U.S. Department of Justice Provides Much-Needed Guidance Regarding the Meaning of “Illegal DEI”

On January 20, 2025, on his first day of office, President Trump issued Executive Order 14151, titled “Ending Radical and Wasteful Government DEI Programs and Preferencing,” which directed the termination of all discriminatory programs, including “illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, programs, preferences, and activities in the Federal Government, under whatever name they appear.” Executive Order 14151 applied to federal employment practices and also directed federal agencies to review the DEI and DEIA practices of federal contractors. On January 31, the President issued Executive Order 14173, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which required federal contractors and grantees to certify that they do not operate any “illegal” DEI programs. Unfortunately, the nature of executive orders is that they are brief statements of policy or agency directives, but lack sufficient detail to answer all questions that may arise. For purposes of the two afore-mentioned Executive Orders, further guidance was both needed and anticipated from one or more federal agencies.

On July 30, U.S. Attorney General Pam Bondi released “Memorandum for All Federal Agencies: Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination,” (“Guidance”) dated July 29, 2025, to provide further guidance on these Executive Orders and ensure that recipients of federal funding do not engage in unlawful discrimination.

The Guidance—a nine-page memorandum—urges all recipients of federal funding to review and revise their programs and policies to ensure full compliance with federal anti-discrimination laws. The Guidance warns federal funding recipients that they “may also be liable for discrimination if they knowingly fund the unlawful practices of contractors, grantees, and other third parties.”

The Guidance identifies a “non-exhaustive list” of five practices that the U.S. Department of Justice (DOJ) considers unlawful and lists detailed examples for each.

Five Practices the DOJ Considers Unlawful

1. Practices that grant preferential treatment based on protected characteristics:

The DOJ Guidance outlines several examples of practices that it considers to be unlawful preferential treatment based on protected characteristics. This includes:

• Race-based scholarships or programs, including without limitation race-inclusive opportunities, such as internships, mentorship programs, or leadership initiatives, that are available only to, or reserve spots for, students of a specific racial group (for example, a “Black Student Excellence Scholarship”). Although the Guidance provides an example regarding students, the Guidance is expected to equally apply to applicants, employees, or employer program participants.
• Hiring or promotion practices that prioritize candidates from “underrepresented groups” for admission, hiring, or promotion if the underrepresented groups are determined based on a protected characteristic like race.
• Access to facilities or resources based on race or ethnicity such as “safe spaces” accessible exclusively to people that belong to a specific racial or ethnic group. Although the Guidance provides an example regarding university spaces, the Guidance is expected to equally apply to employer spaces.

2. Practices that use facially neutral proxies for protected characteristics:

In the DOJ’s Guidance, unlawful proxies occur when an entity intentionally uses facially neutral criteria that function as substitutes for explicit considerations of a protected characteristic. The DOJ Guidance warns that facially neutral criteria become legally problematic or suspect when they are: (1) selected because they correlate with, replicate, or are used as substitutes for protected characteristics; or (2) implemented with the intent to advantage or disadvantage individuals based on protected characteristics. This includes:

• Requiring applicants to describe their “cultural competence,” “lived experience,” or “cross cultural skills” if the requirement is designed or intended to be used or is actually used by decision-makers to evaluate candidates’ racial or ethnic backgrounds rather than objective qualifications.
• “[R]ecruitment strategies targeting specific geographic areas, institutions, or organizations chosen primarily because of their racial or ethnic composition rather than other legitimate factors.”
• Requiring applicants to describe “obstacles they have overcome” or submit a “diversity statement” if such narratives and statements are designed or intended to be used or actually are used as a proxy to provide advantages based on protected characteristics.

3. Programs that segregate participants based on protected characteristics:

The DOJ Guidance identifies programs that segregate participants based on protected characteristics as another area of questionable legality. The DOJ Guidance further cautions that to ensure compliance with federal law and “to safeguard the rights of women and girls, organizations should affirm sex-based boundaries rooted in biological differences.” Examples of such unlawful programs include:

• Training sessions that separate participants into race-based groups (for example, a “Black Faculty Caucus” or “White Ally Group”).
• Segregation in facilities and resources, including study spaces, computer labs, or event venues, based on protected characteristics (for example, a “BIPOC-only study lounge” or “safe” space restricted to BIPOC students). This could also include workspaces such as segregated employee lounges or affinity group meetings. The DOJ warns that “[e]ven if access is technically open to all, the identity-based focus creates a perception of segregation and may foster a hostile environment.” Notably, the DOJ Guidance expressly states that its prohibitions do not apply to “facilities that are single-sex based on biological sex to protect privacy or safety, such as restrooms, showers, locker rooms, or lodging” and women’s athletic competitions.
• A DEI-focused program or workshop series that requires participants to identify with a specific racial or ethnic group (for example, “for underrepresented minorities only” or mandates specific eligibility based on protected characteristics).

