On July 29, 2025, Attorney General Pam Bondi issued a memorandum to all federal agencies entitled, "Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination." The memorandum restates the administration's focus on curtailing those programs that favor individuals because of a protected category, such as race or sex, and provides "Best Practices" as non-binding suggestions to help entities comply with federal antidiscrimination laws. While the memo is directed to federal agencies, the guidance is equally applicable to any entity that receives federal financial assistance, such as educational institutions, hospitals, state and local governments, and government contractors.
Recognizing that federal law prohibits discrimination based on protected characteristics like sex, race, color, national origin, or religion, the memorandum highlights that these characteristics may not be considered as criteria for employment, program participation, resource allocation, or other benefits. In addition, the memorandum emphasizes the point that facially neutral criteria (e.g., "cultural competence," "lived experience", etc.) may not be used as a "proxy" for advantaging or disadvantaging individuals.
The memo provides several examples of unlawful practices, including:
- Race-based Scholarship or Programs: Race-based internships, mentorship programs, leadership initiatives that reserve spots for specific racial groups, or similar scholarship funds exclusively for students of a specific racial group are illegal, even if intended to promote diversity.
- Race-based Access: DEI initiatives designating certain spaces (e.g., lounges for specific racial or ethnic groups) are illegal.
- Preferential Hiring or Promotions: DEI policies prioritizing candidates from "underrepresented groups" for admission, hiring, or promotion are illegal.
- Failure to Maintain Sex-Separated Intimate Spaces and Athletic Competitions: Based on the administration's perspective that every individual is either male or female, and that such sex is determined at birth and not after, the memorandum provides that "[c]ompelling employees to share intimate spaces with the opposite sex or allowing men to compete in women's athletic competitions would typically be unlawful." This would presumably include those who have transitioned from one sex to another, as Executive Order 14168 expressly states that sex is determined at birth, not thereafter, and "are not changeable."
The memorandum also notes that unlawful proxies may not be used to consider protected characteristics indirectly. For instance, a federal fund recipient may not consider "lived experience" or "cross-cultural skills" in order to evaluate a candidate based on race or ethnicity. "Diversity statements" or "overcoming obstacles" and other similar narratives intrinsically tied to protected characteristics are also deemed impermissible. This guidance seemingly would apply to programs like hospital residencies in evaluating candidates. Race-based training sessions or race-based groups (e.g., "Black Faculty Caucus") would also run afoul of these best practices. Notably, the guidance also considers any DEI policy that prioritizes awarding contracts to women-owned businesses or minority owned businesses as unlawful.
For "Best Practice" recommendations, the memorandum recommends that entities open all workplace programs, activities, and resources to everyone, regardless of protected characteristic. Diversity quotas should be entirely eliminated. Nondiscrimination clauses should also be incorporated into grant agreements, subcontracts, and partnership agreements, specifying that federal funds cannot be used for programs that discriminate based on any protected characteristic. To be clear, discriminate means to favor any group based on a protected characteristic.
One interesting question is how the present administration would enforce the concern it raises in the memorandum with the use of "proxies" for what it believes to be "illegal" DEI when it is also prohibited from utilizing disparate impact theory as a basis for identifying improper, discriminatory conduct (see Executive Order 14281). Executive Order 14281 states that disparate-impact liability has hindered businesses from making hiring and other employment decisions based on merit and skill, their needs, or the needs of their customers, and directs enforcement agencies to ignore disparate impact liability theories, specifically directing enforcement agencies to not utilize disparate impact liability theories to police applicable federal non-discrimination laws. The nuance here is that, typically, in order for the administration to enforce its position regarding illegal DEI programs that are facially neutral (but utilize proxies for promoting DEI), the administration logically would have to consider a disparate impact analysis, contrary to the position advanced in Executive Order 14281. We will have to see how this plays out through the administration's enforcement of these "Best Practices."
However, it should be noted that, while the executive enforcement agencies may be prohibited by Executive Order 14281 from using disparate impact liability theory to assert a claim of discrimination, private parties are not. And, to this end, a decision from the 9th Circuit Court of Appeals on July 30, 2025, may create opportunities for plaintiffs to utilize EEO data to assert claims based on disparate impact theory. In The Center for Investigative Reporting v. the US Department of Labor, the federal appeals court ordered the Department of Labor to produce thousands of EEO reports filed by federal contractors to the news-reporting agency, finding that the reports were not protected from production under the Freedom of Information Act (FOIA). The EEO reports were filed by federal contractors pursuant to direction from the Office of Federal Contract and Compliance Programs (OFCCP), and the news agency sought all such reports filed between 2016 to 2020. The reports summarize federal contractor workforce data based on employment classification, race, and gender. The reports might be used as evidence of discrimination favoring individuals on account of their race or sex, relying on a disparate impact theory.
In conclusion, the memorandum is a reminder that any recipient of federal funds should review its programs, policies, and agreements to ensure compliance with federal non-discrimination law and to closely scrutinize DEI-focused programs to mitigate against legal, financial, or reputational risks. Please let us know if you have any questions or would like to discuss particular practices or policies in more detail.
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