices, which may result in the revocation of federal funding, that are provided in the memorandum. The memorandum states that this list is non-exhaustive.

• Granting preferential treatment based on protected characteristics. Preferential treatment occurs when federal fund recipients provide, or engage in a preference to provide, benefits to individuals or groups based on protected characteristics that disadvantage other qualified individuals or groups. Examples of preferential treatment include, but are not limited to, preferential hiring or promotions that prioritize candidates based on race. 
• Intentionally using neutral criteria that function as substitutes for protected characteristics. Impermissible neutral criteria may be selected because they correlate with protected characteristics. Examples of such neutral criteria include, but are not limited to, (1) requiring potential employees to have “cultural competence” that correlates with a specific racial or ethnic background, (2) recruiting from specific geographic areas or institutions because of these areas’ or institutions’ racial composition, and (3) requiring job applicants to submit “‘diversity statements.’”
• Organizing programs or providing resources to specific individuals or groups based on race, sex, or other protected characteristics. The memorandum argues that such practices “violate federal law by creating unequal treatment or reinforcing stereotypes, regardless of the stated” objective. Examples of unlawful segregation may include, but are not limited to, (1) use of race or sex to restrict eligibility to participate in certain programs, (2) training sessions that separate participants into race-based groups for discussions, (3) provision of resources to a specific group of individuals based on race, (4) race- or sex-based quotas for hiring or holding specific positions within an organization, and (5) preferences based on race or sex for the award of contracts to third parties.
• Holding training programs that promote discrimination or a hostile work environment through the use of stereotypes or exclusion based on protected characteristics. For example, a federal fund recipient should not require employees to complete DEI trainings that include statements that stereotype individuals based on protected characteristics. The memorandum provides the following examples of unpermitted statements: “All white people are inherently privileged” and “toxic masculinity.”

The memorandum clarifies that federal law permits workplace harassment trainings that are focused on preventing unlawful workplace discrimination. Employers are encouraged and, depending on applicable state laws, may be required to continue to provide workplace trainings related to antidiscrimination and anti-harassment laws.

Consequences

Federal fund recipients that engage in unlawful discrimination face two primary consequences. First, the federal government may revoke the contract or grant funding. This process may occur quickly and without effective avenues for recourse or adjudication.

Second, the federal government may pursue fraud claims under the False Claims Act (FCA). The FCA provides that any person who knowingly submits, or causes to submit, materially false or fraudulent claims for government payment is liable for up to three times the government’s damages plus per-claim penalties. Although the July 29 memorandum does not expressly refer to the FCA, the DOJ has made clear it is an important tool in the administration’s efforts to target “unlawful” DEI. On May 19, 2025, Deputy Attorney General Todd Blanche issued a memorandum regarding the creation of the Civil Rights Fraud Initiative, focused on “vigorous enforcement” of the FCA “against those who defraud the United States by taking its money while knowingly violating civil rights laws.” The July 29 memorandum provides insight into what kinds of investigations the Civil Rights Fraud Initiative may pursue.

To be clear, the July 29 memorandum is not legally binding and does not change Title VI, Title VII, Title IX — or any other federal, state, or local antidiscrimination statutes — or existing juridical precedent. The memorandum simply provides insight into how the DOJ will likely seek to enforce these antidiscrimination laws with respect to DEI programs against entities that receive federal funds and the “best practices” companies might undertake to avoid “legal pitfalls.”

Recommendations

The July 29 memorandum provides the following best practice recommendations for an organization’s internal policies and procedures:

• Ensure inclusive access to all workplace programs, activities, and resources, regardless of race, sex, or other protected characteristics.
• Base employment decisions on objective, measurable skills and qualifications that are directly related to job performance or program participation.
• Discontinue programs or policies designed to achieve discriminatory outcomes through the use of demographic-driven criteria.
• Clearly document the legitimate rationales for using hiring or promotion criteria that may correlate with protected characteristics. Similarly, evaluate and document whether facially neutral employment criteria are proxies for protected characteristics.
• Eliminate diversity quotas and focus only on nondiscriminatory performance metrics.
• Ensure trainings are open to all qualified participants.
• Establish clear anti-retaliation procedures for individuals who report unlawful discrimination.

The memorandum is clear that the best practices are practical, but not mandatory, recommendations to minimize the risk of violating federal antidiscrimination laws.

The memorandum also recommends that prime contractors and grantees should include nondiscrimination clauses in contracts with lower-tier entities and continuously monitor these entities’ compliance. The contract clauses should require the third parties to comply with federal laws and explicitly state that federal funds may not be used for programs that discriminate based on protected characteristics.

In addition to the memorandum’s guidance, employers may also consider removing key terms that may be viewed as potentially discriminatory against protected classes from public-facing language, such as websites and press releases. These key words may include, but are not limited to, “diversity,” “equity,” “inclusion,” and “cultural competence.”

Although private employers are not the focus of the memorandum, Goodwin recommends that private employers that are subject to federal antidiscrimination laws review the examples and recommendations under the memorandum when evaluating DEI-related programs and initiatives to ensure such programs and initiatives do not include practices that the DOJ states are unlawful. While the memorandum is targeted toward recipients of federal funding, it is likely that other agencies, such as the EEOC, would find similar practices by private employers to be violations of federal antidiscrimination laws.

Conclusion

Goodwin’s Government Contracts & Grants, Complex Litigation & Dispute Resolution, and Employment teams have significant experience counseling clients on matters involving compliance with antidiscrimination laws and defense against FCA prosecutions. Please contact the authors of this alert if you have questions.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.