4. Use of protected characteristics in candidate selection, contract awards, or program participation:

The Guidance outlines several examples of practices that it considers to be the unlawful use of protected characteristics in hiring, contracting, or program participation. This includes:

• “Diverse slate” policies for hiring that require a certain percentage of or minimum number candidates be from an underrepresented group or of diverse backgrounds (for example, requirements for at least two “underrepresented minority” candidates). The Guidance states that this prohibition extends to any policy that sets racial benchmarks or mandates geographic representation in candidate pools, such as requiring a certain percentage of finalists to be from “diverse” backgrounds.
• Implementing a policy that prioritizes in any way, including a tiebreaker policy, awarding contracts to women-owned or minority-owned businesses over equally qualified businesses owned by men or white individuals.
• Race- or sex-based program participation, such as a scholarship, fellowship, leadership initiative, or internship program, requiring that a certain percentage of selected participants be from underrepresented racial groups or be female students and rejecting equally or more qualified men and majority group applicants. This could also include employer mentorship or leadership development programs. The Guidance does not consider the positive intent of these programs—namely, addressing underrepresentation—as a safe harbor.

5. Training programs that promote discrimination or hostile environments:

While President Trump’s Executive Order 14151, titled “Ending Radical and Wasteful Government DEI Programs and Preferencing,” did not define the term “illegal DEI,” the DOJ Guidance clarifies that illegal DEI training programs are those programs that “through their content, structure, or implementation—stereotype, exclude, or disadvantage individuals based on protected characteristics or create a hostile environment.” Examples of these types of programs include:

• Trainings or statements that stereotype individuals based on protected characteristics, or create a hostile environment through severe or pervasive use of materials that single out, demean, or stereotype individuals based on protected characteristics (for example, “all white people are inherently privileged,” “toxic masculinity,” etc.).
• The Guidance notes that “[f]ederal law allows for workplace harassment trainings that are focused on preventing unlawful workplace discrimination and that do not single out particular groups as inherently racist or sexist.”

The DOJ’s “Recommendations on Best Practices”

The Guidance provides recommendations or suggestions on best practices to help entities comply with federal anti-discrimination laws and avoid legal pitfalls and minimize the risk of violations of federal law. This includes:

• Ensure inclusive access to all workplace programs, activities, and resources, but also ensure separation where necessary to respect “biological differences” (e.g. women’s restrooms and locker rooms).
• Focus on skills and qualifications when selecting candidates and base selection decisions on specific, measurable skills and qualifications.
• Avoid using proxies like socioeconomic status, first-generation status, or geographic diversity to in effect prioritize individuals based on racial, sex-based, or other protected characteristics.
• Prohibit and discontinue demographic-driven criteria. For example, a scholarship program must not target “underserved geographic areas” or “first-generation students” if the criteria are intended or actually used to increase participation by specific racial or sex-based groups. Instead, entities should use universally applicable criteria, such as academic merit or financial hardship, applied without regard to protected characteristics or demographic goals.
• Document legitimate rationales to demonstrate that decisions are unrelated to protected characteristics.
• Scrutinize neutral criteria for proxy effects.
• Eliminate diversity quotas and focus solely on nondiscriminatory performance metrics, such as program participation rates or academic outcomes, without reference to race, sex, or other protected characteristics.
• Discontinue policies that require representation of specific racial, sex-based, or other protected groups in candidate pools, hiring panels, or final selections.
• Avoid the following: (1) excluding qualified participants from training programs; (2) segregating participants into groups based on protected characteristics; and (3) requiring participants to affirm specific ideological positions or “confess” to personal biases or privileges based on protected characteristics.
• Include nondiscrimination clauses in third-party grant agreements, contracts, or partnership agreements and specify in those agreements that federal funds cannot be used for programs that discriminate based on protected characteristics.
• Monitor third parties that receive federal funds to ensure ongoing compliance, including reviewing program materials, participant feedback, and outcomes to identify potential discriminatory practices.
• Terminate funding for noncompliant programs.
• Establish clear anti-retaliation procedures and create safe reporting mechanisms and include these policies in employee handbooks, student codes, and program guidelines.

Key Employer Takeaways on "Illegal DEI" Practices

• The DOJ Guidance emphasizes that entities receiving federal funds must ensure compliance with federal law and avoid discrimination based on protected characteristics, no matter the programs’ or initiatives’ labels, objectives, or intentions. Significantly, the DOJ appears to have set its sights on what the DOJ calls “unlawful proxy discrimination” or facially neutral criteria (for example, “cultural competence,” “lived experience,” and geographic targeting or marketing) that function as proxies for protected characteristics.
• The Guidance includes a non-exhaustive list of practices the DOJ believes could lead to the revocation of grant funding.
• The Guidance highlights certain “best practices,” as “non-binding suggestions,” to help entities that receive federal funds avoid violating the federal law. The Guidance emphasizes that the best practices are not mandatory requirements but “rather practical recommendations to minimize the risk of violations” of federal anti-discrimination laws.
• The Guidance emphasizes the importance of inclusive access and skills-based selection, while maintaining sex-separated intimate spaces and athletic competitions based on biological sex.
• The Guidance reminds federal funding recipients and individuals about the protection against retaliation for individuals who object or refuse to participate in discriminatory programs, trainings, or policies.

The Guidance concludes by urging entities to review all programs, policies, and partnerships to ensure compliance with federal law and discontinue any practices that discriminate on the basis of a protected status.

Miller Nash attorneys understand that compliance with federal, state, and local laws in the current environment is not easy, and we are available to discuss existing programs, initiatives, policies, and procedures and how to ensure compliance with Executive Order 14151 and the new DOJ Guidance.

This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.