Labor & Employment Law Daily Wrap Up, DOJ NEWS—Bondi issues sweeping memo regarding federal funding recipients and ‘unlawful discrimination,’ lobs warning at private employers too, (Jul 31, 2025)

By Brandi O. Brown, J.D.

“Entities that receive federal financial assistance or that are otherwise subject to federal anti-discrimination laws, including educational institutions, state and local governments, and public and private employers,” it states, “should review this guidance carefully to ensure all programs comply with their legal obligations.”

Yesterday, Attorney General Pamela Bondi announced the issuance of a memo purporting to provide “guidance for recipients of federal funding regarding unlawful discrimination,” which also appears to send a warning to private employers as well. According to the Justice Department’s announcement, the new guidance “emphasizes the significant legal risks of initiatives that involve discrimination based on protected characteristics and offers non-binding best practices to help entities that receive federal funds avoid the risk of violations and the revocation of federal grant funding.”

More far-reaching? “Entities that receive federal financial assistance or that are otherwise subject to federal anti-discrimination laws, including educational institutions, state and local governments, and public and private employers,” it states, “should review this guidance carefully to ensure all programs comply with their legal obligations.” (emphasis added editorially)

The memo addresses statutory nondiscrimination requirements (including Title VII) and includes information about the “legal pitfalls” of DEI. It includes a “non-exhaustive list” of practices that could result in grant funding being revoked and lead to federal funding recipients being “liable for discrimination if they knowingly fund the unlawful practices of contractors, grantees, and other third parties.”

“Preferential” treatment. It addresses the granting of “preferential treatment” based on protected characteristics, which it defines occurring “when a federally funded entity provides opportunities, benefits, or advantages to individuals or groups based on protected characteristics in a way that disadvantages other qualified persons, including such practices portrayed as ‘preferential’ to certain groups.” Examples it provides include those in the following categories: race-based scholarships or programs; preferential hiring or promotion practices; and access to facilities or resources based on race or ethnicity.

Proxies prohibited. It also seeks to prohibit the use of “proxies” for protected characteristics, with examples including: “cultural competence” requirements; geographic or institutional targeting; and “overcoming obstacles” narratives and “diversity statements.”

Exception for certain remedies. Next, it expounds on “unlawful segregation” based on protected characteristics. It states, “Such practices generally violate federal law by creating unequal treatment or reinforcing stereotypes, regardless of the stated goal (e.g., promoting inclusion or addressing historical inequities).” However, there can be exceptions. These are “narrow,” according to the memo and “include only cases where federal law expressly permits race-based remedies for specific, documented acts of past discrimination by the institution itself or in specialized contexts such as correctional facilities where courts have recognized compelling institutional interests.”

Examples of unlawful practices, as the memo defines them, include race-based training sessions, segregation in facilities or resources (such as a “BIPOC-only study lounge” or event venues), and “implicit” segregation through program eligibility, such as workshops “for underrepresented minorities only”).

Hiring, contracts, programs. As for unlawful use of protected characteristics, the memo states that this occurs when a federally funded entity or program considers race, sex, or any other protected trait “as a basis for selecting candidates for employment (e.g., hiring, promotions), contracts (e.g., vendor agreements), or program participation (e.g., internships, admissions, scholarships, training).”

“This includes policies that explicitly mandate representation of specific groups in candidate pools or implicitly prioritize protected characteristics through selection criteria, such as "diverse slate" requirements, diversity decision-making panels, or diversity-focused evaluations. It also includes requirements that contracting entities utilize a specific level of working hours from individuals of certain protected characteristics to complete the contract.”

Job candidates and women or minority-owned businesses. According to the memo, these practices create unequal treatment or disadvantaging otherwise qualified candidates, regardless of any intent to advance diversity goals. Examples of unlawful practices included in the memo: race-based “diverse slate” policies in hiring, including mandated numbers of minority candidates, racial benchmarks, or mandated demographic representation; sex-based selection for contracts (such as prioritizing awarding contracts to women or minority-owned businesses); and race- or sex-based program participation.

Training programs. “Unlawful DEI training programs are those that-through their content, structure, or implementation-stereotype, exclude, or disadvantage individuals based on protected characteristics or create a hostile environment.” A provided example is a federally funded school district that requires teachers to complete a DEI training that includes statements such as “all white people are inherently privileged,” or those about "toxic masculinity."

Finally, the memo provides recommendations on best practices. Of note, it suggests that “universally applicable criteria,” that might be used for a scholarship program would be “academic merit or financial hardship, applied without regard to protected characteristics or demographic goals.”

News: AgencyNews Discrimination GovernmentContracts