DOJ Issues Guidance on “Unlawful Discrimination”

On July 29, 2025, US Attorney General Pam Bondi issued a memorandum that provides guidance for recipients of federal funding regarding “unlawful discrimination” on the basis of race, color, national origin, sex, religion, or other protected characteristics (the Guidance). The Guidance aims to clarify the application of federal anti-discrimination laws to programs or initiatives that, according to the Department of Justice (DOJ), may be discriminatory, including efforts related to diversity, equity, and inclusion (DEI). Further, the Guidance provides recommendations regarding “best practices” for complying with federal anti-discrimination laws.

The Guidance is consistent with the Trump administration’s previously articulated views on DEI practices that may violate federal anti-discrimination laws and further underscores that the administration will scrutinize certain diversity- and equity-related efforts that have been historically viewed as lower risk. Moreover, the Guidance signals that the administration may seek to hold recipients of federal funding liable for the conduct of third parties.

This Client Alert outlines DOJ’s identified policies and practices that may run afoul of federal law, as well as the recommended “best practices,” and provides key takeaways for entities across all sectors.

Background

The Guidance reflects a key step in the administration’s broader strategy to root out DEI efforts in the private sector, in line with President Trump’s January 21, 2025, executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” See this Latham Client Alert for more information.

On February 5, 2025, the Attorney General issued a memorandum to DOJ employees stating that DOJ would “investigate, eliminate, and penalize illegal DEI” programs in the private sector, including through potential criminal actions. See this Latham Client Alert for more information.

On May 19, 2025, DOJ issued a memorandum establishing a Civil Rights Fraud Initiative that will use the False Claims Act as its “primary weapon” to investigate and pursue claims against recipients of federal funds who “knowingly violate civil rights laws.” See this Latham Client Alert for more information.

“Unlawful” and “Potentially Unlawful” Policies and Practices

The Guidance outlines a “non-exhaustive” list of unlawful discriminatory policies and practices that could result in the revocation of federal funding. The Guidance emphasizes that recipients of federal funding may be liable for discrimination if they knowingly fund unlawful practices of “contractors, grantees, and other third parties.” The Guidance also highlights five categories of conduct that, in DOJ’s view, could give rise to liability under federal anti-discrimination laws, including Title VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972, which prohibit discrimination based on race, color, or national origin, and discrimination based on sex, respectively, in programs and activities that receive federal financial assistance; Title VII of the Civil Rights Act of 1964, which prohibits discrimination in employment; and the Equal Protection Clause of the Fourteenth Amendment.

The five categories of conduct include:

1. Preferential treatment based on protected characteristics, which includes race-based scholarships or programs, preferential hiring or promotion practices, and access to facilities or resources based on race or ethnicity.
2. Prohibited use of proxies for protected characteristics, which could occur when a federally funded entity “intentionally uses ostensibly neutral criteria that function as substitutes for explicit consideration of race, sex, or other protected characteristics.” The Guidance notes that potentially unlawful proxies include requiring narratives related to “overcoming obstacles” or “diversity statements” insofar as they “advantage[] those who discuss experiences intrinsically tied to protected characteristics[.]” Critically, the Guidance suggests that efforts to recruit from particular organizations or geographic areas can constitute unlawful activity if these entities or locations were chosen “because of their racial or ethnic composition rather than other legitimate factors.”
3. Segregation based on protected characteristics, which includes race-based training sessions, segregation in facilities or resources, and implicit segregation through program eligibility. Importantly, DOJ reiterates the administration’s position that “failing to maintain sex-separated athletic competitions and intimate spaces can also violate federal law” when transgender individuals are permitted “to access single-sex spaces designed for females[.]”
4. Unlawful use of protected characteristics in candidate selection, which includes race-based “diverse slates” in hiring, sex-based selection for contracts, and race- or sex-based program participation goals (e.g., requirements that programs have a certain percentage of participants from underrepresented groups).
5. Training programs that promote discrimination based on protected characteristics or promote hostile environments, which include trainings that affirm that “all white people are inherently privileged” or recognize the concept of “toxic masculinity.” The Guidance notes that such trainings “may” violate Title VI or Title VII “if they create a hostile environment or impose penalties for dissent in ways that result in discriminatory treatment.”

DOJ’s Recommended “Best Practices”

The Guidance lists nine “best practices,” which it describes as “non-binding suggestions to help entities ... avoid legal pitfalls.” According to DOJ, these best practices are intended to be “practical recommendations to minimize the risk of violations.”

The nine best practices include:

1. Ensuring inclusive environments for all
2. Focusing on skills and qualifications for employment and other selection decisions
3. Prohibiting demographic-driven criteria for participation or eligibility
4. Documenting legitimate rationales for employment and other selection decisions
5. Scrutinizing neutral criteria for potential use as proxies for protected characteristics
6. Eliminating diversity quotas and discontinuing policies that mandate representation based on protected characteristics
7. Avoiding exclusionary training programs
8. Including nondiscrimination clauses in contracts that require third parties to comply with anti-discrimination laws, and monitoring compliance
9. Establishing clear anti-retaliation procedures to protect employees who raise concerns about allegedly discriminatory conduct

Key Takeaways

The Guidance aligns with other Trump administration guidance from the Department of Education, the Department of Health and Human Services, and the Equal Employment Opportunity Commission — each of which have outlined DEI-related programs and practices that, in the administration’s view, may violate federal anti-discrimination laws.

The Guidance underscores that even programs that appear to be permissible can be implemented in a manner that runs afoul of the law and be subject to enforcement risk. For example, with respect to the use of diversity statements or other personal essays, DOJ explains that such statements are “potentially unlawful” if used “as a proxy for advantaging [a] protected characteristic in providing benefits.” In this way, the Guidance signals that DOJ will continue to aggressively target DEI programming, particularly with regard to recipients of federal funding.

Notwithstanding the Guidance, the legality of DEI practices ultimately depends on the scope of federal anti-discrimination laws, which the Guidance does not change. Nonetheless, the Guidance provides insight into how DOJ and other agencies are likely to interpret those laws in enforcement matters.

Private entities across all sectors — particularly federal contractors and recipients of federal funding — should exercise care to understand federal anti-discrimination laws, guidance, and interpretative decisions from the courts. Further, in coordination with counsel, private entities should carefully audit their existing policies, practices, and programs to ensure that they are non-discriminatory and to mitigate the risk of scrutiny in this political environment.

Latham & Watkins is closely following developments in this area, including agency action taken in connection with this and other federal guidance and directives.